A fair return for Australia's resources

A stronger, smarter and fairer tax system should ensure that all Australians can benefit from the returns from our non-renewable resources, lowering the tax burden on individuals and businesses.

The Minerals Resource Rent Tax

The Minerals Resource Rent Tax (MRRT), which commenced on 1 July 2012, is an important long term reform that will ensure all Australians receive a fairer return for our coal and iron ore resources. The MRRT, like the Petroleum Resource Rent Tax (PRRT), is responsive to changing industry conditions by only taxing those projects earning above-normal profit and not imposing additional burdens on low profit operations. Unlike royalties, the MRRT adjusts with profitability and so is unlikely to adversely affect investment and production, but will collect greater revenue during periods of high profitability.

The minerals sector is currently in an investment stage and the additional productive capacity that willresult from these significant investments can be expected to deliver gains to revenue over the longer term. ABARE has estimated that around $10 billion in revenue was forgone during the period 2000-01 to 2006-07 in present value terms. The sudden drop in coal and iron ore prices from their 2011 highs weighed heavily on MRRT receipts in 2012. MRRT receipts are expected to increase significantly over the forward estimates, reflecting strong volumes and lower capital investment as the economy transitions from the investment phase of the mining boom.

Extension of the Petroleum Resource Rent Tax

The PRRT has applied successfully to offshore petroleum projects located in Commonwealth waters since its commencement in 1986, raising more than $28 billion over that period despite volatility and difficulty in forecasting.

As part of the Government's resource tax reforms, the PRRT regime was extended to onshore petroleum projects and the North West Shelf from 1 July 2012. The extension to onshore projects can be expected to increase PRRT revenue collections over the longer term.

Cash Bidding for Offshore Petroleum Exploration Rights

To complement the operation of the PRRT, a cash bidding system will be introduced from 2014 to allocate offshore petroleum exploration acreage in mature areas and those known to contain petroleum. Cash bidding will prevent inefficient and wasteful over-exploration being undertaken by industry under a work program bidding system in areas where little may be required, while securing an upfront return for the community. The Government will also replace stamp duties on the transfer of offshore project interests with more efficient cost-recovery arrangements. This will remove stamp duties imposed by the Commonwealth.

PRRT - volatile but growing collections