Mining tax 'ensures Australians share in boom' By Melissa Clarke Updated Sun May 2, 2010 4:06pm AEST The Government will use about one-third of the revenue raised from the resource super profits tax to establish a new infrastructure fund (ABC News ) Video: Rudd responds to the Henry review (ABC News) Related Story: Families play waiting game on tax overhaul Related Story: Contentious tax proposals rejected Related Story: Mining boom to pay for super revolution Mining companies will have to hand over hundreds of millions of dollars each year under a new tax announced by the Federal Government. But all businesses will benefit from a lower company tax rate and simplified depreciation rules as part of the Government's response to the Henry tax review. Treasurer Wayne Swan says the changes are designed to ensure all Australians get their fair share from the nation's resources. From July 1, 2012, the Federal Government will take 40 per cent of mining companies' profits under a new resource super profits tax. But the tax will only apply after exploration and capital investment costs have been recouped and shareholders have received a normal dividend. The new tax will collect $3 billion for the Government in 2012-13 and $9 billion in 2013-14. The Federal Government will reimburse mining companies the royalties they pay to state governments. The move is designed to force the states to drop their charges. The Government will use about one-third of the revenue raised from the resource super profits tax to establish a new infrastructure fund. The Government has indicated that resource-related infrastructure will be a priority for the fund, meaning resource-rich states like Western Australia and Queensland will benefit most from the fund. "It will ensure that all Australians get a better share of the boom," Treasurer Wayne Swan said. "There are billions of dollars that Australian people have missed out on. It is absolutely critical that we grow all sectors of the economy together." The Government says the new arrangements will see highly profitable mining projects pay more tax and less profitable companies pay less tax. Sweeteners for resource companies The Government is hoping it can relieve some of the pain inflicted by the new tax with other measures. There will be a five year phase-in period for the new tax and companies will be able to accelerate the depreciation of their existing projects. From July 1 next year, all mining companies will get a rebate for exploration costs at the company tax rate. Small resource companies not turning a profit will get the rebate as a cash benefit. "We believe the arrangement we are putting forward will encourage growth," Mr Swan said. Lower company tax rate Australia's 30 per cent company tax rate is relatively high compared to other OECD nations. The review recommends bringing it down to 25 per cent to make Australia more internationally competitive. The Government is taking the middle road by scaling the tax down to 28 per cent. Small businesses will pay the new rate from 2012-2013, but larger businesses will have to wait longer to benefit from the concession. For them, the tax rate will be lowered to 29 per cent in 2013-2014 and then to 28 per cent in 2014-2015. Less red tape Small businesses will also benefit from changes aimed at simplifying compliance obligations. They will be able to instantly write-off assets worth up to $5,000. Currently the limit is $1,000. All assets costing more than $5,000, except buildings, will fall into one depreciation pool with a rate of 30 per cent. In the long run, the Federal Government says all of its changes to the tax system will add 0.7 per cent to gross domestic product. It calculates that will see a full-time worker on average weekly earnings get an extra $450 a year.