Introduction The Australian government has heeded to the international concerns of environmental conservation and thus, set up policies that would help it to cut down its high carbon emissions. As a result, the government established a Carbon Price Mechanism which states that from the 1 st of July 2012, the prices of carbon dioxide equivalents would change. One tonne of CO 2 which is emitted by about 500 of the country’s largest emitters would cost $23 per ton. This new price would remain fixed for three years starting from 2012 to 2015. This would be indexed per year at a rate of 2.5%. After that period, the government will initiate Market-Based Emissions Trading Scheme and through this systems, the government will define emission level cap. The market mechanism on the other hand will play their role in determining the price. The carbon price will not affect the fuel consumption by households for lightning, transportation, renewable fuels like ethanol, biodiesel and light commercial motorcars (Graham and others 2008, 114). Effect of Rising Energy Prices on Households Many people and organizations claim that they support the introduction of the carbon pricing mechanism in Australia. Nonetheless, the cost of the poor families who earn very little to afford gas will suffer (Seaton 2011, 3). This is because they will be required to spend more of gas because the carbon pricing is intended to cut or reduce pollution that is greatly associated with the uses of the other sources of fuels. Whereas the anticipated increases in the prices could comparatively modest, they are instruments and important enough to bring further harsh conditions to families that live on low earnings (Hatfield-Dodds and others 2007, 78; Aldy and others 2010, 905). The government is setting up strategies that will ensure that the support accorded to the poor families will still be in the spirit of environmental conservation and support carbon price policy. In addition, the support provided should ensure that the producers and retailers adjust their prices accordingly (Tamiotti and others 2009 167). The help accorded to the poor households need to take care of a number of factors that are deemed reasonable (Seaton 2011, 3). They need to be reviewed and adjusted so that it can match future transition to flexibility. That means dealing with things like arrangements (Hatfield-Dodds and others 2007, 78). Compensation should only be done for cost impact of the carbon price. In this context, the policy should not seek to address the fuel prices that were caused by other factors ((Hester and Harrison, 2009, 56)). In view of the proposed carbon pricing by the Australian government, there needs to be assistance provided which can be achieved through combination of the following factors:  1. The recurring cash expenses through the income support system which are derived by calculating the values as dollar amount and sufficient indexation (Hatfield-Dodds and others 2007, 78), and  2. Adjusting tax system including low income tax offsets, family tax benefits Even though taxation and transfer system can be used to offer the best means of ensuring fairness to exploit assistance for households, the existing payment levels and systems are u