Budget Review 2013–14 Index

Kai Swoboda

Background

When it announced the introduction of a Resource Super Profits Tax (RSPT) in May 2010, the Government directly linked the revenue from the tax to a number of expense measures including funding the income tax forgone from lifting the superannuation guarantee from 9 per cent to 12 per cent and the introduction of a $500 low income superannuation contribution (LISC) for those earning $37,000 or less to compensate for the 15 per cent superannuation contributions tax paid.[1]

Following a period of consultation in the second half of 2010 and negotiations in early 2011 between the Government and some mining companies the proposed RSPT was modified to what became the Minerals Resource Rent Tax (MRRT), with the linked measures retained. Of course there is no practical hypothecation of MRRT revenue to linked measures.[2] While legislation that has been passed by the Parliament to implement some measures was dependent on the passage of the MRRT legislation, future revenues and expenses are simply put through the Consolidated Fund.

As part of the 2012–13 Budget, the Government revised its revenue estimates for the MRRT and announced that several linked measures would be deferred or abandoned. The Parliamentary Library estimated that the combined impact of these revised revenue estimates and changes to measures notionally funded by the MRRT were an overall impact on the budget of – $43 million in 2011–12, +$2,068 million in 2012–13 and – $619 million in 2013–14.[3]

The 2013–14 Budget has also seen further revisions to MRRT revenue and some changes to linked expenditures. So what is the overall impact taking into account further revisions to revenue estimates and 2013–14 Budget announcements relating to measures linked to the MRRT?

MRRT revenues

Estimates of revenue raised by the MRRT have been revised down several times since the introduction of the MRRT-related Bills in Parliament in November 2011. The Treasurer revealed on 8 February 2013 that revenue from the MRRT was only $126 million over the first two quarters of 2012–13,[4] so it is perhaps no surprise that revenue for the full 2012–13 financial year is only expected to be $200 million, $1.8 billion less than at October 2012 (Table 1).

Table 1: Changes in Minerals Resource Rent tax revenue projections ($ billion)

	2012–13	2013–14	2014–15	2015–16	2016–17
May 2010 announcement of Resource Super Profits Tax	3.0	9.0	Not available	Not available	Not available
November 2011 introduction of MRRT Bills	3.7	4.0	3.4	Not available	Not available
November 2011 MYEFO	3.7	3.8	3.1	Not available	Not available
2012–13 Budget	3.0	3.5	3.2	3.7	Not available
October 2012 MYEFO	2.0	2.4	2.1	2.6	Not available
2013–14 Budget	0.2	0.7	1.0	1.4	2.2

Sources: Australian Government, Budget measures: budget paper no. 2: 2010–11, p. 45, accessed 9 May 2013; Revised Explanatory Memorandum, Minerals Resource Rent Tax Bill 2011, p. 4, accessed 15 May 2013; Australian Government, Mid-year economic and fiscal outlook 2011–12, p. 264, accessed 9 May 2013; Australian Government, Budget strategy and outlook: budget paper no. 1: 2012–13, p. 5–20, accessed 9 May 2013; Australian Government, Mid-year economic and fiscal outlook 2012–13, p. 357, accessed 15 May 2013; Australian Government, Budget strategy and outlook: budget paper no. 1: 2013–14, 2013, pp. 3–18 and 9–21, accessed 14 May 2013.

Changes to MRRT-related expenses in the 2013–14 Budget

There were four changes announced in the 2013–14 Budget to measures that were linked to MRRT revenue:

• the abandonment of a proposed increase to Family Tax Benefit Part A (FTB-A) from 1 July 2013
• an increase in the concessional superannuation contributions cap from $25,000 per year to $35,000 per year for those aged 50 and over from 1 July 2014 with a start date of 1 July 2013 for those aged 60 and over[5]
• a minor change to the LISC so that those with an entitlement below the $20 minimum receive at least $10 and
• reduced funding for stream 2 of the Regional Infrastructure Fund (RIF) of $2 billion (with $1 billion of this relating to 2018–19 and 2019–20).[6]

Of these measures, the Government attributed the reduced allocation for the RIF to the change in revenue estimates for the MRRT, while the Government’s reasons for abandoning the increase in FTB-A referred to broader revenue write downs.[7] The combined net gain to the budget as a result of these changes is almost $2.9 billion over the forward estimates (table 2):

Table 2: 2013–14 Budget MRRT-related revenue and expense measures 2012–13 to 2016–17 ($ million)

Measure	2012–13 ($ million)	2013–14 ($ million)	2014–15 ($ million)	2015–16 ($ million)	2016–17 ($ million)
Abandon increasing rate of FTB-A		615.8	623.3	632.0	646.4
Concessional contributions cap increase for over 50s	-0.2	-195.3	104.9	230.8	225.9
Technical change to low income superannuation contribution	-3.0	-3.0	-3.0	-3.0	-3.0
Reduced funding for Regional Infrastructure Fund		150	50		678
Total net impact	-3.2	567.5	775.2	859.8	1547.3

Source: Australian Government, Budget measures: budget paper no. 2, 2013–14, p. 41, 150, 225–227 and 266, accessed 15 May 2013.

Net impact of MRRT revenue and linked expenses

Taken as a package, the net cost of the MRRT and associated measures can be calculated for three financial years, 2011–12, 2012–13 and 2013–14. In these years, based on the latest revenue forecasts and the cost of associated measures, the net cost of the package is $43 million in 2011–12, $560 million in 2012–13 and $3,471 million in 2013–14 (table 3).

Table 3: Net MRRT package cost 2011–12 to 2016–17 ($ million)

Measure	2011–12 ($ million)	2012–13 ($ million)	2013–14 ($ million)	2014–15 ($ million)	2015–16 ($ million)	2016–17 ($ million)
Revised MRRT revenue	0	200	700	1 000	1 400	2 200
Revised MRRT-related expenditures	-43	-760	-4 4171	Not available	Not available	Not available
Net cost of MRRT package	-43	-560	-3 471	Not available	Not available	Not available

Source: Table 1 for revenue and Parliamentary Library analysis of Table 4.

Table 4: Impact of 2013–14 Budget and intervening policy announcements on Minerals Resource Rent Tax-linked expenditures

Measure	2011–12	2012–13	2013–14	2014–15	2015–16
Company tax rate cut to 28 per cent and then revised to 29 per cent
Original cost adjusted for (a)			300	1400	Not available
Impact of 2012–13 Budget and intervening policy announcements	Reduced to nil	Reduced to nil	Reduced to nil	Reduced to nil	Reduced to nil
Early company tax rate cut for small business
Original cost (b)	50	100	50	Not available	Not available
Impact of 2012–13 Budget and intervening policy announcements	Reduced to nil	Reduced to nil	Reduced to nil	Reduced to nil	Reduced to nil
Superannuation guarantee increase from 9 per cent to 12 per cent
Original cost (c)			240	500	Not available
Impact of 2012–13 Budget and intervening policy announcements			Legislated – no impact	Legislated – no impact	Legislated – no impact
Raising the superannuation guarantee age limit from 70 to 75
Original cost (d)			-22	27	Not available
Impact of 2012–13 Budget and intervening policy announcements			Legislated – no impact	Legislated – no impact	Legislated – no impact
Low income government superannuation contribution
Original cost (e)	1	20	892	976	Not available
Impact of 2012–13 Budget and intervening policy announcements		-25.6	-26.6	-25.6	Not available
Impact of 2013–14 Budget		3	3	3	3
Higher superannuation caps for people aged 50 or more with a superannuation balance of less than $500 000
Original cost (f)		545	785	Not available	Not available
Impact of 2012–13 Budget		-580	-730	-130	-10
Impact of 2013–14 Budget		0.2	195.3	-104.9	-230.8
Instant asset write-off for small business ($5000 threshold)
Original cost (g)			1030	Not available	Not available
Impact of 2012–13 Budget and intervening policy announcements			Legislated – no impact	Legislated – no impact	Legislated – no impact
Standard work-related deduction
Original cost (h)			410	Not available	Not available
Impact of 2012–13 Budget and intervening policy announcements			Reduced to nil	Reduced to nil	Reduced to nil
Phasing down interest withholding tax on financial institutions
Original cost (i)				70	Not available
Impact of 2012–13 Budget and intervening policy announcements			-70	-70	Not yet legislated – no impact
50 per cent refund on tax paid on savings
Original cost (j)		470	480	Not available	Not available
Impact of 2012–13 Budget and intervening policy announcements		Reduced to nil	Reduced to nil	Reduced to nil	Reduced to nil
Regional Infrastructure Fund
Original cost	42	794	867	665
Impact of 2013–14 Budget and intervening policy announcements	No impact	No impact	-150	-50	No impact
Expanding the definition of exploration to include geothermal energy
Original cost			5	5
Impact of 2012–13 Budget and intervening policy announcements	No impact	No impact	No impact	No impact	No impact
Supplementary income support for low income earners
Original cost	Not applicable	Not applicable	Not applicable	Not applicable	Not applicable
Impact of 2012–13 Budget and intervening policy announcements		153	299	306	313
Increase in the rate of Family Tax Benefit A
Original cost (k)	Not applicable	Not applicable	Not applicable	Not applicable	Not applicable
Impact of 2012–13 Budget			603	615	626
Impact of 2013–14 Budget			-615.8	-623.3	-632
Tax loss carry-back
Original cost	Not applicable	Not applicable	Not applicable	Not applicable	Not applicable
Impact of 2012–13 Budget and intervening policy announcements			150	250	300

Notes: Measures can be linked to the MRRT through a number of mechanisms, including the packaging of measures in the initial announcement of the RSPT and by subsequent announcements by Government members. Measures can also be linked to the MRRT if they were part of negotiations with non-Government parties and members in finalising the MRRT Bills for passage through the House of Representatives. The cost of measures does not include associated administrative costs that were allocated to agencies (a) Original cost as presented in the 2010–11 Budget and subsequently changed by the announcement on 2 July 2010 which changed the proposed cut to 29 per cent; (b) The early start for the small business company tax rate reduction to 28 per cent was amended to 29 per cent in the 2 July announcement. (c) Original estimates updated were updated in the Supplementary Explanatory Memorandum for the Bill to introduce the measure; (d) Original cost for this measure was to include increasing the age limit to 75. This was amended during the Bill’s passage through Parliament. Original costs were updated by Supplementary Explanatory Memorandum for the Bill and amended by the Revised Explanatory Memorandum; (e) Cost estimates as provided in the Explanatory Memorandum. The measure was refined in the November 2011 MYEFO to include additional income eligibility tests and a minimum $20 payment requirement. This was further modified in the 2013–14 Budget so as to introduce a $10 minimum payment requirement even where contributions are less than this amount. (f); This measure was deferred in the 2012–13 Budget by two years to commence from 1 July 2014. The measure was then revised in the 2013–14 Budget for a higher cap of $35,000 but without reference to total superannuation account balance (g) Cost of original proposal excluding the further increase to $6500 under the Clean Energy Future package; (h) Original cost amended in the November 2011 MYEFO by being deferred by 1 year; (i) Original proposal to commence from 2013-14 but deferred in November 2011 MYEFO to commence in 2014–15; (j) Original estimates updated by three subsequent policy changes until decision to abandon the proposal in the 2012–13 Budget; (k) Original cost for this measure as announced in the 2012–13 Budget. The measure was abandoned in the 2013–14 Budget.

Source: Parliamentary Library estimates based on Australian Government, Budget measures: budget paper no. 2: 2010–11, accessed 16 May 2013; Supplementary Explanatory Memorandum; Superannuation Guarantee (Administration) Amendment Bill 2011, accessed 16 May 2013; Revised Explanatory Memorandum, Superannuation Guarantee (Administration) Amendment Bill 2011, accessed 16 May 2013; B Shorten (Minister for Financial Services and Superannuation), One-year deferral of interest withholding tax phase down, media release, 23 November 2011, accessed 16 May 2013; Australian Government, Economic statement July 2010, accessed 16 May 2013; Australian Government, Mid-Year Economic and Fiscal Outlook: 2011–12, pp. 167, 319, accessed 16 May 2013; Australia Government, Budget strategy and outlook: budget paper no. 1: 2012–13, pp. 1–18, accessed 16 May 2013; Revised Explanatory Memorandum, Tax Laws Amendment (Stronger, Fairer, Simpler and Other Measures) Bill 2011, p. 5, accessed 16 May 2013; Australian Government, Budget measures: budget paper no. 2: 2013–14, pp. 150 and 266, accessed 16 May 2013.

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