The Minerals Resource Rent Tax (MRRT) is a tax on profits generated from the exploitation of non-renewable resources in Australia.^[1] 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.^[1] A company was to pay the tax when its annual profits reach $75 million, a measure designed so as not to burden small business.^[2] The original threshold was to be $50 million until independent MP Andrew Wilkie negotiated an amendment.^[3] Around 320 companies will potentially be affected by the changes.^[4]

Background [edit]

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.^[4]

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.^[5] Gillard made implementation of the tax her first priority.^[6]

The controversy regarding the RSPT was such that an "ad war" between the government and mining interests began in May 2010^[7] and continued until the downfall of Prime Minister Kevin Rudd in June 2010.^[8] 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.^[9] Mining interests re-introduced the advertisements arguing against the proposed revised changes during the 2010 federal election campaign.^[10]

Mining industry and political response [edit]

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,^[11] 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".^[2] Mining magnate Gina Rinehart, listed by Forbes Australia in 2011 as Australia's wealthiest person,^[12] is a fierce opponent of the tax, arguing that it will drive away billions of dollars of investment.^[13]

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^[14] whilst funding for the Federal government's advertisements came from the consolidated revenue fund.^{[citation needed]} Julia Gillard ceased the government's advertising after becoming prime minister and the mining lobby ended their ads shortly thereafter.

Effects and impacts [edit]

Billions of dollars are expected to be raised from the tax, which will be spent on pensions, tax cuts for small businesses and infrastructure projects, particularly in Queensland and Western Australia.^[2]

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,^[6] on changes which were announced on 2 July 2010.^{[citation needed]} Negotiations with smaller companies did not take place at this time.^{[citation needed]}

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.

Levy [edit]

The proposed tax will be levied on 30% of MRRT assessable profit, where assessable profit is defined as assessable receipts minus deductible expenditure (including an MRRT allowance). The MRRT allowance is proposed to be set at the long term government bond rate plus 7% (700 basis points). Projects will also be eligible for a 25% extraction allowance, which reduces the effective statutory tax rate to 22.5%. State royalties will be deductible for MRRT purposes, and MRRT payments will be deductible for company income tax purposes.

Unlike the proposed RSPT system, the MRRT will not see the Commonwealth Government refund a portion of project losses.

Passing of the Bill [edit]

On 23 November 2011 the tax passed through the lower house with the support of the Greens and independent MP Andrew Wilkie.^[15] 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.^[16]

The tax was passed by the Senate on 19 March 2012 by 38 votes to 32, with support of the Greens.^[17]

Revenue [edit]

The tax raised $126 million in the first six months since its introduction.^[18]

On February 12, 2013 one the authors of the tax Kevin Rudd 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"^[19] as the expected revenue has not materialised.

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 dollars, on May 14, 2013, the receipts are announced that they were expected to be $200 million, much less than the $3 billion predicted in May 2012.^[20]

See also [edit]

	Australia portal
	Mining portal

• Mining in Australia

References [edit]

External links [edit]

• News articles on Mining Super Tax