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Thursday, 1 November 2012
Page: 8793


Senator CORMANN (Western Australia) (14:00): My question is to the Minister representing the Treasurer, Senator Wong. Can the Minister confirm that all state and territory royalties on iron ore or coal paid by mining companies across Australia are creditable against any minerals resource rent tax liability?

Senator WONG (South AustraliaMinister for Finance and Deregulation) (14:00): It is the case, I think, in this debate that we have been using the word 'creditable'—and I assume that the senator is referring to a question which was asked and answered in the other place yesterday—when in fact the technical term would be 'deductible allowance'. I can confirm that royalty credits are used by way of a deductible allowance; that is the way it operates in law. Obviously, in the course of the way in which royalties have been discussed in the context of the MRRT, various ministers and other players, including the industry, have referred to it as 'creditable'. But, in fact, the technical way in which this is administered under the MRRT and in tax returns is by way of a deductible allowance that reduces tax liability. So I trust that that is of assistance to the senator in terms of clarifying how these royalties work.

I would again make the point that I made yesterday: that the design of the tax, including the fact that state royalties can be deducted against MRRT liability, has of course been factored into the estimates, which were updated in the midyear review. Those reflect, as the senator has heard me say on a number of occasions now, a reduction in the revenue as a result of various parameters changing, including the fact that commodity prices have come off significantly since the budget. I think we had a discussion that, as a Western Australian, he should be aware of that. Obviously royalties do represent a cost to miners, and it is disappointing that we see the Liberal Party championing an additional cost to miners that is based on volume and not profit.

Senator CORMANN (Western Australia) (14:02): Mr President, I ask a supplementary question. Given the minister's answer, and given that in the MRRT heads of agreement, which the Prime Minister and the Treasurer signed, it says very clearly that 'all state and territory royalties will be creditable against a resources tax liability', can she explain why the Treasurer told the House of Representatives yesterday that unused royalties are not creditable?

Senator WONG (South AustraliaMinister for Finance and Deregulation) (14:03): I think that what we see in that question is the problem with asking a supplementary that you wrote before you listened to the primary answer, because I in fact answered that question in the first answer. He may not have understood it; I shall try it again. It is obviously the case that royalties are able to be deducted or credited against MRRT revenue. The Treasurer was making the point that the government is not providing—

Senator Cormann: Why did the Treasurer say they were? What he said was wrong. Just admit it!

Senator WONG: Do you want the answer, or do you want to yell at me? Which would you prefer? I can just sit down if you want to yell at me.

Senator Ian Macdonald: That was Don Farrell yelling at you!

The PRESIDENT: Order! Minister, ignore the interjection. Interjections are disorderly; address the chair.

Senator WONG: The Treasurer was making the point yesterday that the government was not providing a refundable credit, as was the case under the RSPT. Instead, royalty credits are used by way of a deductible allowance under the law.

Senator CORMANN (Western Australia) (14:04): Mr President, I ask a further supplementary question. Given that yesterday this Minister for Finance and Deregulation was not able to confirm that a growing stockpile of royalty credits would attract more than 10 per cent compound interest and that the Treasurer is clearly not across the operation of his complex mining tax either, why should anyone believe that it will raise $2 billion this financial year? Instead of waiting until next year to admit that Labor will deliver yet another budget deficit, why do they not just come clean and now fess up that there will be no Labor budget surplus this year?

Senator WONG (South AustraliaMinister for Finance and Deregulation) (14:05): Most of that was in fact another recital of the coalition's lines on this issue, but in terms of the question time response I am very happy to try and assist the senator on the royalties issue. In the same way as most other mining costs are treated, royalties are carried forward with an uplift factor, which in this case, as he would be aware, is the long-term bond rate plus seven percentage points. It can be deducted in future years as a royalty allowance. This is the same treatment applied to most types of deductions under the MRRT but, unlike most other expenses, royalties cannot be transferred to separate projects. I would make the point that, without this sort of design feature, investors would be discouraged from undertaking investments that take time to recoup. So I assume that the coalition would in fact not be opposed to this.

I think I took these issues on notice yesterday, and I am glad that I have had the opportunity to provide the senator with further information now.