The RSPT is dead; long live the MRRT ! Start saying "Mineral Resource Rent Tax (MRRT)" every morning in the mirror because that's the new term we will all hear a lot from now on.
The Resources Super Profit Tax has been relaunched as the Mineral Resource Rent Tax as follows:
Today, BHP Billiton Chief Executive Officer, 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 (MRRT) on mined iron ore and coal.
“As we have previously stated, BHP Billiton believes that tax reform that is prospective, competitive, differentiated and resource-based will ensure that the Australian mining sector continues to grow through investment in the industry which benefits all Australians.
“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.
“At the request of the Prime Minister, there have been constructive discussions in the last week with the Deputy Prime Minister and the Resources Minister which have resulted in a material improvement from the original tax proposal,” Mr Kloppers said.
The proposed MRRT is closer to meeting the tax design principles in the following ways:
Prospective – businesses can transition into the MRRT at market value of the business (not the previously proposed book value) with depreciation over 25 years. This is particularly important for the iron ore and coal operations which have been in existence for many years.
Competitive – the headline tax rate is 30 per cent, with a 25 per cent allowance for the extraction activity such that only the resource profit is taxed. Company tax will continue to be paid.
Differentiated – the tax applies to coal and iron ore resources with all other resources exempt.
Resource based – taxable profit will be that at the mine gate and not on downstream processing or infrastructure.
“There is still a great deal of work to be done before this tax is enacted, and we will work constructively with the Government to ensure that the detailed design of minerals taxation maintains the international competitiveness of the Australian resources industry into the future and is in the long term interests of the industry and all Australians,” Mr Kloppers concluded.
Here's the news item:
Julia Gillard has announced that the Government has reached a deal with the mining industry over its controversial super profits tax.
The Government has made major concessions to the mining industry in a redesign of the tax.
The new arrangements will apply to iron ore, oil, gas and coal.
Iron ore and coal will now be subject to a new tax at a rate of 30 per cent instead of the originally announced 40 per cent.
And the tax will kick in at the Government bond rate plus 7 per cent, which would be at around 12 per cent.
"The new arrangements also recognise the preference of industry for more generous recognition of past investment, through a credit that recognises the market value of that investment written down over a period of up to 25 years," Ms Gillard said in a statement.
Today's agreement with the industry after intensive discussions with Rio Tinto, Xstrata and BHP Billiton in Canberra this week ends a two-month brawl with the resources sector which contributed to Kevin Rudd's ousting as prime minister.
The resolution is likely to increase speculation that an election will be called soon with the stoush now defused.
The legislation for the tax still needs to go through Paraliament but will not be introduced until after the election.
The Federal Opposition has vowed to block the tax.
Here are the full
MINERAL RESOURCE RENT TAX HEADS OF AGREEMENT:
The Design of the Minerals Resource Rent Tax
The new resource tax will apply from 1 July 2012 only to mined iron ore and coal. All other minerals are excluded.
The rate of tax will be 30% applied to the taxable profit at the resource.
Taxable profit is to be calculated by reference to:
• The value of the commodity, determined at its first saleable form (at mine gate) less all costs to that point
• An extraction allowance equal to 25% of the otherwise taxable profit will be deductible to recognise the profit attributable to the extraction process. (i.e. this to only tax the resource profit)
• Arms length principles on all transactions pre and post first saleable form.
MRRT is to be calculated on an individual taxpayer’s direct ownership interest in the project.
There will be no MRRT liability for taxpayers with low levels of resource profits (i.e. $50m per annum).
All post 1 July 2012 expenditure is to be immediately deductible for MRRT on an incurred basis. Non-deductible expenditure will be broadly consistent with PRRT.
MRRT losses will be transferable to offset MRRT profits the taxpayer has on other iron ore and coal operations.
Carried-forward MRRT losses are to be indexed at the allowance rate equal to the LTBR plus 7 percent.
The MRRT will be an allowable deduction for income tax.
All State and Territory royalties will be creditable against the resources tax liability but not transferable or refundable. Any royalties paid and not claimed as a credit will be carried forward at the uplift rate of LTBR plus 7 percent.
Starting Base
The starting base for project assets is, at the election of the taxpayer, either:
• Book value (excluding the value of the resource) or
• Market value (as at 1 May 2010).
All capital expenditure incurred post 1 May 2010 will be added to the starting base and depreciated against mining operations from 1 July 2012.
“Project assets” for the purpose of the MRRT will be defined to include tangible assets, improvements to land and mining rights (using the Income Tax definition).
Where book value is used to calculate starting base, depreciation will be accelerated over the first 5 years. The undepreciated value will be uplifted at LTBR plus 7 percent.
Where market value is used to calculate starting base, there will be no uplift and depreciation will be based on an appropriate effective life of assets, not exceeding 25 years.
Any undepreciated starting base and carry forward MRRT losses are to be transferred to a new owner if the project interest is sold.
