The mining tax has been repealed after passing the Senate following a government deal with mining millionaire Clive Palmer's Palmer United Party (PUP) to compromise parts of the legislation.
The result will slam the brakes on the planned steady increase in the superannuation guarantee towards 12 per cent, by freezing it at the present 9.5 per cent up to and including 2021. It will then increase at half a percentage point every year after that until it hits the 12 per cent on or after 1 July 2025.
Industry Super Australia estimates that the change will have a great effect on retirement savings. The umbrella organisation for industry superannuation funds said that for an average income earner aged 25, the delay in the super guarentee will cost them around $100,000 over their working life ($36,000 in today's dollars).
To get the support of PUP, the government will maintain, until after the next election, three of the eight spending measures attached to the mining tax. It will keep the schoolkids' bonus until 31 December 2016 – although means-tested at a threshold of $100,000 – the income support bonus until the same date, and the low-income super contribution until 30 June 2017.
The low income super contribution gives up to $500 a year to help those earning $37,000 or less save for their retirement. The schoolkids' bonus is a $410 boost to family tax payments for primary school students, and $820 for families with children at high school.
Small business the biggest loser
The two million or so small businesses in the country look like being the biggest losers out of the compromises entered into by the government to clear away the mining tax for the big mining companies. The compromises mean that other measures will be abolished immediately. These include the abolition of the loss-carry back provisions for small business, reducing the instant asset write-off threshold to $1,000, and axing the accelerated vehicle depreciation.
The date of the repeal's effect will be set by proclamation, which adds to the uncertainty around when the changes will become law.
PUP Senate leader Glenn Lazarus said the party only supported the changes to the repeal legislation because they locked in some of the measures, such as the low income super contribution, until after the next election — when the people can have their say. "These amendments ensure these three key measures, which the previous government attached to the mining tax, will remain in place and protected until after the Australian people have spoken at the next election."
PUP also secured government support to set up two parliamentary committees as part of the negotiations. The first will explore the possibility of establishing a new Australia Fund to deal with natural disasters, while the other will look at ways of boosting national trade and investment.
The legislation has passed the upper house and will now head back to the House of Representatives, where its passage is guaranteed.
Reece Agland, superannuation products and services manager, Taxpayers Australia