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HIA - how the carbon tax will apply to residential building


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How the Carbon Tax May apply to Residential Building

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HIA - how the carbon tax will apply to residential building

  1. 1. FOR IMMEDIATE RELEASE 14 July 2011 HOW THE CARBON TAX WILL APPLY TO RESIDENTIAL BUILDINGThe Federal Government’s plans to introduce a carbon pricing mechanism will impactacross the entire Australian economy. The residential building industry will beaffected more than most.Once the legislation is passed, facilities that emit more than 25,000 tonnes of carbondioxide per year will pay a fixed carbon tax of $23/t from 1 July 2012 – increasing to$24.15/t in 2013/14 and $25.40/t in 2014/15, and then transition to an emissionstrading scheme from July 2015.Around 500 facility operators will be required to pay the new carbon tax. Foreveryone else, the tax will be embedded in the products they produced, such aselectricity, gas and other fuels, and in the primary materials such as steel, glass,cement, bricks and aluminium. The cost will further increase progressively as theypass through the various manufacturing and fabrication phases.How much will it add to a new home?As you would have seen in the press, on news websites and through radio and ontelevision over the past 3-4 months, HIA’s modeling work estimates that theaggregate increase in cost of all the inputs (building materials, products, assemblies,administration, etc) into an average new house and land package due to the carbontax will be between $5,000 and $6,000. Based on the details announced last Sunday(including the initial rate of $23/t, zero impact on petrol and diesel for general purposeand compensation rates for "emissions-intensive, trade-exposed" emitters), weanticipate our final analysis will show an increase of between 1.2% and 1.4%.When will we know for certain?It’s impossible to know for certain what the cost increase will be exactly.However, to provide the best possible estimate for members, HIA is analysing theflow-on cost increase for each building material, product and assembly used in a newhouse and land package, based on the details announced last Sunday. The analysisfollows each input though its various stages of production, manufacture andfabrication and the fuels used at each stage (electrical, gas, coal, oil). It models theenergy consumption, embodied carbon and cost increase, based on the bill ofquantities for HIA’s Standard House design, to determine a realistic estimate of theaggregate cost increase. Our final estimates will be available within the next twoweeks.How can I pass on the cost increase?Unlike the GST which applied a 10% tax immediately to every transaction on thesame date, under the carbon tax the cost of building materials, products andassemblies will increase progressively as they pass through the various productionphases – some faster than others. Members should therefore factor in increases inthe cost of inputs on projects expected to continue over the transitional period -around the proposed 1 July 2012 implementation date – and beyond.