Monday, 19 March 2018
Treasury Laws Amendment (Junior Minerals Exploration Incentive) Bill 2017; In Committee
That the House of Representatives be requested to make the following amendment:
(1) Schedule 1, item 2, page 8 (lines 13 to 23), omit section 418-82, substitute:
418 -82 When does an entity have an unused allocation of exploration credits from an income year
(1) An entity has an unused allocation of exploration credits from an income year if each of the following:
(a) the entity's *exploration credits allocation for the income year;
(b) the total credits issue for investment in the entity for the income year;
exceeds the total amount of all *exploration credits created by the entity for the income year.
Statement of reasons: why certain amendments should be moved as requests
Section 53 of the Constitution is as follows:
Powers of the Houses in respect of legislation
53. Proposed laws appropriating revenue or moneys, or imposing taxation, shall not originate in the Senate. But a proposed law shall not be taken to appropriate revenue or moneys, or to impose taxation, by reason only of its containing provisions for the imposition or appropriation of fines or other pecuniary penalties, or for the demand or payment or appropriation of fees for licences, or fees for services under the proposed law.
The Senate may not amend proposed laws imposing taxation, or proposed laws appropriating revenue or moneys for the ordinary annual services of the Government.
The Senate may not amend any proposed law so as to increase any proposed charge or burden on the people.
The Senate may at any stage return to the House of Representatives any proposed law which the Senate may not amend, requesting, by message, the omission or amendment of any items or provisions therein. And the House of Representatives may, if it thinks fit, make any of such omissions or amendments, with or without modifications.
Except as provided in this section, the Senate shall have equal power with the House of Representatives in respect of all proposed laws.
Division 418 of the Income Tax Assessment Act 1997 (the ITAA 97) provides a refundable tax offset under section 67-23 of the ITAA 97 to taxpayers who invest in a minerals explorer, by allowing the minerals explorer to issue those investors with exploration credits.
The Bill extends the refundable tax offset for a further 4 years. Under the Bill, the minerals explorer may apply for an exploration credits allocation for a particular year and cannot issue more credits than allocated. The minerals explorer also cannot issue more exploration credits for an income year than would relate to investment in the minerals explorer during that year. However, if allocation is not used up in one year, investors in that year are given priority in the following year, up to the limit of the unused allocation of exploration credits. Because the allocation of exploration credits for the first year may exceed the amount of exploration credits that would relate to investment in that year, investors in the second year may miss out on exploration credits that could never have been issued to first year investors anyway.
Amendment 1 addresses this problem by redefining the unused allocation of exploration credits. Under the amendment, exploration credits are not "wasted" and are instead available to investors in the second year. As a result, the amount of exploration credits that may result in a refundable tax offset is greater under the amendment than it would be under the Bill (and, given that the Bill extends the offset over 4 more years, under the Act).
The refundable tax offset could entitle a taxpayer to a refund under Division 3A of Part IIB of the Taxation Administration Act 1953. This would increase the amount of expenditure out of the Consolidated Revenue Fund under the standing appropriation in section 16 of the Taxation Administration Act 1953. It is for this reason that the amendment is covered by section 53.
Statement by the Clerk of the Senate pursuant to the order of the Senate of 26 June 2000
This amendment will allow the unused allocation of exploration credits for an income year to be available to investors in the subsequent year, thereby increasing the amount of exploration credits available as a refundable tax offset.
The statement of reasons for moving the amendment as a request advises that it will increase expenditure under the standing appropriation in section 16 of the Taxation Administration Act 1953.
The Senate has long followed the practice that it should treat as requests amendments that would result in increased expenditure under a standing appropriation. If that is the effect of the amendment, then it is in accordance with the precedents of the Senate that it be moved as a request.
I move amendment (2) on sheet GU143:
(2) The amount of the unused allocation of exploration credits from the income year is the lesser of:
(a) the amount by which the amount mentioned in paragraph (1) (a) exceeds the total amount of all *exploration credits created by the entity for the income year; and
(b) the amount by which the amount mentioned in paragraph (1) (b) exceeds the total amount of all *exploration credits created by the entity for the income year.
(3) If neither the amount mentioned in paragraph (1) (a) nor (1) (b) exceeds the total amount of all *exploration credits created by the entity for the income year, there is no unused allocation of exploration credits from the income year, and the amount of any unused allocation of exploration credits from the income year is nil.
(4) In this section:
total credits issue for investment in the entity (the minerals explorer) for an income year means the total of all *exploration credits that may be issued by the minerals explorer to all other entities in relation to *exploration investment made by those other entities in the minerals explorer in the income year if section 418-120 is complied with.
(2) Schedule 1, item 66, page 31 (lines 16 to 20), omit subitem (1), substitute:
(1) Despite subsection 418-100(2) of the Income Tax Assessment Act 1997, as inserted by item 2 of this Schedule, an application to the Commissioner for a determination allocating exploration credits to an entity for the 2017-18 income year must be made during the period of one month starting on the later of:
(a) the eleventh business day after the day on which this Act receives the Royal Assent; and
(b) the day on which this item commences.
These two technical amendments are proposed to clarify the operation of the new scheme. The amendments adjust the application period for the 2017-18 income year. The bill previously provided that junior explorers could apply to the ATO from 1 February 2018 for an allocation of credits. It is necessary to adjust the application period as this time frame has passed. The new application period will begin on 11th business day after this bill receives royal assent, or the day of the commencement of the amendments if this is later. Applications will be open for a month. Under the JMEI, the Commissioner of Taxation allocates credits between junior explorers on a first come, first served basis until the annual exploration cap for an income year is reached. The amendments clarify the definition of 'unused allocation of exploration credits' to ensure the scheme operates as intended. Where an explorer raises less capital than expended, they will not be prevented from issuing credits to investors in the following year, to the extent of the shortfall. For example, where an explorer receives an allocation of credits to raise $1 million of capital but is only able to raise $600,000 of capital, only those credits that relate to the $600,000 can be issued to investors. Those credits need to be issued to first-year investors before credits can be issued to investors in subsequent years.
Labor will support these government amendments to the Treasury Laws Amendment (Junior Minerals Exploration Incentive) Bill. The first amendment will be to the 2017-18 credit year, as indicated by the minister, reflecting the date on which the bill passes the parliament. The start date of the scheme is linked to royal assent, and that is appropriate and Labor will support it. The other amendment, we understand, is to clarify the use and availability of credits by junior explorers, according to the intent of the bill. Therefore, Labor will also support that amendment.
I move Greens amendment (1) on sheet 8384, as circulated in my name:
(1) Schedule 1, item 2, page 7 (line 3), after "*petroleum", insert ", thermal coal".
It is a very simple amendment, on which I elaborated to some extent in my second reading contribution, so I won't go over all of that again. As the bill currently stands—and as we all know this bill will become law fairly soon, as it is going to pass—it exempts the incentive from being made available to exploration or prospecting for petroleum or oil shale. All this amendment seeks to do is to ensure that thermal coal is also exempt from being eligible for this exploration incentive.
The time for coal in Australia is over, and we need to be recognising that. We need to be recognising that we do not need to be putting any more public resources into continuing to explore for new thermal coal deposits. We need to be transitioning away from coal. We need to be ensuring that all of our communities that in the past have had some economic benefit from these industries are able to transition effectively, that the workers are able to transition effectively and the communities are able to be provided with other economic opportunities, many of which are already there and many of which need support and investment to develop more effectively and more sustainably. There is a lot of debate of course in my own state of Queensland—an argument regarding the future of the thermal coal industry. The Greens' position on that is unequivocally clear, and we think it's about time the parliament's position on that was made unequivocally clear.
There are alternative economic futures for regional communities. They are ones that are better both in terms of employment opportunities and in terms of more solid and stable communities. So much of the profit from coal in the past has gone to overseas corporations, many of which have managed to avoid tax. The harm done by the boom-bust component of the last mining boom to communities in regional Queensland is quite significant. I know my Greens colleagues could talk about other states as well. But it caused quite significant social and community damage.
We've got $100 million-plus available here. That money could be invested far more effectively in economic opportunities that are far more stable and suited for communities. It also should not be being spent in any way to encourage further exploration of thermal coal. We should not be opening up existing coal deposits that have already been identified. We still do not have a clear position from the Queensland government about whether they do or do not support the Adani coalmine. We do not have a clear position from the Queensland government on whether they do or do not support opening up the whole new massive coal deposits in the Galilee Basin. As I said in my second reading contribution, any further expansion of that will predominantly have a harmful effect on existing coal jobs. We need to be supporting people who are in existing employment and providing assistance for a smooth transition for those workers, many of whom are already being inappropriately exploited by overseas mining corporations, due in part to the inadequacies under our existing so-called Fair Work Act and the inadequacies of our existing industrial relations laws. The last thing we should be doing is providing more taxpayer money to subsidise exploration to identify more thermal coal deposits. That's why the Greens are moving this amendment. It's a pretty straightforward one and I certainly would encourage other parties to support it.
For clarification, Senator Bartlett: you read some numbers that I don't know actually align with what had been circulated. You are moving the amendment on sheet 8384, aren't you?
Thank you. Labor will not be supporting the Greens amendment. We heard some extraordinary words from Senator Bartlett here this morning. The reality is that over the five years to 2015-16 expenditure on greenfield exploration around Australia dropped by 70 per cent. That's just a fact. It's a reality that the Greens seem to be completely unaware of. We heard the member stand up and say that they support mining and exploration, but they don't. And clearly they have decided on a strategy here today that for media simplicity they're going to oppose this legislation. We heard Senator Bartlett say that $100 million is not a good investment, despite the reality of that maximum decline in exploration—70 per cent—in the last five years, up to 2015-16. We need to be doing something for people in the regions who actually require sound investment in exploration. If the Greens want to be taken seriously and to genuinely participate in the debate around mining, they need to engage with stakeholders, and we know that hasn't been the case.
Labor is the party that, I'm very proud to say, has been very much involved in facilitating a timely review of this scheme. Our amendments, which I'll move shortly, will seek to do that careful review of the investment in exploration into the future. We actually believe in and support evidence based policymaking. We understand that the mining sector is broad, that it employs a lot of Australians in regional parts of the country. Labor takes the mining sector seriously, Labor takes jobs seriously and Labor takes regional Australia seriously. The Greens need to engage much more seriously with the opportunity to grow jobs in a sustainable way throughout the regions of Australia, and this piece of legislation seeks to do that in an evidence based and careful way.
The government doesn't support the amendment proposed by the Greens, which would exclude exploration or prospecting for thermal coal, typically used for power generation, from the junior minerals exploration incentive. In line with the exploration development incentive, the JMEI is designed to encourage greenfields exploration for minerals, excluding petroleum and oil shale. Much of Australia's petroleum and oil exploration occurs offshore. However, this incentive is focused on encouraging exploration onshore. The government does not support unnecessarily narrowing the JMEI based on anti-coal rhetoric. Narrowing the scheme would deny junior explorers the ability to convert a tax loss from exploration or prospecting for thermal coal into a tax benefit that can be distributed to new investors. This would detract from the scheme's objective, which is to contribute to a better investment climate in the sector and an improved likelihood of mineral discovery for the benefit of the Australian economy and the benefit of jobs in the Australian economy. We therefore oppose the amendment.
I want to briefly respond to the comments that have been made. It's disappointing but not surprising that the government doesn't support this; it's simply disappointing that Labor is not supporting this. Senator O'Neill's comment did not go to the heart of the amendment, which is a simple one; it went to the broader nature of the legislation. They were valid comments to make, but not with regard to this amendment. This amendment is simple: it seeks to ensure that taxpayer money is not made available to subsidise exploration for thermal coal. That's all it will do.
Senator O'Neill talked about people being taken seriously. This is a simple matter about whether Labor want to be taken seriously on their commitment to move away from fossil fuels. As the minister himself just outlined, this exploration incentive regime does not apply to petroleum or oil shale at the moment. The Greens simply want to make sure it does not apply also to exploration for thermal coal. It's a very simple amendment. If you support ensuring that we do not further expand subsidising exploration for thermal coal, you'll vote yes to this amendment. If you support more subsidies being made available to explore for thermal coal, you'll vote no. It's very disappointing that Labor appears to be going to vote no.
I just want to record that we are absolutely confident that this scheme will operate appropriately in facilitating greenfield exploration for discoveries of the future, and we are confident that companies will explore for minerals that global markets demand.
by leave—I move the opposition's amendments standing in the name of Senator Cameron on sheet 8370:
(1) Schedule 1, Part 1, page 20 (after line 19), at the end of the Part, add:
6A At the end of Division 418
Subdivision 418 -G—Other matters
Table of sections
418-190 Annual impact assessments of this Division
418 -190 Annual impact assessments of this Division
(1) As soon as practicable after the end of each income year referred to in subsection (2), the Minister must cause to be conducted an impact assessment of the operation of this Division during that income year. The objective of the impact assessment should be to measure the additional *exploration or prospecting attributable to the Division.
(2) The income years are as follows:
(a) the 2017-2018 income year;
(b) the 2018-2019 income year;
(c) the 2019-2020 income year;
(d) the 2020-2021 income year.
(3) Each impact assessment must make provision for public consultation, including consultation with the industry.
(4) The Minister must cause to be prepared a report of each impact assessment. The report must include any information made publicly available by the Commissioner under section 3F of the Taxation Administration Act 1953 in relation to *exploration credits allocated for the income year.
(5) The Minister must cause a copy of a report of an impact assessment to be published on the Australian Taxation Office website as soon as practicable after the completion of the preparation of the report.
(2) Schedule 1, page 25 (after line 10), after item 26, insert:
26A At the end of Part IA
3F Reporting of information about junior minerals exploration incentive offset
(1) This section applies if the Commissioner makes a determination under section 418-101 of the Income Tax Assessment Act 1997 allocating exploration credits to an entity for an income year.
(2) The Commissioner must, as soon as practicable after making the determination, make publicly available:
(a) the ABN and name of the entity; and
(b) the amount of the entity's exploration credits allocation for the income year.
(3) An expression used in this section that is also used in the Income Tax Assessment Act 1997 has the same meaning as in that Act.
The explanatory memorandum for this piece of legislation notes that it's the government's intention that the Department of Industry, Innovation and Science will review the operation of the junior minerals exploration incentive scheme by 30 June 2020 to assess both its uptake and its efficacy in attracting investment. The explanatory memorandum for the bill that introduced the previous incarnation of the program stated:
The Department of Industry will monitor greenfields exploration and the scheme throughout its operation, with a review of the scheme in 2016 …
… … …
Key performance indicators for the scheme, against which the review will be conducted, will be finalised by the end of 2014. Subject to the outcome of the review, the programme may be extended for a further period.
According to the new explanatory memorandum, in early 2017 participants in the Exploration Development Incentive and other stakeholders were formally requested to provide feedback on the performance of the exploration development incentive, and this informed the basis for consultation on improving the scheme. The explanatory memorandum states that the government engaged with industry bodies, shareholder representatives, departments and state governments. Although feedback was incorporated into the new scheme, the materials are not public and the explanatory memorandum does not give any detail of impact or uplift of exploration.
Labor supported the passage of the exploration development incentive legislation, and I note for the record that we're supportive of this bill. Consistent with Labor's approach to evidence based policy, Labor is moving these amendments in the Senate today to require the minister to instigate an annual impact assessment of the measure, with provision for public consultation, particularly including industry. The amendments will also require the Commissioner of Taxation to make publicly available the ABN and name of an entity receiving credits and the amount of credits given. This is important. It will enable the sector to see more clearly and in a more timely way exactly what's going on. Labor believes in transparency and rigorous policy evaluation to ensure that initiatives work as intended, and the amendments proposed by Labor today will achieve that end.
I also want to note that the government has indicated that they will support the amendments. I and the shadow Assistant Treasurer wish to thank the government for their good-faith discussions around these amendments. Labor's amendments will give extra certainty to all stakeholders, including industry and taxpayers, that the measures operate as intended. Rigorous policy evaluation helps to guide targeted initiatives in future and ensures the best bang for the taxpayer buck on investment and jobs. I commend the amendments to the committee.
Whilst the Greens still oppose the legislation, we support these amendments. They are improving it a bit.
Question agreed to.
Bill, as amended agreed to, subject to a request.
Bill reported with amendments and a request; report adopted.