The Labor government's much vaunted Mineral Resources Rent Tax (MRRT) passed through the Senate last night, along with less publicised reforms to superannuation legislation and company tax rates.
The MRRT has been all over the news for the past year thanks to a very public stoush between the government and big miners. However the really important outcome of the legislation for most of us isn’t the effect it’ll have on resources shares in our portfolios, but how the extra tax dollars will be spent.
The MRRT will provide funding to boost the superannuation guarantee from 9% to 12% as well as the financing to lower the company tax rate by 1%. These might sound like small percentages but they’re going to drive some big numbers.
The superannuation reforms will increase the superannuation rate to 12% by 2020. For the average 25 year old worker, the change equates to an extra $143,000 in retirement savings. If you’re ten years older earning $60,000 each year, an extra $75,000 will be in the kitty when you retire at 67.
That’s a great result for individuals, driven by the governments program of achieving a fairer distribution of the countries resources profits.
The other leg of the legislation is a 1% cut in the corporate tax rate across the board. Big businesses will get the benefit from 2013 onwards, while small businesses (those with turnover of less than $2 million) are set to feel relief from July 1 this year.
Part of the $11 billion tax revenue expected to be generated by the MRRT will also be used to fund infrastructure spending across the nation.
ACTU President Ged Kearney said of the reforms, “It is simply unsustainable for the two-speed economy that has occurred in Australia as a result of the mining boom can continue unheeded. It is time the balance was corrected and the mining tax will help deliver a fairer and stronger economy from which more working Australians can benefit.”
Predictably the nay-sayers are having a field day undermining the landmark legislation, and there is certainly substance to some of their arguments.
Tax experts have warned the revenue projections are susceptible to the risk of falling commodity prices, a strong Aussie dollar and big tax breaks already afforded to the big miners. There are also concerns the imposition of the MRRT will inhibit Australia’s international competitiveness and curb investment in the resources sector.
Some parties are even claiming the whole thing will be successfully appealed against in the courts, as maintained by Liberal Senator Mathias Cormann. "Labor's mining tax will be thrown out by the High Court just like their dodgy Malaysia people swap deal," he said.
However, regardless of the doubts and conjecture over the new legislation, for now it’s been passed and for most Australians and small business owners its pretty good news.
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