How the carbon tax will hit your household bills

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I expect my bills to go up by $9.90 each week when the carbon price comes along in the middle of 2012.

About half of this will come from a rise in power bills as electricity jumps by $3.30 and gas by $1.50. My food bill is going up $1 a week. All up, the cost of living will rise by 0.7% in 2012-13, or about $500, according to estimates by the Australian Treasury.

The good news is that I can get some, or perhaps all, of this money back.

carbon tax

Nine out of 10 households will receive a combination of government payments and tax cuts (see panel) to help them with the impact of the carbon price on goods and services. In fact, some 69% of Australian households will be better off, according to a report by the National Centre for Social and Economic Modelling. Of these, 11.5% will be more than $10 a week better off.

So who will be worse off? Well, 4.8% of households will be worse off by more than $10 a week, says NATSEM.

It is largely the big polluters that will pay for their emissions - those that pump more than 25,000 tonnes of CO2 into the atmosphere.

The federal government estimates there are 500 big polluters, operating in industries such as waste disposal (190), mining (100), electricity (60), industries that use cement, chemicals and metal processing (60), fossil fuel-intensive sectors (50) and natural gas (40). They will pay $23 for every tonne of carbon they send into the atmosphere.

The government is helping pensioners and self-funded retirees with an extra $338 a year if they are single and up to $510 a year for couples combined. Families receiving Family Tax Benefit Part A will receive an extra $110 per child per year, while eligible families will obtain an extra $69 in Family Tax Benefit Part B each year.

If you receive a government allowance you will get up to $218 extra each year for singles, $234 for single parents and $390 for couples.

Students receiving benefits such as Youth Allowance, Austudy and Abstudy will get an extra 1.7% to cover the carbon price. Students working part-time will receive tax cuts equivalent to $503 for earning $25,000.

What do tax cuts have to do with the carbon tax? The government is compensating low- and middle-income households, which often will not be eligible for the new clean energy supplements, through lower personal income tax.

It has lifted the first marginal tax threshold to $18,200 (up from $6000). Some 7.5 million taxpayers with an annual income under $80,000 will secure a tax cut, most getting $300 a year. This means more than 1 million Australians won't have to lodge a tax return.

Why is this all happening? The big benefit is that Australia will be cleaner by about 160 million tonnes of atmospheric pollution each year from 2020. This is equivalent to taking about 45 million cars off the road. Visit www.yourcarbonprice.org.au, a website put together by the ACOSS, the Climate Institute and Choice.

What you get to offset the cost of the carbon price

A $15 billion government package will help households adjust to the carbon tax through a mix of tax cuts and handouts. On average a household will be better off by $2.50 (rounded up) under carbon pricing, according to figures from the National Centre for Social and Economic Modelling (NATSEM).

How does this work out? NATSEM says the average government benefit is $4.50 a week while the average tax gain is $6.40 a week, totalling $10.90. It estimates that the impact of the carbon price will be lower than the $9.90 figure from Treasury - it puts it at $8.50 a household. Pensioner households will be $4.70 a week better off on average.

Expect the extra payments initially in the form of a lump sum in May-June 2012. Still puzzled?

Visit cleanenergyfuture.gov.au to find out what payments and tax cuts you will receive. An estimator calculates how much assistance you are likely to receive.

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Susan has been a finance journalist for more than 30 years, beginning at the Australian Financial Review before moving to the Sydney Morning Herald. She edited a superannuation magazine, Superfunds, for the Association of Superannuation Funds of Australia, and writes regularly on superannuation and managed funds. She's also author of the best-selling book Women and Money.