The carbon tax

What you need to know as a business owner

The carbon tax or the clean energy future as it’s been euphemistically called of late – love it or hate it, will become part of the business landscape this week (on July 1).

But according to a recent survey done by MYOB, more than 40% of small businesses still don’t have a solid understanding of what that really means for them (aside from the promise of paying more for electricity).

Only 294 of Australia’s largest polluters will be required to pay a price on carbon. It will start at $23/tonne and increase by 2.5% on July 1, 2013 and again by the same amount in July 2014. After that it becomes an emissions trading scheme (ETS) where the price will rise and fall depending on market fluctuations.

And whilst there are no direct impacts on smaller businesses or households per se, there’s been much ado about the likely indirect impacts. Many businesses

are predicting that they’re likely to have those costs passed on through the supply chain, especially if their business involves significant freight, travel, waste or large scale manufacturing.

Some businesses have even gone as far as to put up prices in anticipation of errant price rises. For example we’ve heard about businesses putting up the price of food, beer, gym memberships, etc.

BUT you need to be extremely careful about raising your prices as a result of the carbon tax. In fact, we’d advise that you reconsider altogether – until you have actual data on the impact carbon pricing has made on your business.

Why the wait?

The ACCC have established a complaints hotline to flush out carbon tax cheats – ie: those using the carbon tax to mask revenue hikes. Thus far the commission have received more than 200 complaints. And it’s likely to increase – given the ACCC have recently recruited an extra 23 investigators to handle carbon price claims complaints.

The investigators will be looking for businesses specifically trying to mislead their customers using false claims to accept higher prices. This is an important distinction. That means it’s not just about putting up prices, but it’s also about not using the carbon tax as a “buy now, beat the price rise” marketing mechanism. Some people have already fallen foul of the ACCC on this one. And they’re likely to face fines in the vicinity of $6,600-$66,000 (larger businesses face fines of more than $1million).

So how might you prepare for what might be coming your business’ way?

  1. Start by reviewing your expenses? If electricity is going to go up by 10%+ in the next year, where else might you be able to find the equivalent cost savings. We’d be happy to help.
  1. Think about how you can decrease your electricity costs. Are you or you staff leaving computers on all night, lights, air conditioning, hot water heaters – when there’s no need for it? MYOB have some great posters for workplaces to remind staff to ‘switch off’ as part of their Carbon Tax Toolkit. You might like to also have a look at their tips for saving energy and money on page 9 of the toolkit.
  1. Review your supply chain. Ask your suppliers what the effects are likely to be for them and what, if any, additional costs they’re expecting as a result.
  1. If you can, investigate locking in now for electricity, waste, travel pre-carbon tax pricing.
  1. Think about replacing your older equipment. Newer equipment is generally more energy efficient and there’s an added benefit for SME’s of an instant tax write off of up to $6,500 on newly purchased assets from July 1.
  1. If you’re thinking of raising your prices – tread carefully. It won’t just be customers you’ll need to justify your increases to. The ACCC will be watching.

If there’s anything we can do to help you during this end of financial year transition period, please let us know.

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