Australian Government Rules Out Mining Tax Changes

by Mary Swire, Tax-News.com, Hong Kong

16 September 2010

During an interview, Australia’s Minister for Resources and Energy, Martin Ferguson, has confirmed that the new Labor government will not raise the rate of the proposed mineral resources rent tax (MRRT) in order to obtain the support of the Greens.

In July this year, the less onerous 30% MRRT replaced the previously proposed 40% resources super profits tax after the government had negotiated changes in the tax with the country’s largest mining companies. In the non-oil sector, the MRRT will apply only to iron ore and coal, Australia’s biggest and most profitable commodities, and be levied from July 1, 2012.

During the election campaign, the Greens said that, if the party held the balance of power after the election, which it will in the Senate from next year, they would try to reverse the reduced rate of the MRRT in order to increase revenue from the mining sector. Furthermore, the party indicated that it would also look to amend the new tax to include uranium mining.

However, in the interview, Ferguson stipulated that the new government would not increase the rate of the MRRT to retain the support of the Greens, given that the rate of the tax had been pre-negotiated and had been taken to the electorate. In addition, he said that the government had no intention of extending its scope to include uranium.

The government had already set up a mining tax policy transition group, co-chaired by former BHP Billiton chairman Don Argus and Ferguson, before the election. That group is consulting with the mining industry and will provide advice on the implementation of the MRRT.

Arising out of those consultations and examination of the tax’s details, Ferguson agreed that the government was reviewing some of its parts, such as an exploration rebate. However, he emphasized that any such amendments would have to be revenue-neutral as the MRRT forms part of a package of measures, the net effect of which could not be changed.

Given the complex work still to be undertaken by the transition group, and also that the tax would not apply until July 2012, it is expected that the legislation for the MRRT will not be introduced into parliament until sometime early next year.

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