Australia's Future Tax System

Architecture of Australia's tax and transfer system

12.3 Australian Government's commitments to assist households

The Carbon Pollution Reduction Scheme Green Paper outlined the Australian Government's commitments to assist households.

The revenue provided by the auctioning of the carbon pollution permits provides the Government with the capacity to assist Australians — households and businesses — adjust to the scheme.

The Government has committed that every cent raised for the Australian Government from the Carbon Pollution Reduction Scheme will be used to help Australians — households and business — adjust to the scheme and to invest in clean energy options.

In order to give households time to adjust to the scheme, the Government will make an offsetting cut in fuel taxes as part of a broader on‑going response to the rise in the cost of transport fuel which continues to strongly affect Australian households and transport businesses. The Government will cut fuel taxes on a cent for cent basis to offset the initial price impact on fuel associated with the introduction of the scheme. The Government will periodically assess the adequacy of this measure for three years and adjust this offset accordingly. At the end of the three year period the Government will review this adjustment mechanism.

The Government is also committed to provide low‑income households with increases in assistance through the tax and payment system and all households with other assistance to address the impact on their living standards.

The Australian Government is committed to:

  • Increase payments, above automatic indexation, to people in receipt of pensioner, carer, senior and allowance benefits and provide other assistance to meet the overall increase in the cost of living flowing from the scheme.
  • Increase assistance to other low‑income households through the tax‑transfer system to meet the overall increase in the cost of living flowing from the scheme.
  • Provide assistance to middle‑income households to help them meet any overall increase in the cost of living flowing from the scheme.
  • Review annually in the Budget context the adequacy of payments to beneficiaries and recipients of family assistance to assist households with the overall impacts of the scheme, noting that these payments are automatically indexed to reflect changes in the cost of living.
  • Provide additional support through the introduction of energy efficiency measures and consumer information to help households take practical action to reduce energy use and save on energy bills so that all can make a contribution.

As long as support to households takes the form of cash or measures that are not linked to the amounts of specific emissions‑intensive products that are consumed (such as electricity or gas), this assistance should not blunt the incentives for households to change their behaviour in ways that result in lower emissions. In relation to fuel, given recent significant increases in global energy prices and the current cost of living pressures facing households, the Government recognises that households already face strong incentives to reduce their fuel use.

The Australia's Future Tax System review will consider the mechanism for delivering assistance for the Carbon Pollution Reduction Scheme. This will include consideration of how assistance will interact with existing:

  • transfers;
  • income tax arrangements; and
  • taxes on fuel.