CANBERRA, May 2 (Reuters) - The Australian government announced a major overhaul of the country's complex tax system on Sunday. Here are the major changes:
PROFITS-BASED TAX ON MINING PROJECTS:
- From July 2012, a 40 percent tax on mining profits to be imposed on all projects not already subject to an existing profits tax on the offshore petroleum industry.
- The new tax will apply to existing and new projects, with no exceptions for smaller projects or those involving low-value or marginally profitable commodities.
- The government will pay rebates for miners to reimburse them for resource royalties currently paid to state governments in Australia.
- In calculating amounts due under the new profits tax, miners can also claim a separate tax break based largely on the capitalised cost of exploring and developing a resource before becoming profitable. This will be calculated as a percentage, based on a 10-year government bond yield.
- Overall, the new profits tax is estimated to raise A$12 billion ($11.1 billion) for the government in its first two years of operation in fiscal years ending June 2013 and June 2014.
- All miners and non-petroleum resources projects in Australia will be hit with the new tax, including the enormous portfolios owned by global firms such as BHP Billiton, Rio Tinto and Xstrata. The tax will be applied at the project level or as close to it as possible.
INCREASE IN EMPLOYER CONTRIBUTIONS TO WORKERS' RETIREMENT FUNDS
- Employers will need to gradually increase the amount they are obliged to pay into their workers' retirement funds, from 9 percent now to 12 percent by 2019-20.
- The move will send another A$85 billion into Australia's A$1.2 trillion pension-fund industry over the 10-year phase-in. Australia is already home to one of the world's top-five pools of private pensions savings.
- The increase is likely to result in employers pushing for correspondingly smaller wage rises, or insisting on more productive work practices. The government hinted at this by saying the long phase-in would enable employers and employees to 'factor this into future wage negotiations'.
- Mandatory employer contributions will rise by increments of 0.25 percent in 2013-14 and 2014-15, then by 0.5 percent each year until they reach 12 percent by 2019-20.
- Further tax incentives on savings to be announced in coming months.
LOWER COMPANY TAX RATE
- Company tax rate to fall to 29 percent in 2013-14 and to 28 percent in 2014-15, from 30 percent now.
- Australia has one of the higher rates of company tax among developed countries and, in the view of many tax experts, relies too heavily on this and other forms on tax on investment returns.
- Company-tax cut estimated to cost the government A$2.3 billion in the first two years, excluding the A$550 million cost of accelerating these cuts for small businesses.
NEW SOVEREIGN INFRASTRUCTURE FUND
- Set up a new fund to provide badly needed investment to expand the country's network of ports and road and rail links, aiming to ease bottlenecks in the mining export industry.
- The fund will start with A$700 million in 2012-13 and is estimated to swell to A$5.6 billion over the next decade.
- It will channel investment through state governments and this will be a key part of the national government's effort to win states' support for the overall tax reform package.
ECONOMIC IMPACT
- The government estimates the overall tax reform package to increase Australian gross domestic product by 0.7 percent and real wages by 1.1 percent over 10 years.
- The government stresses the total package is dependent on the mining profits tax going ahead. The mining tax will need parliamentary approval and is likely to be hotly contested by the mining industry.
(Reporting by Mark Bendeich) Keywords: AUSTRALIA TAX/ (Canberra newsroom +612 6273 2730; mark.bendeich@thomsonreuters.com; Reuters Messaging mark.bendeich.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
PROFITS-BASED TAX ON MINING PROJECTS:
- From July 2012, a 40 percent tax on mining profits to be imposed on all projects not already subject to an existing profits tax on the offshore petroleum industry.
- The new tax will apply to existing and new projects, with no exceptions for smaller projects or those involving low-value or marginally profitable commodities.
- The government will pay rebates for miners to reimburse them for resource royalties currently paid to state governments in Australia.
- In calculating amounts due under the new profits tax, miners can also claim a separate tax break based largely on the capitalised cost of exploring and developing a resource before becoming profitable. This will be calculated as a percentage, based on a 10-year government bond yield.
- Overall, the new profits tax is estimated to raise A$12 billion ($11.1 billion) for the government in its first two years of operation in fiscal years ending June 2013 and June 2014.
- All miners and non-petroleum resources projects in Australia will be hit with the new tax, including the enormous portfolios owned by global firms such as BHP Billiton, Rio Tinto and Xstrata. The tax will be applied at the project level or as close to it as possible.
INCREASE IN EMPLOYER CONTRIBUTIONS TO WORKERS' RETIREMENT FUNDS
- Employers will need to gradually increase the amount they are obliged to pay into their workers' retirement funds, from 9 percent now to 12 percent by 2019-20.
- The move will send another A$85 billion into Australia's A$1.2 trillion pension-fund industry over the 10-year phase-in. Australia is already home to one of the world's top-five pools of private pensions savings.
- The increase is likely to result in employers pushing for correspondingly smaller wage rises, or insisting on more productive work practices. The government hinted at this by saying the long phase-in would enable employers and employees to 'factor this into future wage negotiations'.
- Mandatory employer contributions will rise by increments of 0.25 percent in 2013-14 and 2014-15, then by 0.5 percent each year until they reach 12 percent by 2019-20.
- Further tax incentives on savings to be announced in coming months.
LOWER COMPANY TAX RATE
- Company tax rate to fall to 29 percent in 2013-14 and to 28 percent in 2014-15, from 30 percent now.
- Australia has one of the higher rates of company tax among developed countries and, in the view of many tax experts, relies too heavily on this and other forms on tax on investment returns.
- Company-tax cut estimated to cost the government A$2.3 billion in the first two years, excluding the A$550 million cost of accelerating these cuts for small businesses.
NEW SOVEREIGN INFRASTRUCTURE FUND
- Set up a new fund to provide badly needed investment to expand the country's network of ports and road and rail links, aiming to ease bottlenecks in the mining export industry.
- The fund will start with A$700 million in 2012-13 and is estimated to swell to A$5.6 billion over the next decade.
- It will channel investment through state governments and this will be a key part of the national government's effort to win states' support for the overall tax reform package.
ECONOMIC IMPACT
- The government estimates the overall tax reform package to increase Australian gross domestic product by 0.7 percent and real wages by 1.1 percent over 10 years.
- The government stresses the total package is dependent on the mining profits tax going ahead. The mining tax will need parliamentary approval and is likely to be hotly contested by the mining industry.
(Reporting by Mark Bendeich) Keywords: AUSTRALIA TAX/ (Canberra newsroom +612 6273 2730; mark.bendeich@thomsonreuters.com; Reuters Messaging mark.bendeich.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.