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Tuesday, 22 November 2011
Page: 13261

Mr SIDEBOTTOM (Braddon) (13:17): On a passion monitor, the member for Stirling would not have registered at all because deep down he understands that this is a fair tax, that this tax is popular and that it taxes a resource that belongs to the Australian people. For all his words, there was not much passion behind it because he does not believe in what he was talking about.

On Monday, the House of Representatives Standing Committee on Economics report on the Minerals Resource Rent Tax Bill and related bills not only recommended that they pass through parliament but also provided information that 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—and that is good. This legislation and the bills associated with it intend to get a fair return for that resource that belongs to Australia, to in no way inhibit the growth of that industry and, indeed, contrary to claims on the other side, to actually act and provide incentives for that industry to continue to employ. So much for the rhetoric about how it is going to be a dagger in the heart of the industry, particularly in Western Australia. You have only to look at those figures. Jack Hill, the blind miner, can work out that there is enough there as an incentive, there is enough there for a fair return to the Australian people and there is enough there to continue what is a very lucrative industry.

The minerals resource rent tax is an amended form of the proposed resource superprofits tax, which others have spoken about here, first announced on 2 May 2010. It is part of a suite of reform measures in response to the Henry tax review and, indeed, is part and parcel of a taxation review for this country. It became the MRRT on 2 July 2010 following the government's consultations with key mining companies that resulted in an agreement with the mining industry. The agreement included a number of amendments to the original reform proposal, and that is where we are at the moment. I mentioned that Australia has a large, high-quality non-renewable resource base. The rights to the majority of this resource base are vested in the people of Australia and in the Crown. The fact that these resources are nonrenewable allows exploitation to generate above normal profit or what we call economic rent.

There are two main types of resource taxes: royalties, which have been mentioned by many in this House previous to my speech and which are typically charged by Australian state governments, and resource rent taxes. Royalties do not take into account the profitability of a mining operation and, as such, will still tax mining operations when no economic rent is present and will recover only a small proportion of profits when rents are high. The Australia's Future Tax System Review found that royalty regimes currently applied by states and territories in Australia to be some of the most distorting taxes in the country; hence, tax reform. Resource rent taxes are profit based, cash-flow taxes. A resource rent tax collects a percentage of the resource project's economic rent.

And, contrary to what the member for Stirling said, there is precedent in Australia for resource rent taxes—it is in the petroleum resource rent tax, and that has not diminished interest in investment in those industries. So this talk of a 'dagger in the heart' stuff—I mean, really and truly, it is no wonder we cannot have much of a debate in this country with that type of overblown rhetoric and nonsense.

So what does the amended tax reform package contain, in essence? It introduces a minerals resource rent tax at a rate of 30 per cent for coal and iron ore, and extends the petroleum resource rent tax to cover all onshore and offshore oil, gas and coal seam methane projects at a rate of 40 per cent. By cutting the company tax rate to 29 per cent in 2012-13, as I mentioned earlier, among all the rhetoric, we are talking about tax reforms, providing revenue to allow for taxation incentives and reductions for businesses and individuals in our country; giving small business an early start to the reduced company tax rate from 2011-12; allowing instant asset write-off for small business—a very important incentive; establishing a state infrastructure fund, one of the major beneficiaries being Western Australia; increasing the superannuation guarantee to 12 per cent; introducing a government superannuation contribution for low-income earners; raising the superannuation guarantee age limit from 70 to 75; and changing concessional contribution caps for people over 50 with low superannuation balances. Most importantly, and again often forgotten in this debate, essentially the revenue the government will receive from the tax on resources will be channelled into increased superannuation benefits, into infrastructure and into business tax cuts. That is where the revenue will be channelled.

Under the MRRT the government taxes mining profits and allows mining operations to carry forward and uplift losses with interest for use in later years. As the MRRT taxes profits from minerals that are commonly subject to state and territory royalties, it will provide a credit for royalties. Iron ore and coal will be subject to the new profits based tax at a rate, as I mentioned earlier, of 30 per cent. The MRRT also applies to profits from gas extracted as a necessary incident of coal mining and gas produced by the in situ combustion of coal. Other commodities will not be included, so the number of affected companies will be around 320—and many fewer, I suspect.

The MRRT assessable profits are calculated on the value of the commodity, determined at its first saleable form—that is, at the mine gate—less all costs to that point. Projects will be entitled to a 25 per cent extraction allowance that reduces taxable profits subject to the MRRT. This allowance recognises the contribution of miners' expertise to profits at the mine gate, as I mentioned earlier. Small miners with resource profits below $75 million per annum will not have an MRRT liability. Miners may elect to use book or market value as the starting base for project assets, with depreciation accelerated over five years when book value, excluding mining rights, is used; or effective life up to 25 years when market value at 1 May 2010, including mining rights, is used. Those are just some of the aspects that are involved with this package deal.

I mentioned earlier that the MRRT will provide our community with a commensurate return when substantial profits are made—substantial profits—from the extraction of iron ore and coal. I also mentioned earlier that the integration of the state and territory royalty regimes and the Australian government resource tax regime is to be achieved through state and territory royalties being creditable against MRRT liabilities.

So, in returning a fairer share of the nation's wealth to Australians, the revenue will be used to fund important tax and superannuation reforms. I would like to elaborate a little bit more on those. The company tax rate for all companies will be reduced to 29 per cent on 1 July 2013, and there will be a new tax break for up to 2.7 million small businesses from 1 July 2012. This will provide really important incentives to business: a reduction in the company tax rate and a new tax break for 2.7 million small businesses.

It will also mean an investment in our regions through the Regional Infrastructure Fund and Regional Development Australia Fund. It will simplify personal tax for 6.4 million Australians, with a $500 standard deduction from 1 July 2012 and a $1,000 deduction from 1 July 2013—again, it is part and parcel of a large package of tax reforms that will affect companies, small businesses and individual Australians. It will reward personal saving of over five million Australians with a 50 per cent tax discount on up to $500 of interest income from 1 July 2012, increasing to $1,000 of interest income from 1 July 2013.

Importantly, it will boost superannuation for 8.4 million Australians with the first increase from 1 July 2013, and we know that is going to have important, long-term beneficial consequences for so many Australians into the future. It will also expand superannuation concessions for 3.5 million low-income earners and about 275,000 over-50s from 1 July 2012.

Contrary to claims made by the opposition—particularly by the member for Stirling—and some within the industry, the MRRT has the same rate of tax for mines big and small; and it has a range of benefits for smaller miners. It has a full exemption for miners, as I mentioned, with up to $75 million per year in profit; and has a partial exemption for miners with up to $125 million per year in profit.

Small mining companies will also be able to access concessional arrangements for complying with the MRRT, including a safe harbour methodology for calculating the value of the resource at the taxing point, which I mentioned earlier.

Finally, the MRRT provides miners who are investing to grow with immediate deductibility for their new investments. I wanted to put that on the record, because we hear so much from those opposite and from some sections of the industry that the package of legislation will discriminate against small miners, and that is not the case.

In summation, this is a fair tax. It is part and parcel of a package of tax reforms that will be beneficial to the whole of the Australian community. It is a tax on a resource that belongs largely to the Australian people. It will be beneficial for individuals, particularly through superannuation and tax offsets, it will be important to companies, reducing taxes to 29 per cent, and it will be important to small business. All are very important to our economy. I am very glad to support this legislation.