Axing mining tax to save $13b

The Government has put itself on a legislative collision course with the Opposition, tying plans to axe the mining tax with a suite of spending measures including superannuation payments to low income earners.

Treasurer Joe Hockey this morning released the draft bill to axe the MRRT, in line with its commitment from 2010 to get rid of the tax.

The proposed bill will abolish the tax from July 1 next year.

In a statement, Mr Hockey with Finance Minister Mathias Cormann and Resources Minister Ian Macfarlane said axing the tax was part of the Government's mandate.

"The MRRT is a complex and unnecessary tax which struggled to raise the substantial revenue predicted by the former government," they said.

"Further still, this failed tax imposed significant compliance costs on one of our most important industries, while damaging business confidence which is critical to future investment and jobs."

But in what appears set to create a face off between the Government and Opposition, the proposed legislation includes a range of spending cuts.

The programs, which the Gillard Government said were to be funded from revenue out of the MRRT, include the low income superannuation contribution, the Schoolkids Bonus, a supplementary payment to welfare recipients and measures that aid the small business sector.

"The repeal of the MRRT package contributes more than $13 billion of savings to the Budget's bottom line on an underlying cash basis over the forward estimates," the ministers said in a statement.

"The repeal of the MRRT will contribute towards repairing some of the fiscal damage inflicted by the previous Government on our nation's finances."

But the Government will keep another measure tied to the mining tax, the gradual increase in the superannuation guarantee to 12 per cent.