Gillard dumps super profits tax

AFTER being Prime Minister for just nine days, Julia Gillard has resolved a stoush with the mining industry over the controversial super profits tax.

The Government has made major concesssions, dropping its plan for a resource super profits tax and replacing it with a minerals resource rent tax.

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"Today we're moving foward together," PM Gillard said at a news conference at Parliament House this morning.

"Now we have a way forward for the Australian mining industry and the Australian people."

The federal government will limit its new resources tax to just 320 companies mining iron ore, coal, oil and gas.

It has dropped its plan for a resource super profits tax and replaced it with a minerals resource rent tax.

The new tax will apply to iron ore and coal projects which will be taxed at a new headline rate of 30 per cent - down from the previously planned 40 per cent.

The cut-in rate has also been adjusted to the long-term bond rate plus seven per cent. The former Rudd government initially set the threshold at the 10-year bond rate, now hovering at 5 per cent.

The current petroleum resource rent tax will be extended to all onshore and offshore oil, gas and coal seam methane projects.

Other commodities will not be included in the tax regime.

The new measures come at a cost, garnering $1.5 billion less revenue than the previously-announced resource super profits tax.

To offset that loss, the government will cut the company tax rate to 29 per cent from 2013/14, but will not reduce it further under current fiscal conditions.

Small companies will still benefit from an early cut to the company tax rate to 29 per cent from 2012/13.

A planned lift in compulsory superannuation contributions - from nine per cent to 12 per cent by 2020 - remains unaffected.

The resource exploration rebate will not be pursued, with the current tax deductible arrangements staying in place.

Small miners with resource profits below $50 million a year won't be liable to pay the new tax.

The petroleum resource rent tax (PRRT) regime, which currently only applies to offshore petroleum projects, will be extended to cover all oil, gas and coal seam methane projects, onshore and offshore Australia. The tax will apply at a rate of 40 per cent.

The new taxation arrangements, which are planned to begin on July 1, 2012, will apply only to the value of the resource rather than the value added by the miner.

The taxing point will be set at the mine gate where possible.

"This agreement provides certainty to the resources industry, to mining communities right around the country, and to the broader Australian economy," Prime Minister Julia Gillard said in a statement, ahead of a scheduled press conference at 8.30am (AEST) on Friday.

"It sends a very clear message to the world that the Australian resources sector is strong and its future is secure."

The changes also recognise the views of the resources sector, Ms Gillard said.

A policy transition group, with Resources Minister Martin Ferguson and former BHP Billiton chairman Don Argus, will also oversee the development of more detailed technical design.

Treasurer Wayne Swan said Ms Gillard's leadership was instrumental in reaching an agreement with the resources sector.

"I think it's fair to say that her intervention changed the tone of this debate and has led to this breakthrough," he told reporters.

"She gets things done and I think that's obvious by the nature of this agreement."

Mr Swan described as "difficult" and "untidy" the spiteful battle fought over the tax since early May.

"It is a better tax for the negotiation that we've had in recent times," he said.

"It's pretty fair to say that not every single company or every single individual in the country is going to agree with this outcome.

"Not everybody will always embrace the idea of paying more tax but I think what we have achieved here is a pretty strong consensus in a key area."

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