House debates

Monday, 21 November 2011

Bills

Police Overseas Service (Territories of Papua and New Guinea) Medal Bill 2011; First Reading

12:58 pm

Photo of Julie OwensJulie Owens (Parramatta, Australian Labor Party) Share this | Hansard source

On behalf of the Standing Committee on Economics, I present the committee's advisory report on the Minerals Resource Rent Tax Bill 2011 and related bills, incorporating a dissenting report, together with the minutes of proceedings. I ask leave of the House to make a short statement in connection with the report.

Leave granted.

Mr Speaker, the committee reviewed the Minerals Resource Rent Tax Bill 2011 and the four related minerals bills; the Petroleum Resource Rent Tax Assessment Amendment Bill 2011 and the three related petroleum Bills; the Superannuation Guarantee (Administration) Amendment Bill 2011; and the Tax Laws Amendment (Stronger, Fairer, Simpler and Other Measures) Bill 2011. The committee reviewed the bills against the backdrop of an unprecedented mining boom with high levels of investment and profit. Mining companies generated profits of $92.8 billion to June and plan to invest $430 billion to expand their industry. In the last decade mining profits have jumped 262 per cent. The Australian government has taken the view that the massive profits of the mining sector should be more fairly taxed and the proceeds returned to all Australians. This is consistent with the evidence the committee received during the inquiry. United Voice stated:

There is a substantial gulf between the perceived benefits of the mining boom and some of the actual impacts on our economy, environment, health and the day-to-day lives of working Australians.

The minerals resource rent tax will be a tax on mining profits. The proceeds of the tax will fund critical infrastructure and a cut in the company tax rate for small business, and make it possible to increase the superannuation guarantee from nine to 12 per cent. Resource rent taxes are much more efficient than royalties. The Australia's Future Tax System review found that royalty regimes were the most distorting taxes in the Federation.

The package of bills implement important reforms to the Australian economy. They apply a 22.5 per cent minerals resource rent tax on the profits that mining companies make on iron ore and coal on their mining activities only. This excludes value-adding activities such as transportation and concentration.

They also extend the petroleum resource rent tax to the North West Shelf and the Australian mainland.

The bills increase the superannuation guarantee from nine per cent to 12 per cent, remove the age limit of 70 for the superannuation guarantee, and implement a superannuation contribution for low-income earners of up to $500 annually.

Finally, the bills give small businesses simplified and greater upfront tax deductions for assets.

Although not formally a part of the package, the government has also announced that it will decrease the company tax rate for small businesses from 30 per cent to 29 per cent.

These reforms recognise that mineral resources belong to all Australians and it is only right that the profits from the mining boom be shared more widely.

During the inquiry there were differing views on how the tax would affect emerging miners, compared with established miners. Emerging miners believed that they would be paying a large amount of the revenue under the minerals resource rent tax and that large miners would pay very little, due to the larger starting base that established miners have available to them as a deduction against the tax. However, Treasury advised the committee that:

The value of the resource, to the extent that it is reflected in the starting base, will be reflective of the expected future cash flows from the exploitation of the resource, so they will be proportional. If you have a large starting base you would expect to have large revenue flow, and if you have a small starting base you will have a smaller revenue flow.

The committee is confident that the MRRT will operate as intended.

Importantly, the other elements of the package deliver significant benefits to the Australian economy as a whole. Small business confirmed that the improved deductions will help them with their cash flow and make it easier for them to obtain finance to invest in their businesses during the two-speed economy. Business Enterprise Centres Australia said:

… we have small business, which is the backbone of the economy, struggling. There has to be a redistribution of that wealth.

The MRRT will also fund substantial infrastructure investment in regional Australia through the Regional Infrastructure Fund.

The superannuation industry confirmed that Australians support compulsory saving for their retirement and that the bills will help address the savings gap that currently exists for the great majority of Australians. The Financial Services Council stated:

… the current SG rate is at nine per cent and that will fail to provide people with their expectations of a comfortable retirement.

Low-income earners stand to significantly gain from the bills. Unlike the majority of Australian workers, 3.5 million Australians on low incomes receive little or no tax benefit from contributing to super because their marginal income tax rate is equal to, or below, the 15 per cent tax applied to superannuation. The low-income superannuation contribution in the legislation will distribute superannuation tax concessions more equitably.

The bills implement important long-run reforms to the Australian economy and ensure that all Australians will benefit from the mining boom. They should become law.

I would like to thank the organisations that assisted the committee during the inquiry through submissions or participating in the hearings in Canberra. I also thank my colleagues on the committee for their contribution to the report and acknowledge the extraordinary work done by the secretariat on a very short time frame. I commend the report to the House.

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