Statement 1:
Budget Overview
(Continued)
Growing the whole economy
This Budget will help grow the economy by cutting the company tax rate, making life easier for small businesses, strengthening financial markets, supporting investments in renewable energy and providing tax rebates for mineral and energy exploration.
A fair return for our non‑renewable resources
The Government will introduce a uniform Resource Super Profits Tax (RSPT) to apply to non‑renewable resource projects from 1 July 2012. Projects currently within the scope of the Petroleum Resource Rent Tax will be provided with opt‑in arrangements to be developed in consultation with industry.
The RSPT will ensure the Australian community gets an appropriate benefit from its resources. It will also provide a more consistent tax treatment of resource projects, promoting better outcomes for the industry.
Profits derived from resource projects will be taxed at a rate of 40 per cent. However, the Government will refund 40 per cent of eligible project costs. Current state royalty payments will be returned to companies as refundable tax credits, effectively removing them as an impediment to investment.
The RSPT will replace existing Commonwealth resource taxes (except for the Petroleum Resource Rent Tax), including the crude oil excise. The states will retain all of their royalty revenues, but state royalties paid by companies will be refunded under the RSPT. By removing the distortionary effects of royalties, mining productivity, jobs and investment will all increase.
The Government will also deliver on its commitment to promote new investment in the resources sector through a new resource exploration rebate. The rebate will allow companies a refundable tax offset at the prevailing company tax rate for their exploration expenditure.
As a boost to the Government's support for renewable energy, exploration costs for geothermal energy will also be eligible for the rebate.
The rebate will provide significant cash flow benefits to small exploration companies in particular, which often do not generate sufficient taxable income against which to offset exploration losses under current tax arrangements.
Cutting the company tax rate
The Government will use some of the receipts from the RSPT to fund a cut in the company tax rate to 29 per cent in the 2013‑14 income year and to 28 per cent from the 2014‑15 income year.
Cutting the company tax rate will make Australia a more competitive destination for investment. Greater investment in capital will support higher productivity and real wage increases for Australian workers.
Combined with the reforms the Government is making to resource taxation, the cut in the company tax rate is expected to lift GDP by 0.7 per cent and increase after‑tax real wages by 1.1 per cent over time. In current terms, this reform dividend is equivalent to an extra $450 per year in the pocket of a full‑time worker on average weekly earnings.
In the future, there is likely to be very strong demand for capital and labour from Australia's resources sector. Cutting the company tax rate will assist other sectors of the economy to attract investment.
Helping small businesses
Some small businesses have been particularly hard hit by the impact of the global financial crisis. In recognition of this, the Government will provide an early reduction in the company tax rate to 28 per cent for eligible small businesses from the 2012‑13 income year.
This measure will assist up to 720,000 incorporated small businesses, allowing them to reinvest more of their profits to grow their businesses.
The Government will also increase existing capital allowance concessions by allowing small businesses to write off assets valued at under $5,000 immediately, up from $1,000.
The Government will also allow 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 significantly simplify depreciation calculations, benefiting up to 2.4 million small businesses.
These measures will commence in the 2012‑13 income year. The Government will consult on the details of the changes prior to their implementation.
Strengthening our financial markets
The Government is committed to positioning Australia as a leading financial services centre by expanding Australia's trade in financial services and developing a deep and liquid corporate bond market.
In response to recommendations put forward by the Australian Financial Centre Forum (AFCF), the Government has agreed to a broad range of important measures to build on Australia's strong reputation as an attractive investment destination in financial services, including improved taxation, better regional engagement and streamlined regulation.
The Government has also announced a significant boost to competition in business lending, with important reforms to encourage investors to consider lower risk corporate bonds as well as to make it easier for business to borrow directly from retail investors.
The Future of Financial Advice reform package introduces a range of reforms designed to improve the quality of financial advice, enhance investor protection and enhance the professionalism of the financial advice industry.
The three key reforms which will apply from 1 July 2012 are a prospective ban on conflicted remuneration structures, the introduction of a statutory fiduciary duty for financial advisers requiring them to act in the best interests of their clients, and the introduction of a more transparent adviser charging regime.
This critical reform package also encompasses the Government's response to the recent inquiry into Financial Product and Services in Australia by the Parliamentary Joint Committee on Corporations and Financial Services (the PJC Inquiry).
The Government will establish a Centre for International Finance and Regulation (CIFR) to become a regional centre for excellence in financial system innovation and regulation. The work of the CIFR will seek to foster financial sector innovation, best practice regulation, and regional financial sector stability.
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