Tax cuts deferred as carbon price falls

Tax cuts deferred as carbon price falls

The falling global carbon price has led the federal government to revise down its forecasts and defer a tax cut earmarked for 2015.

The federal government has deferred a $1.59 a week tax cut, which was due to start in 2015, because of the falling global carbon price.

But Climate Change Minister Greg Combet insists the promised cut is "deferred" and not scrapped.

Mr Combet told reporters in Sydney on Wednesday the carbon price forecasts would be revised down in next Tuesday's budget, but he would not indicate what the new forecasts would be.

The carbon price is currently fixed at $23 a tonne and is paid by the biggest polluters, such as coal-powered electricity stations.

In 2015, the price will move to a market-based mechanism linked to the European emissions trading system.

Last year's budget forecast the price in 2015/16 would be $29 a tonne, but recent falls in the European market mean it will now be much lower.

The initial tranche of tax cuts and pension rises to compensate for the carbon price has already been rolled out.

That package trebled the tax-free threshold from $6000 to $18,200, taking about one million low-paid people out of the income tax system, and boosted family payments.

But Mr Combet said that because there won't be a carbon price-related cost increase for households in 2015/16, the budget would defer a further round of tax cuts for that year.

"Those tax cuts, which of course are two years away, were to be in the order of $1.59 per week for most people earning up to $80,000 a year," he said.

"I say they are deferred because when the carbon price rises in the future, and there will be regular reviews, those tax cuts will still be implemented at that point in time."

Mr Combet said the carbon price revision would not lead to businesses slowing their efforts to minimise emissions.

"The assistance to industry is almost entirely provided in the form of free permits," he said.

"When the value of a permit goes down because of a revised forecast or a change in the market price, for example, then the value of the assistance also reduces but the cost also reduces - that's an automatically adjusting mechanism."

He said carbon pricing remained an important reform "and it's working".

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Tags Australian Governmentcarbon pricingtax reform

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