Carbon Tax

February 24th, 2012

It seems anywhere you go nowadays you cannot avoid any mention of the Carbon Tax, recently passed in the Lower House by the Gillard Government and scheduled to come into effect in July 2012. Yet as much controversy and confusion it has created, many still are unaware just what it is or what it means, especially for small businesses.

Just What Is The Carbon Tax?
The Carbon Tax, in the simplest terms, means that polluters will pay at least $23 per tonne of carbon that is released into the atmosphere. This price will continue to increase until 2015 when the tax will then move to a trading scheme that allows the market to set the cost per tonne. The Carbon Tax is believed to be the most effective way in reducing the impact of carbon output and climate change on our environment and the option that costs the least in achieving this aim.

How Small and Medium-Sized Businesses Fare
However, as effective and cheap as the Carbon Tax has been heralded, many small businesses have voiced their concerns as to how the Carbon Tax will adversely affect them as research by the Australian Chamber of Commerce and industry suggests that small and medium-sized businesses will be the ones most likely to suffer.

Small and medium-sized businesses haven’t received any assurances by the Gillard Government of how the Carbon Tax will affect them and have had to piece information together from the media. They will also not be rewarded any compensations that larger households and businesses will be entitled to, while small businesses will also have to struggle to keep costs down daily by taking further energy efficiency measures. They will also be forced to absorb flow-through power costs. Small businesses have already suffered as a result of high interest rates and a heightened Australian dollar, and will also receive no real incentives that will help cut carbon intensity. Higher costs and lower competitiveness for small businesses will also result in lower probability.

According to ACCI Chief Executive Officer Peter Anderson, the research highlighted by the ACCI and conducted by consultants Castalia, small businesses will be ‘unfairly squeezed by having costs passed down the supply chain but [will be] less able than larger businesses to pass those costs onto consumers because of competitive pressures.’

The Advantages
However, there will be some advantages for small and medium businesses under the Carbon Tax such as being provided with a Small Business Support Line and the creation of a $40 million Energy Efficiency Information Grants program, as well as extending the small business instant asset write-off from $5000 to $6500 for businesses with an aggregated turnover of less than $2 million per annum for depreciable assets from the 2012-13 income year.

As controversial and as the Carbon Tax has been and despite some of the positive aspects it will have for small and medium businesses, it will also mean rising costs and less competition, and who knows in the long-term just what other problems will arise for small and medium businesses in particular because of the new tax.