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Thursday, 22 October 2009
Page: 10684


Mr COMBET (Minister for Defence Personnel, Materiel and Science and Minister Assisting the Minister for Climate Change) (9:53 AM) —I move:

That this bill be now read a second time.

This bill delivers on the government’s commitment to assist low- and middle-income households with the expected increases in the cost of living arising from the introduction of the Carbon Pollution Reduction Scheme, and it is therefore a very important piece of legislation.

Climate change threatens Australia’s way of life and our future prosperity, as I explained in relation to the principal bill.

Australians want the government to take action on climate change.

That is why the government has moved to introduce the Carbon Pollution Reduction Scheme bills to parliament today.

It will allow economic growth without growth in emissions.

The introduction of the scheme will have a modest impact on the cost of living for households.

That is why the government is providing low- and middle-income households with upfront assistance to adjust to the impacts of the scheme.

Through a package of cash assistance, tax offsets and other measures, the government will help these households maintain their standard of living while moving to a low-pollution future.

This bill delivers on the government’s commitments given in the Carbon Pollution Reduction Scheme white paper that:

  • pensioners, seniors, carers, veterans, people with disability, the unemployed, students and other allowees will receive additional support, above indexation, to fully meet the expected overall increase in the cost of living flowing from the scheme;
  • low-income households will receive additional support, above indexation, to fully meet the expected overall increase in the cost of living flowing from the scheme; and
  • middle-income households will receive additional support, above indexation, to help meet the expected overall increase in the cost of living flowing from the scheme.

The assistance in this bill delivers on these commitments.

This bill takes account of changes to the Carbon Pollution Reduction Scheme announced on 4 May 2009 that introduce an initial $10 per tonne fixed carbon price in 2011-12 and a flexible market driven carbon price in 2012-13. The composition of the household assistance package reflects this staged approach.

The bill also takes account of other policy changes in the budget, principally the government’s Secure and Sustainable Pension Reform, which will affect how assistance is paid.

The Carbon Pollution Reduction Scheme will see a modest increase in the overall cost of living as we start to recognise the costs of carbon pollution in our everyday lives.

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.

For many households, government payments represent only a share of their income. Therefore increasing payments in line with headline consumer price index impacts alone will not fully restore their standard of living following the introduction of the Carbon Pollution Reduction Scheme.

To adequately compensate these households, compensation needs to go beyond the average household consumer price index impact.

To ensure fairness, household composition has also been taken into account in designing the assistance.

This household assistance will be funded from the auction of carbon pollution permits. The government has committed to use every cent raised from the introduction of the scheme and the auction of carbon pollution permits to help households and businesses adjust and move Australia to the low-pollution economy of the future.

Increases to pension, benefit and allowance payments

The measures contained in this bill will increase the amount of certain social security and Veterans’ Affairs pension and allowance payments by 2.8 per cent over two years. This includes a one per cent increase from 1 July 2011 and a further 1.8 per cent increase on 1 July 2012, including upfront indexation.

These payment increases include the bringing forward of the expected consumer price index related indexation increases that will automatically flow from the scheme’s introduction. These indexation increases are expected to be 0.4 per cent in 2011-12 and 0.8 per cent in 2012-13. The 0.4 per cent expected indexation increase for 2011-12 will be brought forward and paid from 1 July 2011. The 0.8 per cent increase in the expected indexation increase will be brought forward and paid from 1 July 2012.

Because assistance for the cost-of-living-increase provided through certain payments will be brought forward, subsequent indexation arrangements will be adjusted to avoid duplicate assistance.

These increases will apply to a range of income support payments including the age pension, carer payment, veteran service pension, disability support pension, Newstart allowance, youth allowance, parenting payment and special benefit. A list of affected payments is included in the bill.

Increases to family tax benefit

Similar to pension and allowance increases, family tax benefit will be increased to help low- and middle-income families meet the expected overall increase in the cost of living flowing from the Carbon Pollution Reduction Scheme. The increases to family tax benefit will include the upfront payment of the expected automatic indexation increases that will flow from the scheme’s introduction. These automatic increases are expected to be 0.4 per cent in 2011-12 and 0.8 per cent in 2012-13. Subsequent indexation points for family tax benefit payments will be adjusted to avoid the duplication of assistance.

The per-child maximum standard rates of family tax benefit part A for under-16-year-olds and the family tax benefit part A supplement will be increased by 2.8 per cent over two years, in line with changes to pensions and allowances.

Per-family standard rates of family tax benefit part B and the part B supplement will also be increased by 2.8 per cent over two years.

Additional increases are also being made to the base rate of family tax benefit part A to assist recipients of these payments.

Adjustments will be made to indexation of family tax benefit part A and part B rates on 1 July 2012 and 1 July 2013 (and over further indexation points if necessary) to prevent duplication of the amounts brought forward on 1 July 2011 and 1 July 2012.

A new combined family tax benefit and end-of-financial-year supplement will be created for families eligible for both family tax benefit part A and part B where the main income earner has income above $60,000 per year. The value of the supplement will be up to $240 per family in 2011-12 and up to $680 per family in 2012-13 and later years. The supplement will phase in at four cents in the dollar when the primary earner’s income reaches $60,000 until the supplement reaches the maximum amount. The entitlement to this supplement will cease when a family’s entitlement to family tax benefit part A or part B ceases.

Measures delivered through the tax system

Assistance is also being provided through the tax system. These measures provide additional assistance to eligible low and middle-income households through increases to the low income tax offset and various tax offsets for taxpayers who maintain a dependant.

Low income tax offset

From 1 July 2011, the low income tax offset will increase by $150 from $1,500 to $1,650. From 1 July 2012, it will increase a further $280 to $1,930. This will increase the taxable income up to which a taxpayer is entitled to an amount of low-income tax offset to $71,250 for the 2011-12 income year and to $78,250 for the 2012-13 income year and later income years.

Senior Australians tax offset

These increases in the low income tax offset will increase the income level above which senior Australians eligible for the senior Australians tax offset begin to pay tax. From 1 July 2011, eligible senior Australians will have no tax liability until their income reaches $31,474 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.

Dependency tax offsets

Measures for households also include assistance to eligible adults who maintain a dependant. These increases will apply to the dependent spouse offset, the child-housekeeper offset, the invalid-relative offset, the parent-parent in law offset and the housekeeper offset.

From 1 July 2011, these dependency offsets will increase by $60 while, from 1 July 2012, they will increase by $105. These increases will be in addition to the annual increases in these offsets that occur due to automatic indexation.

Transitional payments

A carbon pollution reduction transitional payment will be payable for each of the 2011-12 and 2012-13 income years to independent adults in low-income households who can show they have not been assisted in line with the government’s commitments.

The amount of the carbon pollution reduction transitional payment for the 2011-12 income year will be $200 per claimant and $550 per claimant in 2013.

The carbon pollution reduction transitional payment will become payable to qualifying individuals for the first year from 1 July 2012 and will be assessed with reference to the individual’s income in the 2011-12 financial year. The person will have until 30 June 2014 to lodge a claim for the 2012 carbon pollution reduction transitional payment.

The second year of carbon pollution reduction transitional payment will be assessed with reference to the individual’s income in the 2012-13 financial year and will become payable from 1 July 2013. A person will have until 30 June 2015 to lodge a claim to receive the 2013 carbon pollution reduction transitional payment.

Interaction with pension reform legislation

The government proposes to pay Carbon Pollution Reduction Scheme household assistance to pensioners through the new pension supplement, announced in the budget as part of the pension reform package. As this supplement did not exist in law when this bill was originally drafted, several provisions that enable legislative instruments to be made were included to allow the timing discrepancy to be addressed.

However, the legislative instrument provisions are now unlikely to be used. Instead, the substantive amendments provided by the pension reform legislation to this current bill—amendments which will commence when this current bill is enacted—will reflect the structure of the new pension system following the government’s pension reforms and pay the household assistance to pensioners via the new pension supplement.

More specifically, the pension reform legislation will remove the relevant powers to create legislative instruments regarding payment amounts and mechanisms for pensioners, and include these details in the primary Carbon Pollution Reduction Scheme legislation.

Conclusion

Through measures introduced by this bill, the government will provide upfront support to low- and middle-income households to help in adjusting to a low pollution future.

The government will update the household assistance package on the basis of any new information on the estimated carbon price before the scheme starts. Each year, the adequacy of this assistance will be reviewed in the context of the budget.

As that is the final bill in this collection of measures designed to introduce the Carbon Pollution Reduction Scheme, I would like finally to take the opportunity to thank my colleague the Minister for Climate Change, Senator Wong, and many of my other colleagues—and, in relation to this final bill, in particular my colleague the Hon. Jenny Macklin, from whose portfolio area this household assistance measure is largely drawn. I also want to thank all the officers and staff of the Department of Climate Change and Water, who have worked assiduously over a considerable period of time now to effectively formulate all of this legislation.

It is extremely important legislation in total and, as I have said on a number of occasions on behalf of the government, these bills collectively, in formulating the Carbon Pollution Reduction Scheme, represent easily the most significant economic and environmental reform ever undertaken by an Australian government. I commend all of them to the House.

Debate (on motion by Mr Billson) adjourned.