Xstrata urged Gillard to exclude existing projects from any new mining tax it would impose and said they are willing to negotiate in good faith with the new government.  Prime Minister Gillard on her part offered to open the government’s doors to negotiation over the so-called “super profits” tax which Xstrata said would possibly drive away industry investments.

“We are encouraged that Prime Minister Julia Gillard has indicated that the Australian government is now prepared to enter into negotiations with the mining industry regarding the Resource Super Profits Tax,” Xstrata said.

Xstrata has earlier threatened to scrap $5.4 billion worth of projects in Australia, saying it could not be justified when the proposed 40 percent levy starts in 2012.  In a separate news, Gillard has ruled out scrapping the resource tax totally, and stressed that the tax is justified because miners were profiting from state-owned resources.

“If we do see some softening on the tax, it could add 150-200 points to the index,” Patersons Securities private client adviser Leon Warburton said.

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Paint and coatings company Valspar Corporation is set to purchase Australian paint maker Wattyl Ltd for about A$142 million as well as assume its existing debt.

This move is targeted to help Valspar build on its presence in the Asia Pacific region and the deal presents new opportunities for growth, Valspar said.  The deal, however, is still subject to the approval of shareholders and regulatory authorities at Valspar.

New PM Julia Gillard might have the resource super profits tax on her priority to-do list but she has no scope to drop the tax and little scope to cut it.

The reason the PM can’t drop the tax is not because it would leave a hole in the budget because it can be dropped without affecting the government’s commitment to put the budget back on track in surplus for fiscal year 2012-13.  The main reason is that the resource tax is included in the tax changes package.  As stated in the package, the tax proceeds would be used to pay for alleged reforms:

• Cut in the rate of company tax
• Instant asset write-off for small businesses
• Various superannuation concessions
• Resource exploration rebate
• Standard tax deduction
• Discount on tax on interest income and contributions to the planned infrastructure fund

Because the RSPT is due to start on July 2012, all the measures it’s programmed to pay for will be phased in from that date.  This means dropping the tax will also consequently drop all the political goodies in the package.

However, this is just the first reason Gillard can’t just drop the RSPT that easily.  The deeper reason is that even Rudd and now Gillard have continually insisted the miners pay the mine owners a “fairer share” of the proceeds.  Taking their backs on the tax just because it proved to be unpopular with miners would be viewed as another of Rudd’s past decisions to turn away from the emissions trading scheme.

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Looks like the downward trend is far from over as EUR/USD continue its slide amid the G-20 meeting last weekend – most major crosses still traded at their NY closing levels. The recently concluded G-20 meeting had their main focus on cutting deficits and pursuing higher capital requirements for banks.

The Euro was led to open the week slightly lower over the Dollar at pre-market trading. Monday figures were at 1.2372 from Friday’s closing at 1.2384. Despite several attempts and efforts to regain the hegemonic currency, it wasn’t able to get back to the 1.2400 level since it lost last Monday. As of 9:00 last night, both currencies were trading around 1.2377 which is only 5 pips above the opening price.

The Chinese central bank has settled the daily official level of its currency at 6.7896 yuan to the US dollar, in response to a pledge to allow greater flexibility in the exchange rate ahead of the G20 summit this weekend.

The People’s Bank of China set the rate 0.03 per cent stronger than Thursday’s rate of 6.8100 which is well within the 0.5 per cent limit that the currency is allowed to move in daily.  The rate – called the central parity rate – is a weighted average of prices given by market makers, excluding highest and lowest offers.

The currency fluctuations is in line of Beijing’s pledge to allow the currency to be more fluid after the Chinese Central Bank kept it pegged near 6.83 for the past two years.  Chinese partners welcome this move after concerns that the yuan’s level may have been undervalued, thus, distorting trade which happens when Chinese become artificially cheap in dollar terms.

China reacted to such pressure, saying the yuan is just on the right level and if there were trade imbalances, it stemmed from other fundamental problems within the US and economies in the west.

Voluntary superannuation payments of low-income workers are due on June 30, and workers need to keep catch this deadline to gain a government top-up to their retirement savings for the 2009/10 financial year according to the non-profit super sector industry body.

According to Chief Executive Fiona Reynolds of the Australian Institute of Superannuation Trustees (AIST), low-income workers who qualified for the superannuation co-contribution scheme should make a voluntary payment before June 30, Wednesday.  “Time is running out for people to benefit from the co-contribution, and even more people are eligible this year because of the higher income thresholds,” Ms. Reynolds added.

The federal government will shoulder half of the voluntary super contributions up to a maximum of $1000 for workers earning below $31,920 for financial year 2009/10.  The top-up will receive a reduced co-contribution of 3.33 cents for every dollar earned above $31,920 and up to $61,920.

Reynolds said the top-up is one of the biggest help the government has offered to low wage earners to increase their retirement savings.  “When it comes to investing for the future, this has got to be one of the best deals around,” Reynolds added.

AIST research has shown that the maximum $1,000 contribution could boost their retirement nest-egg by $85,000.

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Newly-elected Prime Minister Julia Gillard said in today’s press conference one of the major priorities of her government is to review the resources super profits tax (RSPT). The PM said she had met with Deputy Prime Minister Wayne Swan and resources minister Martin Ferguson to work on a new strategy that will hopefully commence negotiations soon.

“We will genuinely negotiate with the mining industry,” Gillard said during the press conference although she refused to go into detail.  “I am not going to go into discussion about all of the detail.  We are going to go into these negotiations again with good faith in a genuine way and resolve this matter,” Swan said.

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In a recent report about excess super contributions paid by your clients, ATO discussed the processes you can do to comply with excess contributions tax (ECT) obligations.  The office also pointed at the penalties that may apply should you not meet release authority obligations:

1.    An ECT Notice of Assessment and a release authority should be mailed separately to individuals at their address for service of notices held by the Australian Taxation Office (ATO).  This release of authority is what enables each member to fulfill a condition of release and gives the authority to a super fund to release the same amount equal to the excess contributions tax payable.  A release authority is then sent out to individuals within days after issuing the assessment.

2.    The assessment has a maturity date of 21 days in which it must be paid.
-    If your clients have excess non-concessional contributions tax, they are required to use the compulsory release authority and deposit it to their funds within 21 days after the release authority date.  You may then give your client two options, have the money paid to a) them or, b) the ATO.  Should a client choose to have the money paid to him/her, the client must make other arrangements to pay their excess contributions tax debt.

-    If your clients have an excess non-concessional contributions tax, you can have them choose between using the voluntary release authority to withdraw up the liability’s amount, or not.

3.    When a release authority from the member had been released to a fund, they are obliged to release the amount equivalent to the excess contributions tax shown on the form within 30 days of receipt.  However, if they were only able to receive the release authority more than 90 days after date of issue, the client must not act on it as it will have expired.

A fund must complete the release authority statement and send it to the ATO, and a coy to their member, within 30 days of releasing the money.

4.    The ATO has the discretion to send a release authority directly to a fund should a member not comply with the compulsory release authority obligations.  If the ATO does send it, the obligations in the fund will not be changed.  However, in such instance, the fund must send the release amount directly to the ATO.

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Looks like Australia and other dairy exporters, including New Zealand and some South American nations, are set for higher demand in this decade as world markets are becoming increasingly hungry for Australian dairy products.  Only seven per cent of global milk production is being internationally traded because big producers like the US and Europe are likely to fully consume what their farmers can deliver.  A growing demand is also seen in neighboring Asia.

Reports had shown that the era of big production resulting to stockpiled mountains of butter and milk lakes in the northern hemisphere in the last two decades have already ended, slashing world stocks to minimal levels.

Facing Big Challenges
Despite a volatile global economy which can affect farmers’ confidence to rebuild herds, dairy processors will be exposed to increasing pressure to lock in long-term pricing and export schedules.  Other production challenges seen by Dairy Australia’s latest Situation Outlook include climate and water shortage pressures for traditionally irrigated dairy powerhouse areas in Victoria, NSW’s Riverina, and the Lower Murray.

“Unless we address the impact on arable land within a 300 kilometre radius of our major population centres we’ll soon have a major problem feeding our domestic and off shore markets efficiently,” Dr Lean, University of Sydney dairy specialist said.

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