From tomorrow, millions more Australians will share in the benefits and opportunities of the mining boom thanks to the Gillard Government's historic resource tax reforms, and the suite of measures they fund.
In particular Minerals Resource Rent Tax (MRRT) starts tomorrow, delivering a revenue stream that is allowing the Government to:
Together with the extension of the existing Petroleum Resource Rent Tax, the MRRT is major economic reform that will help us tackle some of the pressures felt by businesses and households in our patchwork economy.
These reforms – which have been opposed tooth and nail by the Abbott Opposition – will spread the benefits of the mining boom to millions of Australian households and businesses who feel like it is somebody else's boom.
The rapid growth of developing economies in Asia is driving structural change within the global economy. Growth in our region will provide Australia with huge opportunities in the years ahead, with demand for our resources now driving an unprecedented mining investment boom and supporting our historically high terms of trade. This has also given rise to the sustained high dollar.
The mining boom has delivered huge benefits for Australia, super-charging mining-related sectors in particular, but also assisting businesses and the community more broadly, including through cheaper imported goods.
However, the Government recognises that the mining boom has also contributed to challenges for some sectors, like increased competition for labour and the high Australian dollar. The MRRT will enable the Government to tackle some of the challenges of a patchwork economy by securing a more appropriate share of the value of Australia's non-renewable resource wealth.
The MRRT, which is estimated to raise $13.4 billion to 2015-16, will apply to the mining of iron ore and coal in Australia at an internationally competitive effective rate of 22.5 per cent, after taking into account the extraction allowance. Miners with MRRT assessable profits of less than $75 million per annum will not be liable for MRRT.
The revenue raised from the MRRT will help underpin important tax reforms, as well as provide real cost of living relief for families and a boost to workers' superannuation, and fund critical infrastructure investment to boost productivity. In particular, small businesses will benefit from a package of tax reforms that cut red tape and help them improve their cash flow, and companies struggling due to the high dollar will benefit through the introduction of loss carry-back.
The MRRT will fund the $3.6 billion Benefits of the Boom package announced in the 2012-13 Budget.
At the heart of this package is $1.8 billion in extra support for families through more generous family payments, comprising:
By providing families with extra money we are also providing support to other parts of the economy, particularly the retail sector through increased consumption, business activity and jobs.
The MRRT will also fund tax reforms to support companies struggling due to the high dollar and encourage them to invest, retrain and retool to improve their productivity and competitiveness.
From today, the Government will provide further tax relief for companies that report a loss through the introduction of a loss carry-back, allowing companies that incur losses from the 2012-13 income year to carry back those losses. This measure will allow companies to carry back up to $1 million of losses to offset them against previous tax paid. This will provide a tax refund up to $300,000 per year, helping an estimated 110,000 companies in its first four years of operation to finance the investments needed to boost productivity and competitiveness. Companies will be able to carry back losses by one year in 2012-13 and by up to two years from 2013-14.
The Government is also helping Australia's 2.7 million small businesses to invest and improve their cash flows through its $6500 Instant Asset Write-off which starts tomorrow.
From 1 July 2012, small businesses will be able to instantly write off each and every asset they purchase costing less than $6,500, rather than depreciating them over time.
Assets costing $6,500 or above can now be depreciated in a single pool (15 per cent in the year of purchase and 30 per cent in subsequent years). In addition, the first $5,000 of the cost of motor vehicles used by small businesses will also be able to be deducted immediately.
Together these measures will deliver real benefits to small business by improving cash flows and helping operators to reinvest and grow their businesses.
8.4 million working Australians will receive a boost to their superannuation guarantee rate, which will be progressively increased from 9 per cent to 12 per cent from 2013-14 to 2019-20, with the cost to the Commonwealth Budget of this increase to be funded from the proceeds of the MRRT.
This important reform will boost our national savings, which helped to secure Australia's economy during the global recession.
It will also help Australians to enjoy a more secure retirement with a higher standard of living. For example, a 30 year old today on average full-time earnings will retire with an extra $118,000 in superannuation savings as a result of the increase in the superannuation guarantee.
To complement this measure, the Government is also removing the maximum age limit on superannuation guarantee contributions from 2013-14, boosting the retirement incomes of an estimated 51,000 senior Australians in that year.
An estimated 3.6 million low income Australians will also receive the new Low Income Superannuation Contribution (LISC), commencing in 2012-13. The LISC will ensure individuals with incomes up to $37,000 effectively pay no tax on their compulsory superannuation contributions. This payment will help the most vulnerable Australians, such as women and individuals working part time or casual hours, by effectively refunding up to $500 of contributions tax.
The Government will also support Australians that can afford to make extra concessional contributions to superannuation by providing a higher concessional contributions cap for individuals aged 50 and over with superannuation balances under $500,000 from the 2014-15 income year. This will allow Australians to make greater contributions to their superannuation as they approach their senior years and at a time when they are most able to afford to.
The revenue raised from the MRRT will also be directed towards major investments in the critical infrastructure needed to lift productivity, boost export capacity and develop regional economies through the $6 billion Regional Infrastructure Fund.
The Regional Infrastructure Fund will fund roads, rail and other crucial infrastructure needed to address capacity constraints and support the workforce in critical mining regions and their supporting communities.
Recent official data from independent authorities has confirmed that our mining sector continues to invest with great confidence in full knowledge of the MRRT as well as other tax reforms starting tomorrow such as the price on carbon pollution.
Investment in the mining sector has grown very strongly since the announcement of the reforms on 2 May 2010, from $47 billion in 2010-11 to an estimated $86 billion in 2011-12, and is expected to reach $119 billion in 2012-13. This is 13 times the level of investment before the first phase of the mining boom.
Official data also shows there is vast amounts of further investment still to come, with the total pipeline of mining investment now at an all-time high of half a trillion dollars – with over half of this is at an advanced stage.
These reforms are part of the Gillard Government plans to build an even stronger economy in which all Australians can take advantage of the huge opportunities ahead for our country. They build on the Government's track record of strong economic management that has seen our economy outperform virtually every other advanced economy.