Minerals Resource Rent Tax to be repealed and what it means to you
The Abbott Government has released details on the legislation it will seek to pass through Parliament to repeal the Labor Government’s Minerals Resource Rent Tax. If the Coalition is successful in repealing the MRRT it will have some significant ramifications for all workers across all sectors of our economy; and will especially affect low paid workers in the health sector.
As part of the legislation, the Government has also proposed to delay the legislated gradual increase in the Superannuation Guarantee to 12% for 2 years, and to rescind the Low Income Superannuation Contribution (LISC).The MRRT and the LISC were formulated in line with findings of the Henry Tax Review and implemented by the former Labor Government.
In repealing the MRRT, the Abbott Government wants to pause the superannuation guarantee (SG) increase for 2 years. The Explanatory Memorandum, released with the legislation, states that the:
“SG charge percentage will pause at 9.25 per cent for the years starting on 1 July 2014 and 1 July 2015, and increase to 9.5 per cent for the year starting on 1 July 2016, and then gradually increase by half a percentage point each year until it reaches 12 per cent for years starting on or after 1 July 2021.”
This will mean a significant decrease in the total superannuation savings of $28 million by 2027 and by $77 million by 2037.
Under the Labor Government a 30 year old on average full-time wages who retires at age 67, would be an additional $127,000 better off upon retirement and increase the superannuation savings of 8.4 million Australians.
Low Income Superannuation Contribution
The LISC was designed to introduce some equity in tax concessions on superannuation contributions for workers earning up to $37,000pa. As the marginal tax rates paid by these workers are lower than the 15% tax on super contributions, they are the only group who do not benefit from tax concessions on super. The LISC assists around 3.6 million low income Australians, or approximately 3 in 10 working Australians. If the LISC is repealed, these 3.6 million will be $1 billion worse of each year. The majority of these low income earners are women (2.1 million) who collectively will be $500 million worse off in 2013-14 alone.
The impact on a 30-year-old permanent part‑time worker earning a quarter of the average weekly earnings, and who receives the contribution for 20 years of their working life, is projected to be an eight per cent decrease in their real retirement benefits or around $13,000.
The proposed legislation will have a very big impact on low income workers and significantly reduce the superannuation savings for workers across all sectors in the economy in the longer term. Plus there is the immediate impact on those who are close to retiring.
By dumping the Minerals Resource Rent Tax, the Abbott Government is significantly reducing the tax base for the government by reducing how much companies pay for profiting from Australian minerals and resources.
Furthermore there is no mention of repeal of LISC in the Coalition’s Superannuation Policy released prior to the election, reducing any claim the Abbott Government makes to have a “mandate”.
The Abbott Government is needlessly undermining the retirement security for all Australians in the workforce right now. It’s clear we will have to keep a close eye on everything they propose.