Australia’s Minerals Resource Rent Tax (MRRT) was scrapped by the Australian government after the government struck a surprise deal with cross bench senators, including mining tycoon Clive Palmer.

The MRRT was introduced by the previous Labour administration in 2012, with a levy on annual profits above $70 million on iron ore and coal at a rate of 30 percent.

It was intended to return a share of the spoils of Australia's decade-long mining boom to government coffers but was widely criticized after its revenues fell dramatically short of forecasts.

"The mining tax is now gone," triumphant Treasurer Joe Hockey told parliament after the Senate, where minor parties hold the balance of power, voted 36 to 33 for its repeal, a key election promise of the Tony Abbott-led conservatives, The Economic Times reported.

It now heads to the lower house where it is guaranteed passage as the government has the numbers to push it through.

"We said we'd get rid of the mining tax; we've delivered in full," added Hockey.

"The tax package was so poorly designed, it was in fact costing the government billions of dollars each year."

The tax regime was initially watered down after a furious publicity campaign by BHP Billiton, Rio Tinto and Fortescue, which contributed to then prime minister Kevin Rudd being ousted by his deputy Julia Gillard in 2010 as opinion poll ratings plunged.

The big miners claimed the tax hurt their competitiveness and affected investment.

The Labour government originally estimated that the levy would raise $A 3 billion in its first year of operation and $9 billion in 2013-2014.

That was drastically scaled back and according to the 2013 budget the MRRT raised just $200 million in the 2013 financial year and was forecast to bring in $700 million in the 12 months to June 30, 2014.

In changes that will cost the budget bottom line $6.5 billion 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, The Guardian reported.

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 percent in 2015-2016 and then by 0.5 percent each year to reach 12 percent in 2019-2020. After this deal goes through it will be frozen at 9.5 percent and won’t reach 10 percent until 2021, rising by 0.5 percent a year after that.