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Clean Energy (Income Tax Rates Amendments) Bill 2011

Clean Energy (Income Tax Rates Amendments) Act 2011

Clean Energy (Tax Laws Amendments) Bill 2011

Clean Energy (Tax Laws Amendments) Act 2011

Explanatory Memorandum

(Circulated by the authority of the Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)

General outline and financial impact

The 2011 Clean Energy Legislative Package

The Clean Energy (Income Tax Rates Amendments) Bill 2011 and the Clean Energy (Tax Laws Amendments) Bill 2011 are part of the Clean Energy Legislative Package, which sets up the carbon pricing mechanism (the mechanism) as part of the Government's climate change plan, as set out in Securing a clean energy future : the Australian Government's climate change plan .

The full policy context and background to the mechanism is set out in the explanatory memorandum for the Clean Energy Bill 2011. A description of the Bills which will introduce the mechanism is set out below.

Table 1: The Clean Energy Bill 2011 and related Bills
Bill title Description
Clean Energy Bill 2011 The Clean Energy Bill 2011 creates the mechanism. It sets out the structure of the mechanism and process for its introduction. These include:

•
entities and emissions that are covered by the mechanism;
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entities' obligations to surrender eligible emissions units;
•
limits on the number of eligible emissions units that will be issued;
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the nature of carbon units;
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the allocation of carbon units, including by auction and the issue of free units;
•
mechanisms to contain costs, including the fixed charge period and price floors and ceilings;
•
linking to other emissions trading schemes;
•
assistance for emissions-intensive trade-exposed activities and coal-fired electricity generators;
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monitoring, investigation, enforcement and penalties;
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administrative review of decisions; and
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reviews of aspects of the mechanism over time.
Statutory bodies The Clean Energy Regulator Bill 2011 sets up the Regulator , which is a statutory authority that will administer the mechanism and enforce the law.

The responsibilities of the Regulator include:

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providing education on the mechanism, particularly about the administrative arrangements of the mechanism;
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assessing emissions data to determine each entity's liability;
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operating the Australian National Registry of Emissions Units (the Registry);
•
monitoring, facilitating and enforcing compliance with the mechanism;
•
allocating units including freely allocated units, fixed charge units and auctioned units;
•
applying legislative rules to determine if a particular entity is eligible for assistance in the form of units to be allocated administratively, and the number of other units to be allocated;
•
administering the National Greenhouse and Energy Reporting System, the Renewable Energy Target and the Carbon Farming Initiative; and
•
accrediting auditors for the Carbon Farming Initiative and National Greenhouse and Energy Reporting System.
The Climate Change Authority Bill 2011 sets up the Authority , which will be an independent body that provides the Government with expert advice on key aspects of the mechanism and the Government's climate change mitigation initiatives.

The Government will remain responsible for carbon pricing policy decisions.

This Bill also sets up the Land Sector Carbon and Biodiversity Board which will advise on key initiatives in the land sector.
Consequential amendments The Clean Energy (Consequential Amendments) Bill 2011 makes consequential amendments to ensure:

•
National Greenhouse Energy Reporting System supports the mechanism;
•
the Registry covers the mechanism and the Carbon Farming Initiative;
•
the Regulator covers the mechanism, the Carbon Farming Initiative, the Renewable Energy Target and the National Greenhouse and Energy Reporting System;
•
the Regulator and Authority are set up as statutory agencies and regulated by public accountability and financial management rules;
•
that emissions units and their trading are covered by laws on financial services;
•
that activities related to emissions trading are covered by laws on money laundering and fraud;
•
synthetic greenhouse gases are subject to an equivalent carbon price applied through existing regulation of those substances;
•
the Regulator can work with other regulatory bodies, including the Australian Securities and Investments Commission, the Australian Competition and Consumer Commission and the Australian Transaction Reports and Analysis Centre;
•
the taxation treatment of emissions units for the purposes of the goods and services tax and income tax is clear; and
•
the Conservation Tillage Refundable Tax Offset is established.
Procedural Bills Those elements of the mechanism which oblige a person to pay money are implemented through separate Bills that comply with the requirements of section 55 of the Constitution .

These Bills are the Clean Energy (Unit Shortfall

Charge - General) Bill 2011 , the Clean Energy (Unit Issue Charge - Fixed Charge) Bill 2011 , the Clean Energy

( Unit Issue Charge - Auctions) Bill 2011 , the Clean Energy

( Charges - Excise) Bill 2011 , the Clean Energy

( Charges - Customs) Bill 2011 , the Clean Energy (International Unit Surrender Charge) Bill 2011 , the Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Amendment Bill 2011 and the Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Amendment Bill 2011 .
Related Bills Other elements of the Government's climate change plan are being implemented through other legislation. These are:

•
the Clean Energy (Excise Tariff Legislation Amendment) Bill 2011 and the Clean Energy (Customs Tariff Amendment) Bill 2011 , which impose an effective carbon price on aviation and non-transport gaseous fuels through excise and customs tariffs;
•
the Clean Energy (Fuel Tax Legislation Amendment) Bill 2011 , which reduces the business fuel tax credit entitlement of non-exempted industries for their use of liquid and gaseous transport fuels, in order to provide an effective carbon price on business through the fuel tax system; and
•
the Clean Energy (Household Assistance Amendments) Bill 2011 , the Clean Energy (Tax Laws Amendments) Bill 2011 and the Clean Energy (Income Tax Rates Amendments) Bill 2011 , which will implement the household assistance measures announced by the Government on 10 July 2011. These Bills amend relevant legislation to provide payment increases for pensioner, allowees and family payment recipients and provide income tax cuts and establish new supplements for low-and middle-income households.

The Bills need to be read in the context, in particular, of the Clean Energy Bill 2011.

Household assistance for a clean energy future

The Clean Energy (Income Tax Rates Amendments) Bill 2011 and the Clean Energy (Tax Laws Amendments) Bill 2011 amend the personal income tax system to deliver tax cuts to households as part of the Government's plan for a clean energy future. Households will also receive assistance through amendments to social security legislation contained in the Clean Energy (Household Assistance Amendments) Bill 2011.

The amendments implement the Government's commitment to assist low- and middle-income households with expected increases in the cost of living arising from the introduction of the Clean Energy Future Plan .

Schedule 1 to the Clean Energy (Income Tax Rates Amendment) Bill 2011 amends the Income Tax Rates Act 1986 to deliver two rounds of tax cuts through increases in the tax-free threshold and corresponding adjustments to statutory tax rates and thresholds. From 1 July 2012, low- and middle-income individuals will receive tax cuts that provide permanent assistance for the impact of the introduction of a fixed carbon price. From 1 July 2015, the Government will deliver further tax cuts to provide assistance for the projected impact of a floating carbon price out to the end of the decade.

Schedule 1 to the Clean Energy (Tax Laws Amendments) Bill 2011 amends the Income Tax Assessment Act 1936 (ITAA 1936) to adjust the operation of the low-income tax offset, which together with the changes to the tax-free threshold and marginal tax rates, will better align statutory and effective marginal tax rates.

Schedule 2 amends the Medicare Levy Act 1986 (MLA 1986) and the A New Tax System (Medicare Levy Surcharge-Fringe Benefits) Act 1999 to increase the Medicare levy low-income thresholds and the associated phase-in limits, to ensure that the Government's personal tax reforms do not result in a person incurring the Medicare levy before they have a tax liability.

Schedule 3 amends the ITAA 1936 to merge the pensioner tax offset with the senior Australians tax offset (SATO), creating a new seniors and pensioners tax offset (SAPTO). This Schedule also amends the MLA 1986 to extend the income threshold at which recipients of the SATO are exempt from the Medicare levy to all recipients of the new SAPTO.

These amendments will increase the effective tax-free threshold for all individuals from 2012-13, with a further increase in 2015-16.

Date of effect : The amendments in Part 1 of Schedule 1 to the Clean Energy (Income Tax Rates Amendments) Bill 2011, together with the amendments in Part 1 of Schedule 1 and in Schedules 2 and 3 to the Clean Energy (Tax Laws Amendments) Bill 2011, will come into effect on the later of 1 July 2012 or the commencement of the Clean Energy Legislative Package.

The amendments in Part 2 of Schedule 1 to the Clean Energy (Income Tax Rates Amendments) Bill 2011, together with the amendments in Part 2 of Schedule 1 to the Clean Energy (Tax Laws Amendments) Bill 2011, will come into effect on the later of 1 July 2015 or the commencement of the Clean Energy Legislative Package.

Proposal announced : The measures are based on the Government's announcement of its Clean Energy Future Plan on 10 July 2011 as set out in Securing a clean energy future : the Australian Government's climate change plan .

Financial impact : The financial impact statement is included in the explanatory memorandum for the Clean Energy Bill 2011.

Compliance cost impact : Nil.

Summary of regulation impact statement

Impact : The Regulation Impact Statement (RIS) for the mechanism, entitled Australia's plan for a clean energy future , is available at http://ris.finance.gov.au. The RIS was prepared by the Department of Climate Change and Energy Efficiency and has been assessed as adequate by the Office of Best Practice Regulation.


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