Former Prime Minister Kevin Rudd had announced plans for a 40% tax on miners' profits, but his successor, Julia Gillard, has negotiated a reduced rate of 30% for coal and iron ore miners.
"We were determined to get a fairer share of the mineral wealth in our ground for all Australians," Gillard said.
The new Minerals Resource Rent Tax (MRRT) will apply only to iron ore and coal projects, while a Petroleum Resource Rent Tax, currently applicable to offshore oil and gas projects, will be extended to onshore oil and gas projects.
Smaller iron ore and coal companies, with annual profits below A$50M will not be required to pay the new tax.
The new tax will apply from July 1, 2012 and is still expected to raise billions of dollars for the government.
But the tax deal must still be passed by the next parliament, following an election expected within months. Opposition parties vowing to oppose the tax and scrap it if they win office.
Several of the major global mining companies had threatened to cancel mining projects because of Mr Rudd's proposal, which they said seriously risked Australia's international competitiveness.
But the new MRRT has been welcomed by BHP Billiton, Rio Tinto and Xstrata.
"The companies agree that the proposal presented by the government represents very significant progress toward a minerals taxation regime that satisfies the industry's core principles," BHP, Rio Tinto and Xstrata said in a joint statement.
BHP Billiton CEO Marius Kloppers said the company was encouraged by the Australian Government’s decision to replace the proposed Resource Super Profits Tax with a Mineral Resource Rent Tax on mined iron ore and coal.
“We are encouraged that the MRRT design is closer to our frequently stated principles of sound tax reform, in that the proposed tax will be prospective in its treatment of profits from our iron ore and coal businesses, and not apply to the other commodities in our portfolio."