On 2 July 2010, the Australian Government announced revised resource tax arrangements to replace the previously announced Resource Super Profits Tax.

After consultation and negotiations with parts of the mining industry, the Australian Government announced that the proposed Resource Super Profits Tax (RSPT) will be replaced by a new resources tax regime affecting minerals from petroleum differentially, consisting of:

  • a Minerals Resource Rent Tax (MRRT)
  • an extended Petroleum Resource Rent Tax (PRRT).

The Government has forecasted that the change will reduce the number of affected mining companies from 2,500 to around 320, at the same time creating a $1.5 billion revenue shortfall.

When will it apply?

The new regime is proposed to commence on 1 July 2012. Recent pronouncements by the new Government suggest this remains the intention.

Comparison of the MRRT, extended PRRT and the RSPT

Although the details remain to be finalised, there are several key similarities and differences between the regimes. These are summarised on page 2.

Further, mining companies will continue to be subject to income tax on their exploration and production activities with MRRT and PRRT payments being deductible for income tax purposes.

What are the next steps?

The Government is establishing a Policy Transition Group (PTG) which will be led by the current Resources Minister Martin Ferguson and the former BHP Billiton Ltd chairman Don Argus. The role of the PTG is to consult with industry and advise the Government on the implementation of the new resource tax regime.

Exposure draft legislation is proposed to be released by June 2011 for public comment.

Conclusion

It is possible that more concessions may be made by the current Government. Clearly, there are a myriad of hurdles to be overcome before the new regime can become law.  

Any future changes will be addressed in upcoming editions of Resources Update.

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