Australian treasurer reveals first wave of tax reform

08:18, May 04, 2010      

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Low-income workers, people coming up to retirement and small business were the main winners in the Australian federal government's first wave of tax reform, Australian Associated Press reported on Sunday.

The impact of the tax reform measures will add 0.7 percent to economic growth over the long run and lift wages by 1.1 percent, or the equivalent of 450 dollars (416 U.S. dollars) per year for the average paid worker.

Treasurer Wayne Swan, addressing reporters in the media lock-up in Canberra, said the government's response to the review was an " ambitious challenge for long term reform".

"For better super, less tax for business, especially small business ... and 21st century infrastructure," Swan said.

"It will insure all Australians get a fairer share of the ( resources) boom."

From 2013/14, the superannuation guarantee will increase to 9. 25 percent from a longstanding 9.0 percent and then rise incrementally to 12 percent by 2019/20.

The super guarantee will also be extended to 75 year olds, up from 70 at present.

The government will provide a super contribution of up to 500 dollars (462 U.S. dollars) annually to those earning under 37,000 dollars (34,214 U.S. dollars), while retaining the current co- contribution scheme.

Also workers aged 50 and over with a super balance below 500, 000 dollars (462,350 U.S. dollars) will be able to make additional payments into their super of up to 500,000 dollars (462,350 U.S. dollars) at a concessional rate, benefiting 275,000 people.

These measures will cost 2.4 billion dollars (2.22 billion U.S. dollars) over the next four years, but will add some 85 billion dollars (78.6 billion U.S. dollars) to Australia's superannuation pool over the next 10 years.

"This plan means that working families in the future will have to worry less about their retirement," Prime Minister Kevin Rudd told reporters in the lock-up.

The corporate tax rate for the nation's small businesses will also be cut to 28 percent from 2012/13, and incrementally to that level for big business by 2014/15.

The rate has been 30 percent since 2001.

Small business red tape will also be cut with an "instant asset write-off" on assets under 5,000 dollars (4624 U.S. dollars), compared with 1,000 dollars (925 U.S. dollars) now.

Additional the government was setting up a state infrastructure fund that will permanently support support spending on road, ports and railways with government contributing 700 million dollars (647. 3 million U.S. dollars) in 2012/13 and more than 5.6 billion dollars (5.2 billion U.S. dollars) over the next decade.

Swan said he would make further announcements in the coming months, but has ruled out a number of recommendations that were made by Treasury Secretary Ken Henry's review team, including changes to concessions on capital gains tax and negative gearing.

Swan also again ruled out changing the rate of Goods and Services Tax or broadening its base.

The Henry tax review has revealed on Sunday after four months of consideration by Treasurer Wayne Swan.



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