In brief - There are practical steps you can take to turn the carbon tax risk into an opportunity
It’s less than four months to the 1 July 2012 start date of the carbon tax. Here are four things you can do to make sure your business is ready.
1. Estimate your exposure to the carbon tax.
2. Pass through carbon costs where reasonable and substantiated.
3. Resist carbon costs that are unsubstantiated or unreasonable.
4. Utilise the various governmental initiatives to gain additional benefits.
Carbon tax exposure
Around 60 per cent of Australia’s carbon pollution will be covered by the carbon price. The businesses most directly affected are involved in electricity generation, natural gas retailing, mining, processing, waste disposal and transport. About 500 of these will need to purchase carbon permits or reduce emissions.
Other businesses, particularly those engaged in domestic aviation, shipping and rail transport will face, for the first time, an "effective carbon price" via increased fuel excises and reduced fuel tax credits.
Even if you don’t fall into those categories, you could be affected as carbon costs are passed downstream, particularly if you are a heavy consumer of carbon price sensitive products like electricity, gas, cement, certain chemicals and metals, waste disposal and domestic transport.
Passing on carbon costs
One potential solution is to pass on carbon costs (assuming that there is no impediment to you doing so).
If you claim price increases due to the carbon tax, you need to be sure that they aren’t overstated or based on grounds that are not reasonable and substantiated.
In relation to consumer transactions, this is a key compliance point. Overstated or unjustified carbon price claims may fall foul of the Australian Consumer Law and could result in penalties of up to $1.1 million. To avoid running into trouble, read the ACCC’s Carbon price claims - Guide for business.
It is also prudent to avoid talking to competitors about carbon price adjustments because this could be regarded as anti-competitive conduct.
Resisting carbon mark-ups
Attempts to pass carbon costs on to your business should be scrutinised closely.
If they are unreasonable or unsubstantiated then you may be able to resist paying them.
To complain about attempts to pass through carbon costs unlawfully, contact the ACCC.
Government initiatives, grants and programs
It’s not all doom and gloom! Your business may be entitled to government funding, finance, tax concessions or other benefits to help invest in low pollution technologies or to be more environmentally friendly. Particular opportunities are on offer for:
- manufacturers involved in activities that are emissions-intensive and trade exposed, including aluminium, steel, glass, zinc, pulp/paper, plastics and chemical manufacturing (via the Jobs and Competitiveness Program)
- small businesses (by increasing the instant asset write-off threshold to $6,500 and other measures)
- businesses which wish to retrofit commercial properties (via the Energy Efficiency Program)
- the coal sector (via the Coal Sector Jobs Package (CSJP) and Coal Mining Abatement Technology Support Package (CMATSP))
- the steel industry (via the Steel Transformation Plan and Jobs and Competitiveness Program)
- farmers, forest growers and land managers (via the Carbon Farming Initiative (CFI) which generates credits and tax deductions for carbon sink forests)
- businesses in the food processing, metal forging and foundry industries (via the Clean Technology Food and Foundries Investment Program)
- businesses engaging in R&D in the areas of renewable energy, low pollution technology and energy efficiency (via the Clean Technology Innovation Program)
- businesses which wish to be certified as carbon neutral (under the NCOS Carbon Neutral Program)
- businesses that establish large renewable energy solutions, such as wind or solar farms, or hydro-electric power stations (by selling certificates (LGCs) through the Large-scale Renewable Energy Target (LRET))
- businesses that install smaller renewable energy solutions such as solar panels and water heaters and wind or hydro systems (by selling certificates (STCs) through the Small-scale Renewable Energy Scheme (SRES))
This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2023.