Federal Budget 2010

The Budget has been handed down announcing a return to surplus in three years, three years sooner than anticipated?

With the Governments announcements in regards to the Henry Review, this Budget has no real surprises.

The Government has announced increased spending in health, infrastructure, education and training. This additional spending has been funded mainly from the introduction of a Resource Super Profits Tax (RSPT), and the 25% increase in tobacco excise.

The Government acknowledges that the Resource Sector underpins the strength of the Australian economy, with the RSPT expected to fund the reduction in the corporate tax rate and the spending proposed in this Budget. What it fails to acknowledge is the impact of the RSPT on the competitiveness of our Resources Sector versus countries such as Canada, USA, South Africa and Brazil.

Over the past week mining executives in the Resources sector have announced they will be deferring projects and reviewing their operations in Australia. With an RSPT of 40% and a corporate tax rate of approximately 28% mining companies face an overall tax rate in the vicinity of 58%, a tax rate which is unacceptable.

The reduction in the corporate tax rate to 28% effective for most companies from the year ended 30 June 2015 will be welcomed, however this saving will be offset by the increase in Superannuation Guarantee to 12%.

The Resource Exploration Refundable Tax Offset provides companies with a refund for expenditure on exploration carried out in Australia and will be welcomed by many of the junior explorers.

The overall aim of the Budget is to return to a surplus in three years. The concern is that it predominantly relies on a booming Resource Sector which has only just recovered from the Global Financial Crisis and now faces the uncertainty of the RSPT.

Further details on the Budget can be found in this review and we would encourage you to contact your RSM Bird Cameron adviser to discuss issues that will impact your business.