Mitch Fifield (Victoria, Liberal Party, Assistant Minister for Social Services) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows—

This bill repeals the Minerals Resource Rent Tax, commonly known as the mining tax.

This bill ends a sordid history of poor taxation policy. And it discontinues or re-phases measures that were intended to be funded from the expected but disappearing revenue of the mining tax.

Given that the mining tax has failed to deliver meaningful revenue and the government has had to borrow to pay for the related measures, the total mining tax package has imposed a significant cost to the budget.

Passage of the bill will abolish a flawed tax and deliver $13.4 billion in budget savings over the forward estimates period to 30 June 2017.

This will begin to repair the nation’s finances and put the budget on a more sustainable footing.

Schedule 1 — Repeal of the Minerals Resource Rent Tax

Schedule 1 of the Bill seeks to repeal the Minerals Resource Rent Tax with effect from 1 July 2014.

Australia’s mining tax has had a long and tortured journey.

The Henry Tax Review, commissioned by the first Rudd government, recommended introduction of a Resource Super Profits Tax (RSPT). The government forecast that the original RSPT would raise $49.5 billion in the five years from July 2012.

The RSPT was an unprecedented hit to one of Australia’s most successful industries, which understandably reacted negatively.

Ultimately the announcement, consultation, and handling of the RSPT was a contributing factor to the downfall of former Prime Minister Rudd.

Then new Prime Minister Julia Gillard made a key promise to resolve the impasse with the resource sector over the tax.

Her government negotiated with three of Australia’s biggest miners, and from this the Minerals Resource Rent Tax was enacted in 2010.

This new version of the mining tax included an extension of Petroleum Resource Rent Tax to onshore projects.

The forecasts for revenue expected from the new version of the mining tax were significantly revised down from the original tax. $49.5 billion was to be collected from the RSPT over a five year period. This was reduced to $26.5 billion to be collected from the Minerals Resource Rent Tax over the same period.

Since its creation, forecast revenue from the tax has been repeatedly written down.

In February 2013, the former Treasurer, the member for Lilley, released information that indicated the tax had raised just $126 million in its first six months of operation.

Since its inception from 1 July 2012, it has collected a net $400 million.

The mining tax is a flawed tax.

It has been opaque in its operation with key details of how the tax works not clearly articulated by the former government.

One such example is their failure to explain the upfront tax deduction from the market valuation method used to calculate tax liabilities for the mining tax.

This complex and unnecessary tax has imposed considerable administrative costs on resource operators required to comply with it.

Less than 20 taxpayers have contributed to the net $400 million raised by the mining tax to date, but around 145 other miners have been required to submit mining tax instalment notices while making no net payments.

In other words, around 145 taxpayers are complying with the mining tax legislation, but are not actually paying any tax.

It imposes a significant regulatory and compliance burden on the iron ore and coal mining industry and has damaged business confidence in these industries that are critical to future investment and jobs.

Repealing the tax will restore confidence and promote mining activity, which in turn will create jobs and deliver prosperity to the broader community. It will send a clear signal that Australia wants to be a premier destination for mining investment, and is once again open for business.

While mining companies in Australia will no longer be required to pay the mining tax, they will continue to pay their fair share of tax through state royalties and company tax.

Schedule 2 — Loss carry back

Schedule 2 of the bill seeks to repeal the mining tax related company loss carry-back.

The bill provides that, from the 2013 14 income year, companies can carry their tax losses forward to use as a deduction for a future year.

This will save $950 million over the forward estimates.

Schedule 3 — Small business instant asset write-off threshold

Schedule 3 of the bill amends the instant asset write-off threshold provisions for small business entities.

The threshold value of a depreciating asset for the purposes of instant asset write-off provisions was increased from $1,000 to $6,500 as part of the introduction of both the mining tax and the carbon tax package.

This bill seeks to reduce the threshold amount from $6,500 to $1,000 from 1 January 2014.

From 1 January 2014, small business entities will be able to immediately deduct the value of a depreciating asset that costs less than $1,000 in the income year the asset is first used or installed ready for use.

This measure will provide a $2.6 billion saving over the forward estimates.

Schedule 4 — Deductions for motor vehicles

The bill seeks to provide that from 1 January 2014, motor vehicle purchases made by small business entities will no longer be eligible for an accelerated deduction of $5,000.

These purchases will instead be treated as normal business assets under the concessional capital arrangements available under subdivision 328-D of the Income Tax Assessment Act 1997 and depreciated at a rate of 15 per cent, in the year which the asset is first used or installed and then 30 per cent for subsequent years.

The removal of this measure will provide savings of $450 million over the forward estimates.

However it is important to note that in an unrelated initiative the coalition will assist the automotive industry by not imposing Labor’s $1.8 billion fringe benefits tax hit to salary sacrificed cars.

Schedule 5 — Geothermal energy

Schedule 5 of the bill seeks to repeal the geothermal exploration deduction.

As a consequence, geothermal energy exploration and prospecting expenditure will not be immediately deductible.

Amendments are included in the schedule to provide a capital gains tax (CGT) roll-over in cases where a geothermal exploration right is merely exchanged for a geothermal extraction right relating to the same area.

Geothermal exploration will then be consistent with the treatment of other mining rights.

The removal of this measure will provide $10 million in savings over the forward estimates.

Schedule 6 — Superannuation Guarantee Charge percentage

Schedule 6 of the bill seeks to delay further increases in the superannuation guarantee rate for a two-year period.

The superannuation guarantee rate will remain at 9.25 per cent until 30 June 2016 and then rise to 9.5 per cent on 1 July 2016 and then in increments of half a per cent a year until it reaches 12 per cent on 1 July 2021.

The pausing of the superannuation guarantee will save $1.6 billion over the forward estimates.

Schedule 7 — Low income superannuation contribution

Schedule 7 of the bill seeks to abolish the low income superannuation contribution (LISC). The contribution will not be payable on or after 1 July 2013.

When we are responsibly able to and once the budget has been returned to a strong surplus the coalition will revisit concessional contribution caps and incentives for lower income earners.

The removal of this measure will save the budget $2.7 billion over the forward estimates.

Schedule 8 — Repeal of income support bonus

The bill Seeks to repeal the income support bonus, which was intended to be funded from the anticipated revenue from the mining tax. This indexed, non-means tested payment was paid twice annually to eligible social security recipients.

This bill will abolish all future payments of the income support bonus commencing from the date of Royal Assent of the legislation. It will save $1.1 billion over the budget forward estimates.

Schedule 9 — Repeal of schoolkids bonus

Finally, this bill seeks to repeal the schoolkids bonus.

The schoolkids bonus is a payment that is not linked to education or education expenses, paid for by borrowed money which will need to be repaid by the same children it is supposed to benefit.

The coalition government will provide a more efficient, targeted approach to improving education outcomes for students through effective education policies, rather than bonus payments to individuals.

The removal of this measure will save the budget $4.5 billion over the forward estimates.

Conclusion

Full details of the all of these measures are contained in the explanatory memorandum to the bill.

The government has consulted with key industry stakeholders since the repeal of the mining tax was announced as a priority election commitment, including a recent round of public consultation on the exposure draft legislation.

Whilst some of the related expenditure initiatives are worthy in nature, they have been carelessly linked to a complicated and burdensome tax that will, at the end of the day, never pay its way.

I seek leave to continue my remarks later.

Leave granted; debate adjourned.

Ordered that the resumption of the debate be made an order of the day for a later hour.