Today is a really big day for the country, for the economy, and for the families and businesses who stared down a global recession together and now look to the future. A short time ago Prime Minister Rudd and I announced the ambitious tax reforms that make up the initial steps in our tax reform agenda. This plan for our tax system will strengthen and broaden the economy and take important steps towards a fairer, simpler system.
We also released the report of the Australia’s Future Tax System review – the most comprehensive review of the tax system in the last 50 years. It’s easy to think that this journey of tax reform started with the commissioning of that independent tax review two years ago, but for me it actually started a lot earlier when I became Shadow Treasurer in 2004. Ever since I was appointed to that role I’ve thought about one thing, and that’s the need to manage the next resources boom better than our predecessors managed the last.
I want all sectors of the economy to grow together – not apart. In a two-speed economy it is our responsibility to do what we can to grow other areas of the economy without holding the mining sector back. Our reforms will make sure that a fair share of the proceeds of the next boom are dedicated to building a stronger, broader economy. They will be difficult to implement, but I have no doubt that they’re the right set of policies to take Australia forward – building on our success during the global financial crisis to ensure we make the most of our future opportunities.
Our resources belong to Australians and Australians deserve a fair share. Our new Resource Super Profits Tax will tax the super profits of resource projects – that is, those profits above a normal return on capital investments – at a rate of 40 per cent, with existing resource projects to benefit from generous transitional arrangements.
The proceeds of the Resource Super Profits Tax will fund three ambitious sets of economic reforms: business tax reform, infrastructure, and an historic boost to national savings. This will ensure all Australians get a fairer share of this resources boom, with the benefits directed to where they can make the best impact on jobs, growth and savings. It will also ensure sectors of the economy and parts of the country that find themselves disadvantaged by the mining boom will have a chance to thrive.
I’ve lost count of the amount of times people from our manufacturing, construction or tourism sectors have come up to me in my community and around Australia, not to say that they’re unhappy with the success of our resources sector but to explain to me the specific challenges they encounter. That’s why I’m so proud to be able to give those businesses some tax relief today – especially the small businesses around the country who did it so tough during the global recession.
Around a third of the revenue raised by the Resource Super Profits Tax will go towards our business tax reform program which will create new jobs and grow the economy right around the country – to the ultimate benefit of all Australians. We’re going to cut the company tax rate to 29 per cent in 2013-14 and 28 per cent from 2014-15 and give small businesses a head start on the cut. We will also cut red tape and deliver a simpler tax system for Australia’s small businesses by providing an instant write-off of assets worth up to $5,000 and simpler depreciation arrangements for other assets.
Some of the proceeds of the Resource Super Profits Tax will also go into a new infrastructure fund that will make infrastructure spending a permanent structural feature of state and Commonwealth budgets. This fund will invest something like $5.6 billion in infrastructure over the next decade, starting with an annual contribution of $700 million in 2012-13. We will also invest $1.1 billion over four years in a new Resource Exploration Rebate to better support resource exploration companies.
The final third of the package will enhance the superannuation savings of Australians. Over time we will increase the superannuation guarantee rate to 12 per cent, refund up to $500 of contributions tax for workers with incomes up to $37,000, raise the superannuation guarantee age limit from 70 to 75, and increase the concessional contribution cap for those aged over 50. These reforms will boost savings and make sure that whenever the commodities boom ends we have more to show for it.
There are big gains to be made from these reforms. The changes to mining taxation are expected to increase GDP by 0.3 per cent in the long run, and the cut in the company tax rate by 0.4 per cent. That means that taken together, the reforms we’re announcing today will provide a long-run boost to GDP of around 0.7 per cent. They will also increase real after-tax wages by around 1.1 per cent in the long run – equivalent to an extra $450 per year for an average worker.
I’m under no illusions about how difficult it will be to win support for our package of reforms. But it’s always the really worthwhile reforms – the big changes – that are the toughest to implement.
You can find more information on these historic initiatives on our Stronger, Fairer, Simpler website at www.futuretax.gov.au. There you can subscribe to the site and receive regular updates and advice. For a hard copy of any of this information or further details, simply call 1800 614 133.
In the last couple of weeks we’ve secured fundamental reform of the financing of our nation’s health system and announced an ambitious 10-year agenda for tax reform. I’ll have more to say on further actions to convert our successes during the global recession into sustainable growth and lasting gains for families when I deliver this year’s Budget in nine days time. Those looking for a big-spending election year Budget won’t find one. Instead it will be a no-frills Budget focused on responsible economic management and strong fiscal discipline – funding our improvements in health and hospitals while sticking to our strict limits on spending.
Treasurer of Australia
Sunday 2 May 2010