Bills Digest no. 177 2008–09
Carbon Pollution Reduction Scheme Amendment (Household
Assistance) Bill 2009
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage history
Purpose
Background
Financial implications
Main provisions
Contact officer & copyright details
Passage history
Date introduced: 28 May 2009
House: House
of Representatives
Portfolio: Families, Housing, Community Services and Indigenous
Affairs
Commencement: Sections 1 to 3 on Royal Assent. Schedules 1, 2, 3
(Part 2, Division 1 and Part 2, Division 2), 4 and 5 (Part 1)
commence on 1 July 2011. Schedule 5, Part 2 commences on 1 July
2012.[1]
Links: The
relevant links to the Bill, Explanatory Memorandum and second
reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
at http://www.comlaw.gov.au/.
The purpose of the Bill is to
provide financial assistance to low and middle-income households
from the expected increases in the cost of living arising from the
introduction of the Carbon Pollution Reduction Scheme (CPRS). The
Bill is part of a package comprising 11 Bills, the principal one
being the Carbon Pollution Reduction Scheme Bill 2009.
The Carbon Pollution Reduction Scheme Green Paper[2] outlined, in Chapter 8,
the proposed household assistance measures and the impacts of the
CPRS on households. The commitments outlined in the Green
Paper of the Government are 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 and payment 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, and
- 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.
The Government has also indicated in the terms of reference for
Australia’s Future Tax System Review that it is to consider
the interrelationships between the tax and transfer payment systems
and the scheme.
According to the outline in the Explanatory Memorandum:
It is anticipated that the Carbon Pollution Reduction Scheme
will result in increases in the cost of living of 0.4 per cent in
2011–12 and 0.8 per cent in 2012–13, resulting from an
initial $10 per tonne fixed carbon price in 2011–12 and a
flexible carbon price in 2012–13.[3]
In this Bill the Government is proposing to provide assistance
with upfront support to low and middle-income households through a
package of direct cash assistance and tax offsets to help these
households adjust. It will do this by amending the Social
Security Act 1991, the A New Tax System (Family
Assistance) Act 1999, the Veterans’ Entitlements Act
1986 the Military Rehabilitation and Compensation Act
2004, the Income Tax Assessment Act 1936, the
Medicare Levy Act 1986, and some related administration
Acts.
The Bills in the package were referred to the
Senate Economics Committee[4] for inquiry and report by 15 June 2009.
The reader is referred to the
principal
Bills Digest for full commentary on the CPRS generally.[5] There has been some
feedback as a consequence of the Green Paper on the impact of the
CPRS on low income earners. For example, the Combined Pensioners
and Superannuants Association of New South Wales Inc. in its
submission welcomed the Government’s recognition that the
CPRS is forecast to increase household costs by 0.9 per cent and
pensioner household costs by 1.1 per cent (on average), and noted
it ‘is imperative that these costs are covered by the
Australian Government to ensure that financial hardship is not felt
by low income households’.[6]
Similarly, the St Vincent de Paul Society in its
submission on the Green Paper stated:
The cost allocation of both the carbon trading arrangements and
the interval meter rollout on household bills are likely to be
apportioned in the first block of consumption for the carbon
trading arrangements, as this component of household consumption
will be dominated by base load energy generation and hence the bulk
of carbon emissions. While the interval meter rollout cost
will most likely be apportioned to changes in the fixed energy
charge.
In both cases this will see the cost of both disproportionally
impacting upon lower energy consuming households, that is, low
income and the environmentally conscious. Obviously an unintended,
but perverse, policy outcome.[7]
The
White Paper Fact Sheet on the impact of the scheme on the cost
of living said:
Energy is emission-intensive. At a carbon permit price of $25,
households will face increased energy costs of, on average, $4 per
week for electricity and $2 per week for gas and other household
fuels.
For an average household, these estimates are the upper bound of
the estimated increase in energy costs. They assume that permit
costs are immediately and fully passed through to consumers, that
firms do not change their production processes, and that households
do not change their consumption behaviour in response to the Scheme
(for example, by conserving energy).
- Assistance to low-income households will fully meet the
expected overall increase in their cost of living.
- Assistance to middle-income households will help meet the
expected overall increase in their cost of living.
- All households will benefit from fuel tax reductions and
support to take practical action to reduce energy bills.[8]
However, the Australia Institute argues that it is important
that there are ‘complementary measures’ to translate
household energy savings into real financial and environmental
benefits. It argues that price increases will not make
consumers change their behaviour. In fact, the only option to
individuals who wish to reduce emissions below the level set by the
government is to purchase emissions permits and then ‘rip
them up’.[9]
The Opposition spokesperson, Andrew Robb MP, indicated that the
Opposition will also oppose this particular Bill. He stated in his
second reading speech in the House of Representatives:
If this scheme were working in tandem with the schemes of other
countries around the world, the impact would not be anywhere as
severe and the requirement for compensation would not be anywhere
near as severe. The issue of churn and recycling in the community
and the cost of administration associated with that all amounts to
poor policy and for that reason we are opposed to this
bill.[10]
The Opposition position is to oppose the emissions
trading scheme until after the convention in Copenhagen[11], and according to
another report:
The Greens believe the scheme is too soft, the Nationals
don’t believe we need a scheme, and Nick Xenophon thinks it
needs more work.[12]
Family First Senator Fielding at the time of writing was still
considering his position.
The Senate Economics Committee provides a table on the fiscal
impact of CPRS package sourced to the Explanatory Memorandum of
this Bill.[13]
Schedule 1 Part 1 inserts new Division
8 – Increases related to Carbon Pollution Reduction
Scheme – into the Social Security Act 1991.
Proposed section 1206GF sets out the objects of
the new Division which are to increase the amounts of social
security payments to persons receiving the:
- age pension
- Austudy payment
- bereavement allowance
- carer payment
- disability support pension
- Newstart allowance
- parenting payment
- partner allowance
- sickness allowance
- widow allowance
- widow B pension
- wife pension
- youth allowance, and
- payments that the Minister has specified by legislative
instrument under proposed section 1206GM
Another object is to adjust indexation of those amounts after
they are increased (proposed subsection
1206GF(2)). The Explanatory Memorandum states the
adjustment is to avoid duplicating assistance.[14]
The increases will be by 2.8 per cent over two years.
There will be a 1 per cent increase on 1 July 2011
(proposed section 1206GH) and another of 1.8 per
cent on 1 July 2012 (proposed section 1206GI). As
indicated in the Second reading speech, this is additional support,
above indexation, to fully meet the expected overall increase in
the cost of living flowing from the scheme.
Subdivision C, proposed sections
1206GJ and 1206GK provide for adjusted
CPI indexation of the increased amounts.[15]
Proposed subdivision D allows other provision
for increases and adjustments. According to the Explanatory
Memorandum:
The need for this section arises as a result of forthcoming
amendments to the Social Security Act flowing from the
Government’s Secure and Sustainable Pension Reform package.
Those forthcoming amendments have not been finalised at the time of
introduction of this bill, and therefore, capacity has been built
into this bill to address these aspects by way of a legislative
instrument.[16]
Proposed section 1206GL therefore allows the
Minister to provide for increases in rates by way of legislative
instrument. Any such instruments made will be disallowable by
Parliament. There will be amendments necessary to this
subdivision when the pension reforms bill is produced.[17]
Under Schedule 1, Part 2 – Transitional
payments, two payments will be made to qualifying
individuals. These transitional payments are to be made to adults
in low-income households who do not receive sufficient assistance
from other measures in the Bill. According to the Explanatory
Memorandum[18]
summary on this Part of the Bill, two payments will be made to
qualifying individuals. The first payment from 1 July 2012 will be
a flat $200 per claimant. The second payment from 1 July 2013 will
be a flat $550 per claimant (proposed paragraphs 1061XAAZC
(a) and (b) respectively). To
qualify the claimant has to satisfy the income requirements set out
in proposed section 1061ZAAZ of $30 000 (single no
children), $45 000 (couple no children) or $60 000 (singles, and/or
couples with a dependent child). Note in the case of couples,
because of the operation of clause 3 of Schedule 3 to the A New
Tax System (Family Assistance) Act 1999, it is a couples
combined income is to be taken into account when determining
whether a person meets the income requirement. There are also
additional conditions before a person qualifies for the payment
– these are set out in proposed sections
1061ZAAZA and 1061
ZAAZB.
Schedule 2 - Assistance to Families,
amends the A New Tax System (Family Assistance) Act 1999
to insert proposed Part 6 – FTB combined
supplement- into that Act, and consequential amendments to
the A New Tax System (Family Assistance) (Administration) Act
1999. According to the Explanatory Memorandum[19], the Schedule provides for an
increase in certain family tax benefit rates on 1 July 2011 and
again on 1 July 2012, in addition to usual indexation on those
dates.
Schedules 3 and 4 make
amendments to the Veterans’ Entitlements Act 1986
and the Military Rehabilitation and Compensation Act
2004.
Schedule 5 amends the Income Tax Assessment
Act 1936 to increase the low income tax offset to $1 650 for
the 2011–12 income year and to $1 930 for the 2012–13
income year and later income years. For senior eligible
Australians:
From 1 July 2011, eligible senior Australians will have no tax
liability until their income reaches $41 272 for singles and $27
680 for each member of a couple. From 1 July 2012, eligible senior
Australians will have no tax liability until their income reaches
$32 948 for singles and $29 547 for each member of a couple.
Adjustments will also be made to the Medicare levy thresholds for
senior Australians.[20]
. However,
none of the provisions will commence if section 3 of the Carbon
Pollution Reduction Scheme Act 2009 does not commence on or
before 1 July 2011.
[2].
Department of Climate Change,
Carbon Pollution Reduction Scheme Green Paper, Department
of Climate Change, Canberra, July 2008, p. 277.
[3].
Explanatory Memorandum, Carbon
Pollution Reduction Scheme Amendment (Household Assistance) Bill
2009, p. i.
[4].
Senate Economics Committee,
Inquiry into the carbon pollution reduction scheme bill 2009
and related bills, Parliament of Australia website, viewed 19
June 2009,
http://www.aph.gov.au/Senate/committee/economics_ctte/cprs_2_09/index.htm.
[5].
L Nielson, J Styles, A Talberg and J
Tomaras, ‘Carbon Pollution Reduction Scheme Bill
2009’, Bills digest¸ no. 165,
2008–09, Parliamentary Library, Canberra, 2009, viewed
on
19 June 2009, http://www.aph.gov.au/Library/pubs/bd/2008-09/09bd165.pdf
[6].
Combined Pensioners and
Superannuants Association of New South Wales Inc.,
Submission, Carbon Pollution Reduction Scheme Green Paper,
10 September, 2009 (sic), to be found at: www.cpsa.org.au.
[7].
St Vincent de Paul Society,
Submission to the Department of Climate Change, Carbon
Pollution Reduction Scheme, September 2008, viewed 19 June
2009,
http://www.climatechange.gov.au/greenpaper/consultation/pubs/0785-st-vincent-de-paul-society.pdf
[8].
Australian Government, Scheme Impact
on the Cost of Living, Fact Sheet, Canberra, December
2008, viewed 19 June 2009,
http://www.climatechange.gov.au/whitepaper/factsheets/pubs/026-scheme-impact-on-the-cost%20of-living.pdf
[9].
R Denniss, Fixing the Floor in the
ETS, The role of energy efficiency in reducing Australia’s
emissions, Research Paper No. 59, November 2008.
[10].
A Robb, Shadow Minister for Infrastructure and
COAG and Shadow Minister Assisting the Leader on Emissions Trading
Design, House of Representatives, Debates, 4 June
2009,
p. 49.
[11].
L Dodson, ‘The heat is on to reach a deal
on emissions trading’, Australian financial review,
15 June 2009, p. 5.
[12].
P Coorey, Opinion, ‘No rush now for that
dignity fix’, Sydney morning herald, 15 June 2009,
p. 9.
[13].
Economics Legislation Committee, Carbon
Pollution Reduction Scheme Bill 2009 and related bills
[Provisions], Report, 15 June 2009.
[14].
Explanatory Memorandum, Carbon Pollution
Reduction Scheme Amendment (Household Assistance) Bill 2009, p.
3.
[15].
Explanatory Memorandum, pp. 5–7.
[16].
Explanatory Memorandum, p. 7.
[17].
Explanatory Memorandum, p. 7.
[18].
Explanatory Memorandum, p. 11. Further details
on Part 2 can be found at pp. 11–16 of the Explanatory
Memorandum.
[19].
Explanatory Memorandum, p. 17.
[20].
J Macklin (Minister for Families, Housing,
Community Services and Indigenous Affairs), ‘Second Reading
Speech: Carbon Pollution Reduction Scheme Amendment (Household
Assistance) Bill 2009’, House of Representatives,
Debates, 28 May 2009, p. 12.
Diane Spooner
19 June 2009
Bills Digest Service
Parliamentary Library
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