The cost of securing a clean energy future
The Australian government recently announced the Clean Energy Future Plan to set Australia on a low carbon emission future. While the plan centres on the introduction of a carbon tax, there are measures to compensate households where the impact will be greatest. The carbon tax is also a factor that investors cannot ignore.
Proposed to commence in July 2012, a carbon tax will be paid by the 500 biggest polluters in Australia, excluding businesses in agriculture and fuel supplied to passenger and light commercial vehicles. The plan aims to raise $27.3 billion over the first four years and will cost $31.6 billion, resulting in a net cost to the government of $4.4 billion.
More than half of the revenue raised will be used to assist households through tax cuts and direct payments. On average, the carbon tax is estimated to result in an increase of $9.90 per week in average household spending but, according to the government, will be offset by an average assistance payment of $10.10 per week. Specifically, low-to-middle income households will receive higher compensation, 10% of households will receive no compensation and a third will be worse off.
Specifically, these measures to compensate households will be implemented through personal income tax cuts from 1 July 2012 and through increases to family payments, pensions and allowances.
Tax cuts
The government has proposed to change the personal income tax scales for individuals whose annual taxable income is under $80,000. These changes will be delivered in two rounds – the first on 1 July 2012 and the second on 1 July 2015. For example, the first round of changes is proposed to include an increase to the tax-free threshold from $6,000 to $18,200.
Increases to family payments, pensions and allowances
A new Clean Energy Supplement will be paid to individuals receiving family payments, pensions and allowances. These supplements can add up to:
- $388 annually for single pensioners and self-funded retirees holding a Commonwealth Seniors Health Card, and $510 annually for pensioners or self-funded retiree couples
- $110 per child for families receiving Family Tax Benefit Part A and $69 extra for families receiving Family Tax Benefit Part B
- $218 annually for recipients of single income support payments, and $390 annually for couples on allowances
- $234 annually extra for single parents.
Investing in a low carbon future
For investors, the introduction of a carbon tax means that a company’s carbon emissions are an additional factor they cannot ignore, and will have a significant impact when it comes to sector and stock selection.
AMP Capital is a pioneer in Australian sustainability research and investment, being one of the first managers to systematically integrate sustainability issues with financial analysis. They offer a range of funds for investors, such as the AMP Capital Sustainable Share Fund, which is one of Australia’s largest portfolios of investments with a sustainable focus, and the AMP Capital Responsible Investment Leaders range of funds.
Find out more
To find out more about how you can invest in Australia’s clean energy future, please call us today.
What you need to know
Information current as at August 2011.This article contains general information only. It does not take into account your objectives, financial situation or needs. Please consider the appropriateness of the information in light of your personal circumstances. If you decide to purchase or vary a financial product, your financial planner, our practice, AMP Financial Planning and other companies within the AMP Group will receive fees and other benefits, which will be a percentage of the premium you pay and/or the advice fee you agree with us. Some of the information in this article is based on our interpretation of the law. It is a summary of the subject matter covered and is not intended to be comprehensive tax or financial advice. No reader should act on the basis of this article without obtaining specific professional advice. Further details are available from your planner or AMP Financial Planning Pty Limited, telephone 1300 157 173.