Swan hands down first part of tax reform

skynews_2072109239 Low-income workers, people coming up to retirement and small business are the main winners in the federal government’s first wave of tax reform.

The Henry tax review finally saw the light of day on Sunday after four months of consideration by Treasurer Wayne Swan.

There weren’t the sweeping changes that had widely been speculated, but superannuation, corporate tax and small business all received a positive shake-up.

These proposals, however, hinge on resource companies and the states agreeing to a new way of taxing miners – a 40 per cent Resource Super Profits Tax.

The impact of these entire measures will add 0.7 per cent to economic growth over the long run and lift wages by 1.1 per cent, or the equivalent of $450 per year for the average paid worker.

Mr Swan, addressing reporters in the media lock-up in Canberra, said the government’s response to the review was an ‘ambitious challenge for long term reform’.

‘For better super, less tax for business, especially small business … and 21st century infrastructure,’ Mr Swan said.

‘It will insure all Australians get a fairer share of the (resources) boom.’

From 2013/14, the superannuation guarantee will increase to 9.25 per cent from a long-standing 9.0 per cent and then rise incrementally to 12 per cent by 2019/20.

The super guarantee will also be extended to 75 year olds, up from 70 at present.

The government will provide a super contribution of up to $500 annually to those earning under $37,000, while retaining the current co-contribution scheme.

Also workers aged 50 and over with a super balance below $500,000 will be able to make additional payments into their super of up to $50,000 at a concessional rate, benefiting 275,000 people.

These measures will cost $2.4 billion over the next four years, but will add some $85 billion to Australia’s superannuation pool over the next 10 years.

‘This plan means that working families in the future will have to worry less about their retirement,’ Prime Minister Kevin Rudd told reporters in the lock-up.

The corporate tax rate for the nation’s small businesses will also be cut to 28 per cent from 2012/13 – and incrementally to that level for big business by 2014/15.

The rate has been 30 per cent since 2001.

Small business red tape will also be cut with an ‘instant asset write-off’ on assets under $5,000, compared with $1,000 now.

Additional the government is setting up a state infrastructure fund that will permanently support support spending on road, ports and railways with government contributing $700 million in 2012/13 and more than $5.6 billion over the next decade.

However, all these initial measures will be dependent on the government’s 40 per cent Resource Super Profits tax starting in July 2012.

The states will be able to keep their existing royalties, but the commonwealth will refund these payments to the companies.

‘Our resources belong to all Australians, and so they do deserve a fair share,’ Mr Swan said.

‘These are very significant steps in a decade long process of reform.’

He said he would make further announcements in the coming months, but ruled out a number of recommendations that were made by Treasury Secretary Ken Henry’s review team, including changes to concessions on capital gains tax and negative gearing.

He also again ruled out changing the rate of GST or broadening its base.

Original Story from www.bigpond.com & Skynews

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