Senate debates

Monday, 1 September 2014


Minerals Resource Rent Tax Repeal and Other Measures Bill 2014; Second Reading

5:53 pm

Photo of Michael RonaldsonMichael Ronaldson (Victoria, Liberal Party, Minister for Veterans’ Affairs) Share 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, which is more commonly referred to as the mining tax.

The Government is reintroducing this legislation in order to meet both our 2010 and 2013 Federal Election commitments.

This Bill removes the former Labor Government's failed mining tax, and all expenditure linked to the non-existent proceeds of this tax.

This Bill discontinues or re phases expenditure measures linked to the mining tax by the former Government, on the expectation that their cost would be met by the proceeds of mining tax revenues.

As we now know, the failure of the mining tax to return any meaningful revenue meant the former Government had to borrow money to pay for these unsustainable commitments.

Updated costings for the Bill we are introducing today reveal that removing the failed mining tax and all related expenditure improves the Budget position by nearly $17 billion over the current forward estimates.

Updated estimates for projected mining tax revenue reveal that it is expected to raise just $668 million over the same period.

This Bill seeks to repeal or re-phase more than $17 billion of legislated expenditure.

The Government cannot afford to keep borrowing money to pay for this kind of unfunded spending.

By repealing or re-phasing the measures related to the mining tax, this Bill is a necessary step in repairing the damage caused to the nation's finances, and puts the Budget on a more sustainable footing going forward.

The application dates of the measures in this Bill will be fixed by the Treasurer's proclamation once Royal Assent is received.

Schedule 1— Repeal of the MRRT

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

It was of course born out of the Henry Tax Review, which was commissioned by the first Rudd Government.

One of the key recommendations was for a Resource Super Profits Tax (the RSPT). The original RSPT was forecast to raise $49.5 billion over a five year period from 1 July 2012.

This was to be a big hit to one of Australia's most successful industries and, ultimately, the announcement, consultation, and handling of the RSPT, was a large contributing factor to the downfall of former Prime Minister Rudd.

In taking over the Prime Ministership, the former Gillard Government famously struck a deal with three of Australia's biggest miners, RIO, BHP Billiton and Xstrata, and from this the Minerals Resource Rent Tax was born. The new version of the mining tax also included an extension of Petroleum Resource Rent Tax to onshore projects.

Forecast revenue on the new version of the mining tax was significantly revised down when compared to the original Resource Super Profits Tax. It was forecast to raise $26.5 billion compared to $49.5 billion over the five year period from 1 July 2012.

Following the second version of the mining tax, there were three further variations, and forecast mining tax revenue has been written down in nearly every subsequent Budget and MYEFO update.

The Government received just $600,000 (net of refunds) for the June 2014 quarterly instalment of the mining tax.

As previously mentioned, the mining tax, if allowed to continue, would be expected raise just $668 million over the forward estimates.

The mining tax has many design flaws which will preclude it from raising meaningful revenue, particularly when Government administrative costs are taken into account.

We persistently called on the former Government to explain how key details of their mining tax worked, particularly in relation to the upfront tax deduction from the market valuation method which is used to calculate tax liabilities for the Minerals Resource Rent Tax.

A common statement thrown about by those still clinging to this failed tax is that the mining tax was necessary to have the industry pay its way. In 2011-12 the Mining companies paid over $24 billion in company taxes and royalties.

The mining tax is a flawed tax.

And what is worse, it imposes large administrative costs on operators in the resources sector trying to comply with the complex tax.

The repeal of the Minerals Resource Rent Tax will save millions of dollars in compliance expenses for small, medium and large entities.

So far, in the two years of its existence less than 20 taxpayers have contributed to paying the net $340 million raised by the mining tax but over 125 miners have been required to submit mining tax instalment notices while making no net payments.

That is around 125 taxpayers are all complying with the mining tax legislation, but not actually paying any tax.

Therefore, not only is the MRRT a complex and unnecessary tax which has failed to raise the substantial revenue predicted by the former Government, it imposes a significant regulatory and compliance burden on the iron ore and coal mining industries, and damages business confidence which is critical to future investment and jobs.

Some have been claiming that just because the mining tax has raised so little revenue, it could not possibly damage investor confidence.

This argument ignores the importance that foreign companies place on investment decisions, especially in high cost countries like Australia.

Unexpected cost imposts imposed on business with no warning, and unnecessary ongoing compliance burdens are deterrents for foreign investors.

And this is exactly what the mining tax is. The repeal of the mining tax will restore confidence and promote activity in the mining industry, creating jobs and contributing to the prosperity of all Australians.

It sends a clear signal that Australia is determined to remain a premier destination for mining investment, and is once again open for business.

Mining companies in Australia will continue to pay their fair share of tax through State royalties and company tax.

We need to do what is responsible and repair the Budget, and the removal of the mining tax and its associated expenditure is a step in the right direction.

Schedule 2 — Loss carry back

Schedule 2 of the Bill repeals the mining tax related loss carry-back provisions that enable companies making a tax loss of up to $1 million to recoup taxes paid on an equivalent amount of taxable income in a prior income year.

Companies will not lose access to their tax loses. Rather, consistent with arrangements prior to the MRRT-related amendments, companies will carry their tax losses forward to use as a deduction for a future year.

The removal of this measure will improve the budget position by $1.3 billion 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.

The instant asset write-off amount was increased to $6,500 in two stages as part of both the Mining and Carbon Tax packages.

The mining tax package dealt with the increase from $1,000 to $5,000, whilst the Carbon Tax package dealt with the increase from $5,000 to $6,500.

This legislation before the House returns the write-off amount back from $6,500 to $1,000, effective from the income year in which proclamation occurs.

Consistent with arrangements that existed prior to the MRRT related amendments, small business entities will still be able to deduct the value of a depreciating asset that costs $1,000 or over but over a longer time frame.

The single small business pool arrangements will be preserved to maintain lower business compliance costs.

Under these arrangements, assets costing $1,000 or more will be allocated to the existing general small business pool and depreciated at a rate of 15 per cent in the first year and 30 per cent in subsequent years.

If the value of the general small business pool is less than $1,000 at the end of the income year, the small business can claim a deduction for the entire value of the pool.

The improvement in the budget position from reducing the instant asset write-off from $6,500 to $1,000 will be $3.2 billion over the forward estimates.

Schedule 4 — Deductions for motor vehicles

The Bill also provides that motor vehicle purchases made by small business entities will no longer be eligible for an accelerated deduction of $5,000.

Motor vehicle purchases by small business entities using the simplified depreciation rules 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. Under these arrangements they will be depreciated at a rate of 15 per cent in the year which the asset is first used or installed for use and then 30 per cent for all subsequent years.

If this Bill is passed without undue further delay, the removal of this measure will improve the budget position by $550 million over the forward estimates.

Schedule 5 — Geothermal energy

The Bill will repeal the extension of the income tax exploration provisions to geothermal energy exploration so that geothermal energy exploration and prospecting expenditure is not immediately deductible. Rather, normal capital depreciation rules will apply, simplifying a company's compliance requirements.

Amendments are included 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. This ensures that a capital gains tax liability will not be inappropriately incurred, consistent with the treatment of other mining rights.

The removal of this measure will improve the Budget position by $15 million over the forward estimates.

Schedule 6 — Superannuation Guarantee Charge percentage

The rate of the Superannuation Guarantee will be paused at the rate which is currently legislated for the proclamation year. The Treasurer will, by a non-disallowable legislative instrument, have the power to amend the SG charge percentage, which will allow him to pause the rate for the following three income years, and then increase the rate in increments of 0.5 percentage points each year, until the rate reaches 12 per cent.

If this Bill is passed without undue further delay, this measure will result in the SG rate being paused at the 1 July 2014 rate (9.5 per cent) and remaining at that rate until 1 July 2018 when it will increase to 10 per cent on 1 July 2018 and then by 0.5 per cent every year thereafter until the rate reaches12 per cent on 1 July 2022.

These amendments to the superannuation guarantee will improve the Budget position by $2.6 billion in cash terms over the forward estimates.

Schedule 7 — Low Income Superannuation Contribution

Schedule 7 of the Bill abolishes the Low Income Superannuation Contribution (LISC).

The Government will revisit concessional contribution caps and incentives for lower income earners once the Budget is back in a strong surplus.

The White Paper on the Reform of Australia's Tax System to be prepared before the next election provides an opportunity to consider the appropriate taxation of superannuation contributions, including for low income earners.

Low to middle income earners may be eligible for the superannuation co-contribution to boost their retirement savings.

The removal of the low income superannuation contribution will improve the Budget position by $3.6 billion in cash terms over the forward estimates.

Schedule 8 — Repeal of income support bonus

The Bill repeals the income support bonus. The Coalition made very clear in the lead-up to the last election that, if elected, we were committed to getting rid of the mining tax and all of the unfunded spending promises, including the income support bonus.

Participation in the workforce is the best way to ensure economic stability and the payment system is geared to promote this while ensuring that a safety net exists for those requiring help.

This Bill will abolish all future payments of the Income Support Bonus from a date fixed by proclamation following the passage of the Bill.

The removal of this measure will improve the Budget position by around $1.3 billion over the forward estimates.

Schedule 9 — Repeal of schoolkids bonus

The Bill also repeals the schoolkids bonus. The Government intends to offer a more efficient, targeted approach to improving education outcomes for students through effective education policies, rather than bonus payments to individuals.

If this Bill is passed without undue further delay, the removal of this measure will improve the Budget position by almost $4.7 billion over the forward estimates.


By abolishing the failed mining tax and repealing or re-phasing the measures related to the mining tax, this Bill is a necessary step in putting the Budget on a more sustainable footing going forward.

Full details of the measures are contained in the explanatory memorandum.

Debate adjourned.

Ordered that further consideration of the second reading of this bill be adjourned to the first sitting day of the next period of sittings, in accordance with standing order 111.