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Carbon Tax, what it means

The Herald's Environment Editor Ben Cubby explains what the carbon tax will mean to Australia.

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Who actually pays the carbon tax?

Roughly 500 big-emitting companies in Australia will pay for each tonne of carbon they emit. The list isn't yet fixed, but the biggest emitters include electricity wholesalers such Macquarie Generation and Delta Electricity, resources companies such as Woodside Petroleum, Rio Tinto and BHP Billiton, and intensive industries such as steel, aluminium, glass and paper makers.

The government says the average household will get $10.10 a week in extra benefits and tax breaks. 

Will that make ordinary things more expensive?

Yes, some things. The government acknowledges these costs will be passed to customers. They expect the average household's cost of living will rise $9.90 a week. This includes $3.30 in electricity, $1.50 in gas and 80 cents for food. Essentially anything made in Australia by a company that is paying the carbon tax may rise in price.

What about my car?

Car fuel won't be affected by the carbon tax.

And other transport?

Airlines will pay either the carbon price or an equivalent on their fuel. That will push up the cost of a domestic flight sector by $2 according the government, $3.50 according to Qantas.

Rail freight and shipping will be subject to an equivalent carbon price on their fuel. The cost of fuel for trucks will rise after July 2014. This may push up the price of some goods as transport companies pass on the costs.

What do I get as compensation?

The government says the average household will get $10.10 a week in extra benefits and tax breaks. These include:

Tax: The tax-free threshold will rise. Currently, taking into account a low-income tax offset, you don't start paying tax until you earn more than $16,000. In 2012, that will rise to $20,542, then to $20,979 by 2015. More than 1 million people will not have to fill out tax returns.

The bottom line is that a worker on $25,000 a year will get a tax cut of about $500 a year by 2015 and most middle income earners will get at least $300. High income earners on more than $80,000 will get nothing.

In 2015-16, there will be further tax cuts for people earning up to $80,000 with most workers getting at least $80 a year.

Pensions: Single pensioners and self-funded retirees will get up to $338 extra per year, and couples up to $510 a year, starting May or June next year.

Families: Families on Family Tax Benefit A will get up to $110 extra per child per year, starting next May or June. Those on Family Tax Benefit B will get up to $69 extra per year.

Benefits: People on allowances such as the dole will get up to $218 a year extra for singles, or $390 for couples, starting May or June next year.

Will the compensation run out?

Some of it might. Pension and benefit rises will be linked to inflation and will be permanent. But the tax cuts, while permanent, aren't calculated to keep in line with the added cost of living beyond 2020.

What the bottom line? Will I win or lose?

All low-income households will be fully compensated for the expected rise in their cost of living, the government says, and most will be better off. Two thirds of middle-income households will be fully compensated, along with about one in five high-income households.

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