Minerals Resource Rent Tax
The Minerals Resource Rent Tax (MRRT) is a tax on profits generated from the exploitation of non-renewable resources in Australia. It was a replacement for the proposed Resource Super Profit Tax (RSPT).
The tax, levied on 30% of the "super profits" from the mining of iron ore and coal in Australia, was introduced on 1 July 2012. A company was to pay the tax when its annual profits reach $75 million, a measure designed so as not to burden small business. The original threshold was to be $50 million until independent MP Andrew Wilkie negotiated an amendment. Around 320 companies will potentially be affected by the changes.
- 1 Introduction
- 2 Levy
- 3 Expected impact
- 4 Actual revenue
- 5 Constitutionality
- 6 Repeal effort
- 7 Further reading
- 8 See also
- 9 External links
- 10 References
The RSPT was initially announced as part of the initial response to the Australia's Future Tax System review, known as the Henry Tax Review, by the Treasurer, Wayne Swan and the then Prime Minister, Kevin Rudd. The tax is similar in concept, although different in operation, to the existing Petroleum Resource Rent Tax levied on off-shore petroleum extraction activities. The Petroleum Resource Rent Tax is to be extended to all Australian onshore and offshore oil and gas projects as part of the new framework.
The RSPT was to be levied at 40% and applied to all extractive industry including gold, nickel and uranium mining as well as sand and quarrying activities. The tax was replaced by the MRRT following the appointment of Julia Gillard as Prime Minister of Australia in late June 2010. Gillard made implementation of the tax her first priority.
The controversy regarding the RSPT was such that an "ad war" between the government and mining interests began in May 2010 and continued until the downfall of Prime Minister Kevin Rudd in June 2010. The Australian Electoral Commission released figures indicating mining interests had spent $22 m in campaigning and advertisements in the six weeks prior to the end of the Rudd prime ministership. Mining interests re-introduced the advertisements arguing against the proposed revised changes during the 2010 federal election campaign.
Mining industry and political response
The response to the MRRT was mostly divided into supporter and opposition groups consisting of Federal government and opposition parties, lobby groups and the various stakeholders.
The tax received support from the Australian Council of Trade Unions, mining unions such as the Construction, Forestry, Mining and Energy Union and conditional support from the Australian Greens. Unlike the RSPT, mining companies BHP Billiton and Rio Tinto Group have not publicly opposed the MRRT
Those opposing the tax include the mining industry, resource and mining organisations such as Fortescue Metals Group, Xstrata and Hancock Prospecting, mining lobby groups and the federal opposition (Liberal Party and National Party). Andrew Forrest has stated that the tax "will reduce investment in Australia". Mining magnate Gina Rinehart, listed by Forbes Australia in 2011 as Australia's wealthiest person, is a fierce opponent of the tax, arguing that it will drive away billions of dollars of investment.
Advertisements supporting or attacking the proposed tax ran on commercial television and in major newspapers. Funding for the mining lobby's advertisements came from the largest resource companies whilst funding for the Federal government's advertisements came from the consolidated revenue fund. Julia Gillard ceased the government's advertising after becoming prime minister and the mining lobby ended their ads shortly thereafter.
Passing of the Bill
On 23 November 2011 the tax passed through the lower house with the support of the Greens and independent MP Andrew Wilkie. Independent MP Tony Windsor supported the Bill on the condition that a committee be set up to independently assess the environmental risks posed by coal seam gas extraction.
MRRT is calculated separately for each mining project interest, according to the formula
- MRRT = MRRT liability (which cannot be less than nil)
- A = MRRT rate
- B = mining profits
- C = MRRT allowances
- D = low profit offset
- E = rehabilitation tax offsets
The MRRT rate was initially set at 22.5%, being the result of the formula
where the extraction factor is set at 25%.
Profits and allowances
Where a mining project interest's mining profit is negative, it is deemed to be nil for MRRT purposes.
MRRT allowances are available for deduction against mining profits in the following order:
- Royalty allowance
- Transferred royalty allowance
- Pre‑mining loss allowance
- Mining loss allowance
- Starting base allowance
- Transferred pre‑mining loss allowance
- Transferred mining loss allowance
Currently additional compliance costs for this tax to the mining sector is running into the many millions of dollars.
Low profit offset
Where the miner has a group mining profit of less than $125 million, a low profit offset is available so that:
Rehabilitation tax offset
Where a mining project interest or pre‑mining project interest is winding down or has ended, a rehabilitation tax offset can arise if upstream rehabilitation expenditure has occurred which would not otherwise be taken into account in determining MRRT liability.
$22.5 billion was expected to be raised over the first four years of the tax, which were to be spent on pensions, tax cuts for small businesses and infrastructure projects, particularly in Queensland and Western Australia.
Opposition to the tax was cited by many commentators[who?] as one reason for the replacement in June 2010 of the then Prime Minister, Kevin Rudd by his deputy, Julia Gillard. Soon after Gillard's appointment as Prime Minister, the Government reached an agreement with several of the largest mining firms, BHP Billiton, Xstrata and Rio Tinto, on changes which were announced on 2 July 2010. Negotiations with smaller companies did not take place at this time.
The changes lead to a reduction in the amount of revenue expected to be raised by the tax and offsetting reductions in the tax breaks the MRRT will fund, for example; the proposed company tax reduction was halved due to the reduction in revenue to be collected from the tax, along with reductions in other areas.
In May 2012, budget, it was claimed it would bring in $3 billion for the financial year, in October 2012, the figure was reduced to $2 billion, on 14 May 2013, the receipts are announced that they were expected to be $200 million, much less than the $3 billion predicted in May 2012.
On 12 February 2013, Labor minister Kevin Rudd, one the authors of the tax, stated that "Wayne Swan and Julia Gillard must bear the responsibility for Labor's mining tax and deal with the consequences its near non-existent revenue" as the expected revenue has not materialised. It raised $126 million in the first six months since its introduction.
In August 16, 2013, in its Pre-election Economic and Fiscal Outlook by the Treasury and Finance departments there was an increase in forecasts for tax receipts over the next four years to almost $6 billion still way below its original projection of $22.5 billion. Currently the government is paying back several of pre-payments already made for this tax.
The tax is also proving to be a complex and costly to administer for the government. Current cost is more than $50m setting up administering the tax with an ongoing annual cost of administration estimated of $20m a year. On top of that there was an advertising cost of nearly $40m.
In 2012, Fortescue Metals Group and several of its subsidiaries launched a lawsuit with respect to the MRRT's validity under the Constitution of Australia. On 7 August 2013, the High Court of Australia unanimously rejected the claim, declaring that the tax did not:
- discriminate between the States of the Commonwealth of Australia contrary to s. 51(ii),
- give preference to one State of the Commonwealth of Australia over another State contrary to s. 99,
- prevent the States from aiding mining activity under s. 91, or
- curtail State sovereignty contrary to the Melbourne Corporation principle.
Following the 2013 election, a bill was introduced by the Coalition government to repeal the MRRT on 13 November 2013 which passed through all stages in the House of Representatives by 20 November. It is currently being considered by the Senate.
- Minerals Resource Rent Tax Act 2012
- Minerals Resource Rent Tax (Imposition—General) Act 2012
- Minerals Resource Rent Tax (Imposition—Customs) Act 2012
- Minerals Resource Rent Tax (Imposition—Excise) Act 2012
- Minerals Resource Rent Tax (Consequential Amendments and Transitional Provisions) Act 2012
- "Minerals resource rent tax – Introduction". Australian Taxation Office. Retrieved 8 August 2013.
- News articles on Mining Super Tax
- "Full statement and detail of new mining tax". The Australian. 2 July 2010. Retrieved 2 July 2010.
- Phil Mercer (23 November 2011). "Can Australia's new mining tax achieve its objective?". BBC News (British Broadcasting Corporation). Retrieved 17 January 2012.
- "Mining tax bills pass Lower House". ABC News (Australian Broadcasting Corporation). 23 November 2011. Retrieved 17 January 2012.
- "A New Resource Taxation Regime". Commonwealth Of Australia. Retrieved 17 January 2012.
- "RSPT v MRRT - the differences". The Age. 2 July 2010. Retrieved 2 July 2010.
- "Mining tax faces one more hurdle". Brisbane Times (Fairfax Media). 6 February 2012. Retrieved 16 February 2012.
- "Kevin Rudd defends mining ads: News.com.au 29 May 2010". News.com.au. 29 May 2010. Retrieved 2010-08-29.
- AAP. "Mining stocks soar as RSPT ads axed: NineMSN 24 June 2010". Money.ninemsn.com.au. Retrieved 2010-08-29.
- A snip at $22m to get rid of PM: SMH 2 February 2011
- 24 July 2010 12:00AM (24 July 2010). "Miners launch new war on Julia Gillard's tax: The Australian 24 July 2010". Theaustralian.com.au. Retrieved 2010-08-29.
- Neil Sands (11 June 2010). "BHP calls for RSPT to be scrapped". The Australian. Retrieved 19 November 2011.
- Treadgold, Tim (2 February 2011). "Miner's Daughter". Forbes: Australia's 40 Richest. Retrieved 10 September 2011.
- Andrew Burrell & Joe Kelly (2 February 2012). "Raid pits Rinehart against Fairfax boss on mine tax". The Australian (News Limited). Retrieved 17 February 2012.
- Cleary, P. 2011, Too Much Luck; The Mining Boom and Australia's Future, Black Inc; Collingwood, Victoria
- Hudson, Phillip (23 November 2011). "Mining tax passes lower house after Julia Gillard, Greens strike deal". Herald Sun. Retrieved 23 November 2011.
- "Windsor welcomes appointments to mining committee". ABC News (Australian Broadcasting Corporation). 28 January 2012. Retrieved 28 January 2012.
- "Mining tax passes the Senate". The Sydney Morning Herald. 19 March 2012. Retrieved 17 July 2012.
- Minerals Resource Rent Tax Act 2012, s. 10-1
- MRRTA, s. 10-5
- Minerals Resource Rent Tax (Imposition—General) Act 2012, s.4
- MRRTA, s. 25-5
- MRRTA, s. 10-10
- MRRTA, s. 45-5
- MRRTA, s. 45-10
- MRRTA, ss. 225-15, 225-20
- Ker, Peter. "Mining tax embarrassment as Rio funds returned". Sydney Morning Herald. Retrieved 21 August 2013.
- "Swan reveals mining tax revenue". AAP via SBs. 8 February 2013. Retrieved 14 February 2013.
- Fortescue Metals Group Limited v The Commonwealth  HCA 34 (7 August 2013)
- "Mining tax beats challenge ... and what it means for you". Clayton Utz. 7 August 2013. Retrieved 8 August 2013.
- "Minerals Resource Rent Tax Repeal and Other Measures Bill 2013". Parliament of Australia.
- "Lower House passes bill to repeal mining tax, but hostile Senate awaits". Australian Broadcasting Corporation. 21 November 2013.