New tax break recommended

The Federal Treasurer Wayne Swan has welcomed a new report, recommending a tax break that would encourage small to medium sized companies to invest more boldly.

The report is the first of two expected from the government’s business tax working group, which has been studying the tax treatment of losses.

The group recommended a break technically called “loss carry back.”

Mr Swan thanked group members for their work, but did not say whether the government would support either this recommendations, or measures the group also recommended to offset its costs.

The Treasurer did say, though, that the government would now wait for the group’s second report, which will deal with medium to longer term reforms.

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We’re tightening the tax net: Swan

Wayne Swan told business leaders today that he is planning to make Australia’ tax system “more robust.”

The Treasurer also declared that he will be looking for extra savings in his May budget and that there will be very little room for new spending.

But he said getting the budget back into surplus is “an economic imperative in a turbulent new global economic era.”

Addressing a Business Economists’ breakfast in Sydney, Mr Swan noted that a number of recent court decisions had gone against the Tax Office.

He said this had “exposed weakness” in parts of Australia’s tax law.

“We’re looking at these to see where we can make the tax system more robust, more sensitive to complex transactions, and better at deterring people from tax avoidance,” Mr Swan said.

The Treasurer said producing a surplus, in this year’s Federal budget, would require strict discipline.

But that would ensure that fiscal strategy would not be adding to price pressures as the economy strengthens.

“Returning to surplus provides more flexibility for the Reserve Bank to respond to any further developments in the global economy,” Mr Swan said.

“Maintaining our credible fiscal policy also sends a strong message of confidence to investors across the world in uncertain times. “

Mr Swan also warned a new oil shock might be among the challenges that the Reserve Bank would have to face.

He said, too, that the global financial crisis had hit all of Australia’s tax collections.

“The tax to GDP ratio fell 4.2 percentage points to 20 per cent, Mr Swan said.

“Collections, particularly related to company profits, have been lower than expected,” he added.

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Fraud costing almost $500 million

The Federal government lost almost $500 million through fraud, misuse or theft in 2009-10, according to a new report.

The report, by the Australian Institute of Criminology, identified Centrelink as a prime target.

T he welfare agency investigated almost 25,000 cases of suspected fraud – and prosecuted 3,500 – chalking up a conviction rate above 99 per cent.

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Sharing the wealth:Gillard hails new tax

Julia Gillard says all Australians will now share the benefits of the nation’s mining boom, “not just a fortunate few.”

The Prime Minister was speaking after the Senate passed her government’s mining tax bills, which are expected to raise $10.6 billion over three years.

However the Opposition, which fought the new tax, predicted that it would soon be struck down in a High Court challenge.

The tax, which will apply from July 1, will impose a 30 per cent levy on the super profits of several Australian coal and iron ore miners.

Ms Gillard described the Senate’s 38-32 vote, approving this measure as “historic.”

She said it would give Australians “a fair return” from the development of the nation’s resource wealth.

“The Minerals Resource Rent Tax (MRRT), which was passed last night by the Senate, will help spread the benefits of the mining boom to all Australians and strengthen our whole economy,” Ms Gillard said.

“The MRRT will deliver Australians with a fair return on the resources they own 100 per cent,” she added.

Ms Gillard said the new tax would deliver:-

-        A major new tax break for Australia’s 2.7 million small businesses

-       A cut to the company tax rate for all businesses, with small businesses getting a one year head-start;

-       A boost to the superannuation for 8.4 million workers, which will increase the nation’s savings pool by $500 billion by 2035;

-        A much needed extra superannuation contribution for 3.6 million low-income-earners and

-        Critical investment in roads, bridges and other infrastructure, particularly in our great mining regions.

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Super profits tax passes the Senate

The Senate passed the Federal government’s mining tax bills late tonight.

The government’s victory came after the Coalition made repeated attempts to delay debate on the bills.

The Greens also failed in their efforts to have the tax expanded to include gold and uranium mining.

That was ruled unconstitutional, as the Senate cannot initiate a tax bill.

The Green’s leader, Bob Brown, said the government’s bills fell far short of what is needed.

However, he said they would be a start.

The tax, which will start from July, will be levied on highly profitable iron ore and coal mining operations.

The Treasurer, Wayne Swan, says the new tax will spread the wealth of the mining boom throughout the community.

This would be achieved by gradually increasing the compulsory superannuation contributions from 9 to 12 per cent of  weekly pay.

The new tax will also fund a $6,500 tax write off for new equipment, purchased by small businesses.

Big business, though, will have to wait until July next year for its tax break, which will come when the government reduces the business tax rate from 30 per cent to 29 per cent.

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The mining tax:what’s in it for you?

The payout you get, on retirement, could be a lot bigger, if the  Senate passes the Federal government’s new mining tax.

Wayne Swan says, too, that Australians are entitled to that benefit.

After all, he argues,  the big miners,  who will be paying that tax,  are digging up Australian iron ore and coal.

And those resources can only be sold once.

But what, exactly, is  in it for you?

Mr Swan has has been doing his sums – and he is offering some examples that might help.

In fact, the government has done more than that.

It has set up a new website, which will allow you  to make your own calculations, easily.

Its at www.MoreSuper.gov.au.

But let’s look at those examples, first.

There’s a young hairdresser, we might call Cathy.

Cathy, who is  20, would see an see an estimated $110,000 jump in her retirement savings, as a result of a planned boost to superannuation, that would come as part of the Mineral Resource Rent Tax package.

Or Bruce,  a 29-year-old clerk, who could expect likely to gain an extra $78,000.

Or Fred, the  30-year-old plumber who stands to see a $95,000 benefit.

How?

Well, the government is planning to gradually increase statutory superannuation savings, from their present level of 9 per cent of wages, to 12 per cent.

That’s how that extra money would gradually build up.
There would be  some important tax breaks for small business, too, from July 1 this year, if the mining tax plan gets through the Senate, this week.

Take the case of Cathy’s sister, Elaine, who has a suburban hairdressing shop.

If the proposed legislation is passed, Elaine would be entitled to write off up to $6,500 worth of new equipment, for tax purposes, immediately, after July 1.

Elaine’s shop, too, needs a complete makeover.

So that would give her extra money to buy new hairdressing chairs, sinks and perhaps some new computer equipment, to manage her cash flows.

Altogether, some 2.7 million small businesses stand to benefit that way.

There would be tax breaks for big business, too, after July 1 next year.

Mr Swan, of course, is no political innocent.

He knows, only too well, that he is putting pressure on Green and Conservative Senators, by giving these examples. just before the Senate votes on his plan.

He wants either the Greens, or the Liberals, to support him.

Mr Swan says they should.

“ This critical economic reform will help our nation lock in the benefits of the mining boom,” he declares.

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The mining tax: legislation by exhaustion

Wayne Swan is trying an old trick.

Legislation by exhaustion.

He is desperate to get his proposed mining tax legislation through parliament.

It has already passed the lower house, the House of Representatives.

But it now faces two barriers in the Senate.

The Greens, who hold the balance of power in the upper house, are seeking changes that the government is not prepared to accept.

They want the proposed super profits tax extended from highly profitable iron ore and coal mining operations, to uranium and gold miners as well.

The Greens say they are ready to talk, but the government isn’t interested.

It already has an agreement, with most of the miners affected, and it doesn’t want that upset.

So it looked, instead, to the Coalition parties, reasoning that the Liberal Leader, Tony Abbott, would find himself in a tough spot, if his parties blocked legislation that would give other businesses a tax break.

But Mr Abbott is holding out, declaring that tax cuts, funded by a new tax, are “a con.”

That’s a plausible argument, perhaps, but Mr Abbott is still coming under pressure from  business people, who would traditionally support him.

They want those tax breaks.

We have a stand off .

So what happens now?

Well, the legislation will come back to the Senate this week, for consideration.

And you might have noticed that the sitting hours of the Senate were extended last week.

That wasn’t accidental.

This august house has been starting work earlier  that usual each day, and finishing later.

Those extended hours will continue this week.

Already tired Senators will find it hard to be patient.

And Mr Swan is sitting back, waiting for the Greens – or the Tories – to crack.

It has happened before.

Watch this space.

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Wayne Swan’s nightmare

Wayne Swan is horrified.

The Treasurer now faces the spectre of renegotiating the terms of his proposed Mining Resource Rent Tax.

That is the one on which he has based his plan to spread the wealth of the mining boom into the broader Australian community.

It includes tax cuts for big and small business, a $6,500 write off for capital acquired by small business and a significant boost to the superannuation savings of Australian workers.

Mr Swan remembers, only too well, that a previous breakdown, in the government’s  talks with miners on this tax, played a big part in Kevin Rudd’s downfall, as Prime Minister.

This time, though, the looming talks won’t be with the miners.

Despite Mr Swan’s heartfelt pleas, over the past week, the Greens have now declared that they want changes, in the proposed legislation.

“We’re completely open to talk,” one Green declared.

Business is also worried by the Green’s stand.

Heather Ridout, the chief executive of the Australian Industry Group, made that clear, saying  “We would strongly urge the Greens to reconsider their position.”

Ms Ridout recalled that the Henry Tax Review had called for the company tax rate to be cut from 30 to 25 per cent.

The government’s proposed cut, to 29 per cent, was “the bare minimum, but a start,”  Ms Ridout said.

 And it should be available to companies of all sizes,” she added.

Together, Labor and the Greens would have the numbers to force the government’s MRRT bill through the Senate, now that it has passed the lower house.

But they are not together.

The Greens want the definition of a small business, in this bill, expanded.

That’s important.

The government’s plan was to pay the tax cuts that it proposed for small business, from July 1 this year.

Big business would have had to wait till July 1 next year to get its breaks.

The government’s plan, which most miners have accepted, has been carefully costed by Treasury.

The Green’s demand, which might well be the first of many, would add to costs, but not to government revenue.

That’s a vital point, for a government which has committed itself to producing a surplus budget, in the new financial year.

So it turned to the Tories for help.

Only to be turned down.

“We are not hypocrites,” the Opposition Leader,  Tony Abbott declared.

He said the Liberals would not support the proposed tax cuts, because they were to be funded by a new mining tax.

The Assistant Treasurer, David Bradbury, said huffily that Mr Abbott had put himself in a unique position, for a Liberal leader.

That of  blocking a tax cut for business.

It is the government, not the opposition, though, that now has the big problem.

Can it rescue its wealth distribution plan, somehow?

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