The new carbon tax – what does it mean for small businesses? A brief overview

Kreston ANZ

Insights

White Papers

White Papers

The new carbon tax – what does it mean for small businesses? A brief overview

On 10 July 2011, as part of its broader climate change strategy, the Government announced its package for a price on carbon.

What does the plan include?

Putting a price on carbon emissions
Improving energy efficiency
Promoting innovation and investment in renewable energy
Creating opportunities in the land sector to cut emissions by 2020

The plan proposes cutting 159 million tonnes of Australia's carbon emissions by 2020. The carbon pricing mechanism will be implemented in two stages.

For the period 2012 to 2015 there will be a fixed price starting at $23 per tonne. This price will rise by 2.5% each year in real terms.

From July 2015 onwards the carbon pricing mechanism will move to an emissions trading scheme where the price will be set by the market. A price ceiling and floor will apply the first three years of the flexible price period.

The price ceiling will be set at $20 above the expected international price and will rise by 5% in real terms each year.

The carbon pricing mechanism will cover carbon dioxide, methane, nitrous oxide and perfluorocarbon emissions

Who will pay?

Around 500 businesses will be expected to pay for their emissions under this new scheme. Facilities that have direct greenhouse gas emissions of 25,000 tonnes of CO2-e a year or more, (excluding emissions from transport fuels and some synthetic greenhouse gases) will be covered. This encompasses the stationary energy sector, transport, industrial processes, non-legacy waste and fugitive emissions.

Liable businesses will be expected to buy and surrender to the Government a permit for every tonne they produce. Permits will be tradeable once the emissions trading scheme commences.

Who is exempt?

A carbon price will not apply to light vehicle business transport and off-road fuel used by agriculture, fishing and forestry industries. There will be no direct obligations applying to small businesses under the carbon price. Small businesses will not have to count or monitor their electricity or carbon emissions use.

Economic impact

Treasury forecasts indicate that while our economy will continue to grow Australia's overall GDP will be lower by 0.3% in 2020 and by 2.8% in 2050.

Forecasts also indicate that electricity prices are expected to rise, with or without carbon pricing. The price of most goods will increase by less than one half of one % as the result of a carbon price.

Assistance for small businesses

$240 million will be directed to assisting small business, between 2014 – 2015.

The small business instant asset write off threshold will be increased from $5,00 to $6,500.

The Government will also establish a $40 million Energy Efficiency Information grants program to provide small businesses with practical measures to reduce energy costs. It will also provide an additional $5 million in funding over four years to improve the delivery of clean technology advice and other non-grant support programs to small and medium businesses.

For more comprehensive information

"Securing a clean energy future – the Australian Government's climate change plan" www.cleanenergyfuture.gov.au