Generous tax breaks may be offered to low-income families and pensioners while middle-class income earners would also be compensated to soften the blow of rising household bills and living costs associated with the proposed carbon tax.
Labor is considering a range of options to ease the pain but is understood to be in favour of slashing tax rates, a measure encouraged by the government’s chief climate change adviser Ross Garnaut.
Professor Garnaut has urged sweeping compensation tax cuts for about half of Australia’s working population to keep household costs down and floated the idea of a one-off cut to the petrol excise to keep bowser prices manageable.
The government rebates could net low income earners about $1500 a year extra in tax breaks, with welfare increases also a likely option, News Ltd reports today. The report says Prime Minister Julia Gillard is considering raising the tax free threshold to deliver a financial break to a larger number of Australians who will be hit by escalating cost of living pressures under a carbon tax.
”Cutting taxes is a live option,” Ms Gillard is quoted as saying. The current Low Income Tax Offset creates a tax free threshold of $16,000 and gives those earning up to $30,000 a rebate of $1500.
Professor Garnaut delivered working Australians their first look last week at what a carbon price would mean to a household if introduced from July 1 next year.
The starting price for the tax on big polluters should be between $20 and $30 a tonne of carbon dioxide - Professor Garnaut predicted $25 - which would most likely rise by 4 per cent a year.
For an average family that would mean a rise in electricity prices of 18 per cent, or about $300 a year, and would add about 6 cents a litre to petrol prices at the bowser.
Gas would rise by up to $150 a year and water by almost $20.
