The mining tax kicks in with the start of the financial year – but you could be forgiven for forgetting.
Despite all the column inches, ad space, social media churn and broadcast airtime devoted to it over the past three years, the birth of MRRT seems to have been over-shadowed – for the time being, at least – by its twin, the carbon tax.
While an online search for news items will fetch more than 30,000 items on the carbon tax from over the past week, the mining tax barely nudges the 2,000 mark.
So since everyone else seems to be ignoring the impending arrival of MRRT into the world, let’s wet the baby’s head with a few facts on how it came to be.
Spawning from the Resources Super Profits Tax (RSPT) in the heady days of the new Rudd government, the mining tax was conceived as a response to the review of the Australian tax and transfer system led by Treasury Secretary, Dr Ken Henry.
The Henry Tax Review found mining royalties had been set at rates that were low enough for mining to operate in periods of depressed commodity prices but failed to provide adequate return to the community when returns were high.
So in July 2010, just weeks after dumping her predecessor (and hurling his stupid carbon tax baggage out into the street after him), Julia Gillard sat down with BHP, Xstrata and Rio Tinto to cut a deal.
What emerged was the Minerals Resource Rent Tax 2011 Bill, under which all royalties paid to the states and territories will now be credited against the mining companies’ liability for the new tax.
The MRRT kicks in at the $75 million profit threshold (raised from $50 million), gradually increase for mining companies with profits between $75 million to -$125 million a year, reaching 30% for profits above $125 million.
However, a 25% allowance that recognises the expertise and capital that mining companies bring to mineral extraction means the effective top rate of MRRT is 22.5% (diluted from 40%, proposed under the RSPT).
The number of mining companies to pay MRRT will be around 320 and the Treasury estimates it will generate $3.7 billion over the coming tax year, rising to $4 billion in 2013-14 and dropping to $3.4 billion the year after. And that’s one helluva birthday gift list.
This post originally featured on the Symposium Events blog.
Image: Fairfax Media