Australian Prime Minister Julia Gillard on Sunday confirmed that the government's plan on carbon tax will not apply to petrol, due to the intervention of independent member of parliament (MP) Tony Windsor.

It is the latest in a series of announcements by the government, as it releases details of a mechanism to price carbon, which is still subject to agreement with the Greens and independent MPs.

"Petrol prices will not be touched by carbon pricing," she was quoted by ABC Television as saying on Sunday.

"Families, trades, small business people do not have to worry about a petrol price increase."

Gillard acknowledged that one of those independents, Tony Windsor, played a major role in the decision to exempt petrol.

"He has put forward a powerful case for people in country Australia who have got no choice but to jump in their cars to get places," she said.

While a 25 U.S. dollars a ton carbon tax would add about six U. S. cents a liter to the cost of petrol, Gillard said the exemption would not be a temporary measure, and petrol will remain exempt when the carbon tax moves to an emissions trading scheme (ETS).

However, big business are not happy with the move to exempt patrol.

According to Peter Anderson from the Australia Chamber of Commerce and Industry (ACCI), it will simply shift the price burden of a carbon tax to other areas of the economy.

"If you start exempting particular products or particular industries or particular groups, you simply transfer the cost of that tax in a way that becomes more burdensome for those who are not exempted," he was quoted as saying by Sky News on Sunday. " That is a danger."

Nationals leader in the Senate Barnaby Joyce said no matter what exemptions the government made, the carbon tax would hit Australians hard.

Meanwhile, Gillard on Sunday also announced that self-funded retirees will be compensated under a plan to provide quarterly cash payments, in a move to help them deal with the impact of the proposed carbon tax.

About 300,000 self-funded retirees will receive household assistance with about 100,000 of those also receiving tax cuts.

The assistance will begin on the same date the carbon tax deal is signed off on, but Gillard would not reveal how soon that will happen.

The federal government wants to impose the carbon tax from July 2012.