Mining tax scrapped after agreement with Palmer United party to delay abolition of schoolkids bonus and other savings

The mining tax has been abolished after a deal with the Palmer United party (PUP) in which the government delayed the abolition of the schoolkids bonus and other savings and deferred already-legislated increases to workers’ compulsory superannuation for seven years.



The prime minister was jubilant after the shock deal was revealed, claiming it rendered the Labor party irrelevant and proved the government – approaching the first anniversary of its election – was “getting on with the job.”

After secret negotiations with PUP, the government revealed a deal with the crossbench senators to finally abolish the mining tax – as it had so often promised – if it retained three programs until after the next election, instead of abolishing them straight away.

In changes that will cost the budget bottom line $6.5bn over the next four years but leave it no worse off in the long term, the government has agreed to keep the schoolkids bonus, the low income superannuation contribution and the income support bonus until 2016 or 2017.

But it will also freeze the amount employers are compelled to put into all workers superannuation accounts. It is currently legislated to increase to 10% in 2015-16 and then by 0.5% each year to reach 12% in 2019-20. After this deal goes through it will be frozen at 9.5% and won’t reach 10% until 2021, rising by 0.5% a year after that.

According to examples provided by Labor, this seven-year freeze would mean a 25 year old earning $55,000 will have $9,215 less in retirement savings by 2025 and a 35 year old earning $75,000 will have $12,977 less.

And the Financial Services Council said it would mean working Australians would have $128bn less in their superannuation savings by 2025.

“We are concerned it could exacerbate the nation’s low savings rate and that costs will be passed on to future generations. Australia has a savings gap of $727 billion. The delay of revised schedule would result in a widening of the gap,” the council’s chief executive, John Brogden, said.

Labor reacted with fury to the government’s plan to slam the deal through the Senate with minimal debate, but with the support of PUP, Motoring Enthusiast Ricky Muir and Family First senator Bob Day, it does not have the numbers to block it.

Labor said delaying the superannuation increase was a clear breach of a promise by Tony Abbott – that he would not make “any adverse changes to superannuation in this term of parliament” – in order to keep his promise to abolish a tax for the big miners.

Palmer defended the sudden changes to super, saying “Australian families are doing it tough and it is more important Australian families have access to those funds for their purchasing power now while they are bringing up their children, not in 50 years time, and we know it is a statistical fact that over 50% of Australians will be dead by the time they get access to their super.

“Super is just the way to allow merchant banks to make large fees out of the Australian population, or many union movements that manage their own super to have a good time, and workers don’t get access to their own money, so I am sure most Australians will like the fact that they can bargain stronger for wages,” he said.

The chief executive of Industry Super Australia, David Whiteley, said he was deeply disappointed that “significant changes to superannuation are being made to achieve a short-term budget fix without any public debate at all.”

The treasurer, Joe Hockey, conceded that the deal “is not our preferred option, but it is the only option we have on the table so if people don’t like it, blame Labor”.

“We came into government to govern and that means dealing with the cards you have,” Hockey said.

And the finance minister, Mathias Cormann, said the government was committed to eventually increasing compulsory superannuation to 12%..

The deal means the government can tick off another promise before the first anniversary of its election.

During question time Abbott said there were “no adverse changes as a result of this because by delaying the increase in the superannuation guarantee levy we are keeping more money in workers pockets.”

He said “the super guarantee levy is not the perfect answer to every person’s retirement dreams … there is no nirvana in superannuation guarantee levies, because employees bear the cost of these levies through lower wages growth.”

The deal was secured in a letter from Cormann to Palmer on Tuesday morning.

Labor’s deputy leader, Stephen Conroy described the arrangements as a “filthy deal” in which the “PUP senators have once again been mugged and conned by the government”.

The Greens leader, Christine Milne, said Palmer had a clear conflict of interest.

“Why is it fair that politicians and public servants like us get 15% sitting here but others sit there and get 9%? This country has become a plutocracy, a government for the wealthy by the wealthy. Here we have a a coalmining billionaire abolishing a tax on coalmining profits,” she said.