The mining tax and you

In the last week of Federal Parliament this year, the Labor Government will attempt and get its Minerals Resource Rent Tax (MRRT) – mining tax to most people – passed through the lower house. Much of the initial furore which occurred when the tax was first mooted has died down but is this due to an acceptance or a lack of understanding about what is being proposed? YOURLifeChoices simplifies the key issues surrounding the Government’s proposed tax.

Why do we need a MRRT?

Currently, mining companies are extracting non-renewable resources from Australia’s soil. States and territories receive a royalty tax from mining companies to pay for the removal of such resources.

The Australian Government believes that current charging arrangements are inadequate and have led to exploitation of Australia’s non-renewable resources by the large mining companies. As the price and demand for minerals has increased, so have the profits of the mining companies, yet the charging arrangements have not been reviewed to take this into consideration.

The proposed MRRT would also lead to the distribution of mining revenue to the whole of Australia and not just those states fortunate enough to be resource-rich. It would also serve to simplify the complicated excise and royalty agreements which currently exist.

The proposed tax was first mentioned as a Resource Super Profits Tax in the Henry Tax Review, which highlighted the inefficiencies of Australia’s current tax system. Read the complete Australia’s Future Tax System: Report to the Treasury.

Click NEXT to find out at what level will the MRRT be charged and what the revenue will be used for.

At what level will the MRRT be charged?

The MRRT will be charged at 40 per cent of profits. From this 40 per cent, mining companies will be able to deduct liabilities, such as capital investment. States and territories would also be refunded the amount they would have received under the previous royalty scheme.

For more details, visit www.dpm.gov.au

What will the revenue be used for?

String demand for resources has pushed the Australian dollar higher, making export more difficult as Australian goods are now considered an expensive option. The tourism industry has also suffered. The money raised from the mining tax would enable the Government to reduce the current rate of company tax from 30 per cent to 28 per cent, and introduce tax breaks for small business. This would help to offset increased production and export costs. The reduction in company tax would theoretically enable businesses to fund the proposed increase in superannuation guarantee from 9 per cent to 12 per cent.

For more details, visit www.dpm.gov.au.

Click NEXT to find out if you will have more money in your pocket and if they are any benefits for the mining companies.

Will I have more money in my pocket?

Economic modelling by both the Government and KPMG suggests the average worker would gain $450 per annum as a result of the flow-on cuts in company tax and small business breaks. Economic modeling also suggests that the cost of essentials would decrease as follows: food (9 per cent), clothing (1.3 per cent), housing (1.1 per cent) and transportation (1.7 per cent). For more information on the economic modelling for the, visit KPMG.com.au

Are there any benefits for the mining companies?

It is widely reported that the mining companies will stop investment in projects in Australia if the MRRT goes ahead. This is perhaps unlikely as they need to mine the resources in order to make a profit. Under the MRRT the mining companies may benefit:

  • by being able to offset a loss on one project against a more profitable project
  • from projects which otherwise would be unviable under the state royalty program being viable under the MRRT. This is because the MRRT taxes only profit, not simply production.

For more information on how mining companies may benefit, visit www.dpm.gov.au.

Do you feel strongly about the mining tax? Should international companies be able to mine our resources without paying a fair price? Or do you think the mining tax will drive companies away and hurt our economy?

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