Prime Minister Julia Gillard has announced a breakthrough agreement on the controversial mining tax, with the government making concessions in some key areas.
Ms Gillard says the compromise "moves Australia forward" and "moves our mining industry forward".
She says the country "has been stuck on this question for too long".
Compromise makes industry 'competitive'
"Now we can move forward together as a nation," Ms Gillard says.
The compromised deal will make Australia "competitive" and "attractive" to foreign investment.
Resources and Energy Minister Martin Ferguson says the compromise has ensured job security for mining industry employees.
He also hailed the company tax rate reduction as beneficial for tourism.
"I believe we've struck the right balance," Ms Gillard says, but concedes not all parts of the industry will be happy with the deal.
New name for tax
The tax has been given a new name - the Minerals Resource Rent Tax (MRRT).
It was previously known as the Resource Super Profit Tax.
The headline tax of 40 per cent has been reduced to 30 per cent, despite the federal government's previous refusals to back down on the rate.
The reforms will be limited to iron ore and coal projects, and will only apply to 320 companies.
The government says the reduced rate will make the industry "internationally competitive".
Petroleum resource tax extended
The MRRT will apply to iron ore and coal. However, the current Petroleum Resource Rent Tax will be extended to cover all onshore and offshore oil and gas projects.
There will be no rebate for new exploration costs.
To finance the changes, the company tax rate will now only drop to 29 per cent, instead of the promised 28 per cent.
A policy transition group will be established. The group will be lead by BHP's Don Argus.
The federal government estimates the reforms will reduce revenue by $1.5 billion in the forward estimates.
Days of talks with miners
Ms Gillard had engaged in talks with the three big mining companies Rio Tinto, BHP Biliton and Xstrata, over the last few days.
The agreement may prove to be a double-edged sword for the newly sworn-in Prime Minister, who made the mining tax a priority when taking office eight days ago.
Ms Gillard said she would pull all government ads on the tax while consulting with the mining industry on reaching an agreement.
The mining industry also scrapped its ad campaign as a sign of goodwill towards the new Prime Minister.
The federal government is likely to be criticised for its backflip on the company tax and profit tax rate, yet the deal will prove a boom for Ms Gillard's leadership.
Some critics have slammed Treasurer and Deputy PM Wayne Swan's refusal to compromise on the deal earlier.
But Ms Gillard says Mr Swan had "his sleeves rolled up" and engaged in talks with the industry in order to reach a deal.
The federal Opposition has previously stated it will rescind the resources tax regardless of whether a compromise is reached with mining companies.