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Six things you need to do before July 1 to prepare for the carbon tax

feature-carbon-tax-200-gillyIt’s officially only 10 days until the carbon tax is implemented on July 1 and many businesses are concerned about what it means for them.

The introduction of the carbon tax will see a tax placed on pollution emissions and the related Clean Energy Future Bill plans to cut Australia’s emissions by 20% by 2020 and 80% by 2050.

However, small businesses will not be directly impacted by the carbon tax as it only applies to 500 of Australia’s biggest polluters, primarily power companies and heavy energy users like aluminium smelters.

“When July 1 comes around the sky will not fall in, the earth will keep turning. It will be like the GST and people will say ‘What was that all about?’”, says Freddie Sharp, chief executive of the carbon management solution provider, Climate Friendly.

To make sure July 1 is stress-free for you, here are six things to do to prepare for the carbon tax.

1. Renegotiate your contract with your energy supplier

Energy prices are set to rise by 20% in the next year according to Pangolin Associates, however, the consultancy firm says much of this price rise is due to infrastructure changes and less than half of the price rise in energy is due to the carbon price.

Even so, it is worthwhile trying to renegotiate your agreement with your energy supplier to try to lessen this extra cost.

“There are opportunities to negotiate contracts with energy suppliers, which could result in a 10% saving, and the impact of the carbon tax is expected to be 8% to 9%,” says Iain Smale, managing director of Pangolin Associates.

2. Double check any price increases by suppliers

Prices for goods and services outside energy are unlikely to increase by much and Smale says you should double-check any price increases by suppliers which are attributed to the carbon tax.

“Be aware of suppliers passing on exorbitant increases, anything over 1% should be questioned, and ask them to substantiate where that price rise has come from,” says Smale.

“Price increases should be 0.1% to 0.5% depending on the nature of the supplier, for goods and service outside electricity.

“The Australian Competition and Consumer Commission is already investigating over 100 claims. They are taking it very seriously but people are still going to try it on.”

3. Reassess your own prices

While SMEs are not directly impacted by the carbon tax, the higher costs incurred by big polluters are likely to result in higher prices for electricity and potentially other goods.

You need to think about whether your business needs to increase its own prices to cover any costs incurred as a result of the carbon tax.

But be careful, the ACCC is on the lookout for businesses which hike prices as a result of the tax and then cannot justify the price rise when probed by the watchdog.

ACCC deputy chair Dr Michael Schaper told SmartCompany last month that the impact of the carbon tax was difficult to calculate, so it may be “easiest” for businesses to wait until July 1 to adjust prices.

“The key message is that businesses are always free to move prices as they see fit, but if they choose to move prices up and say it is due to carbon tax they need a reason to do that,” he said.

Schaper also warned small businesses needed to be careful about talking to competitors about any price increases.

“As a small business, you might ask your industry association about the carbon tax increase. That is perfectly legitimate, there is no problem looking at what your competitors are doing. But it has always been illegal for two or more businesses to sit around the table and discuss pricing – that is price fixing,” says Schaper.

The watchdog even launched a carbon pricing hotline this week, which is aimed at making it easier for consumers and business to complain if they suspect false price claims are being made about the carbon price.

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Cara Waters

SmartCompany editor

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Cara Waters is the editor of SmartCompany. Previously, Cara was a senior reporter at the Financial Times website FT Adviser in London and she also worked for The Sunday Times in London.
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