11/09/2014 - 16:56

Govt ticks another box as MRRT goes, with conditions

11/09/2014 - 16:56

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The federal government has had to accept some significant amendments to its bill to repeal the mining tax, including a review into the creation of an ‘Australia Fund’ and changes to superannuation increases legislated by the previous government.

Govt ticks another box as MRRT goes, with conditions

The federal government has had to accept some significant amendments to its bill to repeal the mining tax, including a review into the creation of an ‘Australia Fund’ and changes to superannuation increases legislated by the previous government.

The 12 per cent superannuation compulsory contribution will now be reached in 2025, with the guarantee frozen at 9.5 per cent until 2021, when it will increase to 10 per cent, and then increase in 0.5 per cent increments until 2025.

The Financial Services Council, the lobby group for superannuation funds, has claimed the delay will be costly for workers.

But the government claims that the forgone superannuation will mostly lead to higher wages.

Finance Minister Mathias Cormann told ABC Radio that superannuation increases “don’t come out of thin air”.

“We have ensured that people have more of their own money available to them pre-retirement so that they can use it to deal with cost of living expenses or they can use it to pay off their mortgage faster – or they can use it to save more through superannuation voluntarily,” Senator Cormann said.

This echoes the thinking of Bill Shorten when assistant treasurer in 2012, who said a then-planned superannuation rise would be paid for by absorbing money out of wage increases.

Because superannuation is taxed concessionally, wage increases that are allocated to super raise less taxation revenue for the Commonwealth.

The $2.6 billion of additional revenue over the forward estimates from this delay will fund the extension of spending programs required by the Palmer United Party in exchange for support of the legislation.

By 2022-23, the increased revenue from the contribution will make the amendment budget neutral, according to the government’s projections.

The Income Support Bonus and Schoolkids Bonus will remain until December 2016, while the Low Income Super Contribution will operate until the end of June 2017.

These three programs will cost nearly $6.6 billion over the forward estimates, but the repeal of the MRRT has allowed the government to book $10 billion of savings over that period from spending attached to the tax.

Senator Cormann said the abolition of the mining tax package would save $50 billion over a 10-year period, as the savings accumulated over time.

The government also agreed to an inquiry into the creation of a government bank, the Australia Fund, which would buy failed companies and distribute funding to risky business ventures.

Creation of such a bank would be contradicting recommendations in a recent Productivity Commission report, which advised against increasing grants and industry aid.

In the June quarter, the MRRT raised just $600,000, below the tax’s compliance costs, according to the government.

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