Hockey rules out carbon tax compensation

Shadow treasurer Joe Hockey has again ruled out retaining Labor's carbon tax compensation package, despite a Coalition source revealing similar measures will be taken to the election.

Mr Hockey said the Coalition remained committed to dumping the carbon tax and any sweeteners connected to it because consumers would benefit from the ensuing lower household energy prices.

''Let me be very clear, if there is no carbon tax, there is no need for compensation because if you don't have a carbon tax, you don't have injury, and by its very design, the carbon tax is meant to cause injury, it's meant to change behaviour, and that's why the government compensates,'' he said.

Mr Hockey's comments suggested the Coalition was considering going to the election in September with a plan to increase taxes.

But they came on the same day Mr Abbott told a national newspaper that tax arrangements similar to Labor's compensation package could continue. Mr Abbott said it should not automatically be assumed that the tax-free threshold, currently set at $18,200 in annual income, would be returned to its pre-carbon price level of $6000.

This raised the prospect of a Coalition government keeping part or all of the tax cut, even though Mr Hockey, who would be treasurer, appeared to rule that out completely. He claimed however that families would be better off though welfare payments and through tax cuts ''based on tax levels without the carbon tax''.

The comments came in a campaign press conference in western Sydney, the agreed battleground of the election due to a cluster of Labor seats regarded as vulnerable.

According to one Liberal, the Coalition is working on a multi-billion dollar tax and welfare plan of its own. The frontbench source, who is close to the Coalition's financial and tax policy deliberations, conceded the positions of Mr Hockey and Mr Abbott appeared contradictory but he said they were in fact compatible.

He revealed that the Coalition was preparing a comprehensive tax policy which would be ''at least equal to the current tax-free threshold'' rate, as well as retaining pension increases.

He said the Coalition's expenditure review committee was working hard to identify savings from which to fund the competing tax cuts and assistance package.

Labor argues that the Coalition has no capacity to fund such measures, which are at present paid for by revenue from the sale of carbon permits.

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