News & Views

14th August 2014

How Does the Carbon Tax Repeal Affect You?

On 17 July 2014, Parliament passed the Clean Energy legislation (Carbon Tax Repeal) Act 2014 (Cth). The Act repeals the Clean Energy Act 2011. This means that from 1 July 2014 the Carbon Tax no longer applies.

The repeal of the Carbon Tax also lead to changes to the Competition and Consumer Act (the CCA) which now make it an offence to:

  • Engage in price exploitation in relation to the repeal of the Carbon Tax; and
  • Make false or misleading representations concerning the effect of the Carbon Tax scheme or its repeal on the price for the supply of goods or services.

New CCA Offences

Under the amendments to the CCA, the ACCC has been given new powers to:

  • Monitor prices in key sectors (price monitoring);
  • Take action against entities in key sectors that attempt to exploit other businesses and consumers by failing to pass through all their cost savings from the Carbon Tax repeal (Carbon Tax price reduction obligation) (gas and electricity suppliers); and
  • Take action against entities that make false or misleading claims about the effect of the Carbon Tax repeal or Carbon Tax scheme on the price for the supply of goods or services (false or misleading representations).

While the ACCC’s focus will be on the natural gas, electricity and synthetic greenhouse gas industries, there are some important changes which need to be considered by all companies who increased their prices in 2012 as a result of the Carbon Tax.

Suppliers of Regulated Goods

Electricity producers and retailers, natural gas retailers and importers of bulk synthetic greenhouse gases can expect to receive Carbon Tax removal substantiation notices from the ACCC over the next few months, requiring them to provide a statement to the ACCC estimating the cost of their savings from the repeal of the Carbon Tax.  In addition, electricity producers and retailers, and natural gas retailers, will be required to provide statements to their customers.

If your business supplies regulated goods, you will be required to pass through all cost savings, direct and indirect, attributable to the Carbon Tax repeal.  The aim is to ensure that consumers benefit from expected price reductions.

Misleading and Deceptive Conduct

While obligations to pass through savings will not directly apply to companies and individuals who do not supply regulated goods, the ACCC will scrutinise the conduct of companies in relation to false and misleading statements about the impact of the Carbon Tax repeal on their prices.

A new Section 60K under the CCA now makes it an offence for corporations, in trade or commerce, in connection with the supply or promotion of any goods or services, to make false or misleading representations about the effect of the Carbon Tax scheme or its repeal on the price for the supply of goods or services between 1 July 2014 and 30 June 2015.

Top of the list for the ACCC are councils who increased their rates, mostly in respect of waste management services, as a result of Carbon Tax costs and Qantas who introduced a surcharge when the Carbon Tax was introduced but has stated that it will not be reducing its prices, despite the repeal.   While it is questionable whether there is in fact a requirement to reduce prices in these circumstances, the ACCC has said it will require detailed reasons and evidence if those who increased their prices as a result of the Carbon Tax do not reduce them now it has been removed.

What you should do

If you increased your costs as a result of the carbon price in 2012, to avoid breaching the new provisions of the CCA in relation to its repeal, you should:

  • Refrain from making any representations about the impact of the Carbon Tax repeal on price.
  • If you increased your prices as a result of supply chain increases, you will need to consider how these on-cost increases can be identified and passed on.
  • Review your materials to ensure that there are no false and misleading statements in them about the impact of the Carbon Tax.
  • If you are a supplier of regulated goods you must pass through all of your direct and indirect cost savings attributable to the repeal of the Carbon Tax to your customers.

NECA SA would like to thank Lynch Meyer for contributing this article for our members.

For further information, contact the NECA SA office on (08) 8272 2966 or Lynch Meyer on (08) 8223 7600.