Prime minister Julia Gillard warms to carbon tax help

The upper limit of the government’s carbon tax compensation package could be raised, with some families on incomes of up to $170,000 a year in line to receive some form of financial respite.

Government sources yesterday said the broader compensation, however, would be tied to family circumstances such as whether they were receiving single or dual incomes and the number of children in the household. The revelation comes after months of debate about whether families on incomes of $150,000 a year could be considered “rich”.

The government was heavily criticised following the budget for setting the cut-off for family tax payments at $150,000, because it did not take into account the higher cost of living in Sydney.

It was widely expected the carbon tax would be applied to a similar formula, but sources have confirmed that this threshold would not be applied under a carbon tax.

“No decision has been made on the final package but the government has made it clear there will be generous assistance for households,” Climate Change Minister Greg Combet said last night.

“As part of the assistance package, the government has guaranteed more than half the money collected from big polluters will go to assist households. This means millions of households will be better off and, importantly, this assistance will be permanent.

“Under the failed Carbon Pollution Reduction Scheme, families with more than two children were still considered “middle” income earners on combined income of between $130,000 and $160,000 a year.

The Daily Telegraph has been told the compensation plans for the carbon tax will reflect similar income brackets as the CPRS, which was drafted in 2008 and has not since been indexed to reflect the CPI.

Under the final package, yet to be agreed to by Multi-Party Climate Change Committee, low-income earners would remain a priority and be given back the bulk of the revenue raised from the tax.

But some families on incomes of more than $150,000 – also struggling with the cost of living, particularly in Sydney – are expected to be assisted through adjustment to the family tax payments system. High income earners would miss out.

Welfare groups have demanded that any compensation be reserved for low-income families.

Climate change adviser Ross Garnaut, in his final report, also recommended that assistance through tax cuts should be capped at $80,000.

Final details of the tax and the compensation scheme are likely to be released as early as next month, with agreement between members of the MPCCC now more likely following the release of the Productivity Commission’s investigation into the tax yesterday.

The report, which examined climate change policies of our major trading partners, concluded that while not all countries had adopted an emissions trading scheme, a carbon price was the most cost-effective and cheapest way to tackle the climate change issue.

It found the total cost of abatement subsidies spent last year in Australia to reduce emissions by 10 million tonnes could have been achieved more effectively with a $9 carbon tax.

For more on Prime Minister Julia Gillard and the proposed carbon tax go to The Daily Telegraph.