Henry Review : 2nd May 2010

Of the 138 recommendations in the Henry Report  the government has responded by adopting a handful of the recommendations, rejecting 29 and leaving the balance of recommendations on the agenda for further consideration at some future time.

Summary of highlights

• Resource Super Profits Tax will tax resource projects on their profits rather than just their production - more
  
• Company income tax rate will be reduced to 29 per cent for the 2013 14 income year and to 28 per cent from the 2014 15 income year - more
  
• Small eligible business companies will have a 28% lower tax rate applied from the 2012 13 income year - more
• Small businesses to immediately write off assets valued at under $5,000. This measure will commence from 1 July 2012 - more
• Small businesses to write off all other assets (except buildings) in a single depreciation pool at a rate of 30 per cent. This measure will commence from 1 July 2012 - more
• Superannuation — Increasing the superannuation guarantee rate to 12 percent - more
  Superannuation - Contribution of up to $500 annually for individuals on low income - more
• Superannuation  — Raising the superannuation guarantee age limit from 70 to 75 - more
  
•  Higher concessional contributions cap of $50,000 for 50 or over who have total superannuation balances of less than $500,000 - more

Resource Super Profits Tax

A Resource Super Profits Tax (RSPT) will be introduced on 1 July 2012 at a rate of 40 per cent on profits made from the exploitation of Australia’s non-renewable resources. The RSPT will replace the crude oil excise, and operate in parallel with State and Territory royalty regimes. Projects within the scope of the Petroleum Resource Rent Tax (PRRT) will have the option of opting into the RSPT or staying in the PRRT. The election into the RSPT will be irrevocable.

• Under the RSPT a refundable credit for royalties paid to State and Territory Governments will be available.
• The refundable credit will eliminate investment distortions associated with the state royalty systems and ensure there is no ‘double taxation’ of resource profits.

The Government will consult extensively with stakeholders on the design of the RSPT. This consultation has commenced with the release of an Announcement Paper, The Resource Super Profits Tax: a fair return to the nation. The consultation will also cover the need for exemptions from the RSPT where, due to compliance costs, there is no net benefit to society in applying the RSPT. This may occur in respect of low value minerals or micro businesses.

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Cutting the company tax rate

The company income tax rate will be reduced to 29 per cent for the 2013-14 income year and to 28 per cent from the 2014-15 income year, in conjunction with the introduction of the Resource Super

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Early start to the company tax rate cut for small business companies

This measure reduces the company tax rate to 28 per cent for eligible small business companies from the 2012-13 income year.  Small business companies will have a lower tax rate than other companies until the reduction of the general company tax rate to 28 per cent in 2014-15.

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Small business instant asset write-off

The capital allowances provisions will be changed in order to allow small businesses:
to write off immediately assets valued at under $5,000 (compared with the current $1,000 limit) and to write off other assets (ie assets valued at over $5,000) in one depreciating pool at the rate of 30%. Currently, depreciating assets may be allocated to 2 different depreciating pools. This will not apply to buildings. The revised rules will apply from 1 July 2012. The government will consult on the details of the new rules during the 2010/11 year.

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State infrastructure funding

This measure will provide the States and Territories (the States) with a new infrastructure fund.This will make infrastructure funding a permanent structural feature of State and Commonwealth budgets.

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Resource exploration rebate

This provides a refundable tax offset at the company level, set at the prevailing company tax
rate, for exploration expenditure carried out in Australia. It will be available for exploration expenditure incurred on or after 1 July 2011. As part of this measure, the definition of exploration expenditure will be expanded to include expenditure incurred in exploring for
geothermal energy. All companies will be able to access the Resource Exploration Rebate, to avoid the complexity of defining the concept of an ‘Australian small listed exploration company’ in the tax law.

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Superannuation - increasing the superannuation guarantee rate to 12 per cent

This measure will significantly increase future retirement incomes for Australian workers through the gradual increase in the superannuation guarantee (SG) rate to 12 per cent.
The SG rate will be increased gradually with initial increments of 0.25 percentage points on 1 July 2013 and  on 1 July 2014. Further increments of 0.5 percentage points will apply annually up to 2019-20, when the  SG rate will be set at 12 per cent.

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Superannuation - raising the superannuation guarantee age limit from 70 to 75

This measure raises the superannuation guarantee (SG) age limit from 70 to 75.
• Workers aged 70 to 74 will be eligible to have SG contributions made on their behalf for the first time.
• The new SG age limit will now match the age limit for voluntary and self-employed contributions.This measure will commence from 1 July 2013

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Superannuation - low income earners Government contribution

This measure will provide a superannuation contribution of up to $500 annually for individuals on adjusted  taxable incomes of up to $37,000 to improve the equity of superannuation taxation arrangements.The amount payable under this measure will be calculated by applying a 15 per cent matching rate to the  concessional contributions made by or for individuals on adjusted taxable incomes of up to $37,000, with  an annual maximum amount payable of $500 (not indexed). The amount will be paid into a superannuation account of an individual to directly boost their retirement savings.
Concessional superannuation contributions made from 2012-13 will be eligible for the Government  contribution. This will be paid in 2013-14.

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Superannuation - concessional contribution caps

This measure will provide greater flexibility for those nearing retirement by continuing, from 30 June 2012,  a separate higher concessional contributions cap of $50,000 (indexed) for those aged 50 or over who have total superannuation balances of less than $500,000. This will allow these individuals to ‘catch up’ on their superannuation contributions at the stage in their lives when they are most able to do so. It will particularly benefit those who have had periods outside the workforce.  

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