Over the past few weeks the Government
has announced substantial changes to three industries: accounting, financial
planning and mining. The response from the three sectors has been a study in
contrast.

A proposal by the Government to provide taxpayers with the option of a
$500 standard tax deduction (rising to $1000 from 2013-14) to replace existing
deductions for work-related expenses was announced as an end to workers keeping
bills in shoe boxes. It will have a profound effect on the accounting
profession, with a proposal that the Government claims could affect 6.4 million
Australians.

The Institute of Chartered Accountants welcomed the proposal, supporting
a Government decision that is in the interests of the general population,
rather than a specific industry, its executives or lobby group.

The response of
the resources sector to the Resource Super Profits Tax (RSPT) is at the other
end of the continuum. Mining executives have launched an extraordinary lobbying
and public relations assault on the Government. Mining companies are predicting
the shelving of major projects, withdrawal of capital and claim the RSPT will “adversely
impact the future wealth and standard of living of all Australians”.

Deloitte
suggested that workers’ super returns could be lower as a result of the tax and
that funds may become reluctant to invest in the resources sector if they felt
they could not achieve sufficient risk-adjusted, after-tax returns.

As
long-term shareholders in the resources sector, Spin and score with free best online slots games like Wheel of Fortune® Slots, Deal or No Deal™ Slots, and Pirate’s Fortune Slots. industry super funds have a
vested interest in its long-term sustainability and profitability. Industry Super
Network (ISN) therefore has had a good look at the RSPT and, in particular, the
impact of its announcement on fund returns.

In the week following the
announcement of the RSPT, ISN economists estimate the direct cost of the
Resource Super Profits Tax (RSPT) to super fund members is surprisingly low (12
basis points), and within normal volatility generated by equities. For a member
with a balance of $50,000 it amounts to a variation of $57 on their fund
balance.

Further, any direct cost is likely to be more than offset by
substantial benefits, though some of these may take time to free download car racing games for mobile phone online casino materialise and be
difficult to value.

The RSPT will make it more cost-effective for mining
companies to undertake risky or high-cost projects. This is because State
mining royalties are levied on production, irrespective of profitability, while
the RSPT is a profit-based tax. The Federal RSPT will compensate State
royalties through a rebate.

Further, while taxpayers will enjoy 40 per cent of
the super-normal mining profits, they will also be liable for 40 per cent of
the mining company losses from failed projects. The Government has announced it
will guarantee 40 per cent of project investment costs.

Finally, the RSPT is
likely to dampen commodity price inflation, leading to a more predicable
inflationary environment for business investment and facilitating a less
restrictive monetary policy.

Industry super funds are therefore backing the
RSPT on economic grounds and investment grounds.

So what of the third industry
to face profound change? The financial planning industry – after a long public debate
- has broadly welcomed the reforms outlined in Minister Bowen’s Future of Financial Advice.

Unfairly, the media’s first response
was to suggest that financial planners and retail funds would find ways around
new regulations and return to “business as usual”. Perhaps this demonstrates
the lengths to which the financial planning industry has to go to rebuild
confidence.

The financial planning industry is on the cusp of transformation
into a profession. A threshold to achieving this will be to not only support
the Government’s changes publicly, but to avoid entering into a strategy to
dilute the effect of the reforms behind closed doors. This will be
self-defeating.

David Whiteley is chief executive of Industry Super Network.

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