The carbon tax and your building business
Published: 19 April 2012
The Australian Government’s carbon tax will start on 1 July 2012 and will have far-reaching implications for businesses, consumers and the Australian economy, according to Master Builders, Queensland’s peak body for housing and construction.
Master Builders Director of Housing Policy, Paul Bidwell, said there is no doubt the building industry will be affected and for anyone responsible for building contracts, there are some key issues to consider.
“The carbon tax will increase the cost of many goods and services including electricity and many building materials, so you will need to factor these additional costs into building jobs that will run past or start after 1 July 2012.
“While the cost impact will vary depending on the materials used, the size of the building and the location; a number of economic consultants have modelled the price impact of the carbon tax on the cost of a new home.
“For example, The Allen Consulting Group has released a report that estimates that the carbon tax will add around $3,821 to its model two storey brick veneer 200m² house.
“However, this cost increase is just an estimate and the best way to assess the cost impact of the carbon tax on a business will be to speak to associated suppliers about their post 1 July prices.
“Although it is quite likely that the price of bricks, concrete, glass and aluminium will rise as a result of the carbon tax, builders and trade contractors should never inform clients that they are putting their prices up to cover carbon tax, unless they are absolutely certain of the exact costs involved.
“For building contractors, ensuring you pass on the additional costs associated with a particular building job to a client simply makes good business sense. However, in the current situation, this can be challenging task, particularly given many suppliers, manufacturers and distributors are not yet sure about how the carbon tax will affect their prices.
“Master Builders has developed some ‘dos and don’ts’ for building contractors when dealing with the carbon tax in the lead up to its introduction on 1 July 2012.”
- Increase your contract price from 1 July 2012 if you are very confident in your estimates.
- Avoid ACCC penalties for deceptive and misleading behavior and price gouging – unless you are absolutely sure, don’t tell a client that your prices will increase, for example, by 10% or 20%.
- Take the safe approach and tell your client that your prices will rise at the start of the new financial year and leave it at that.
- Advise your client that the price rise is due to the carbon tax if you only have a rough estimate of the cost impact.
- Tell clients that your prices have risen solely because of the carbon tax when in fact they have risen because of a range of factors.
- Increase your price and tell the customer it is to cover the carbon tax. If you cannot fully substantiate your statement, you will likely break the law and the ACCC may prosecute you. If you are found guilty, the penalties are very substantial.
Master Builders has developed information for builders and trade contractors when considering the impact of the carbon tax on contracts. Master Builders members have access to professional advice and can contact us for further assistance.
Julie Russell, Manager – Corporate Affairs via email or phone (07) 3225 6436 or 0414 083 191.