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Wednesday, 2 November 2011
Page: 12411

Mr SHORTEN (MaribyrnongAssistant Treasurer and Minister for Financial Services and Superannuation) (09:01): I move:

That this bill be now read a second time.

As the Treasurer would say, every Australian knows that the mining boom is delivering tremendous benefits to our nation.

But the mining boom won't last forever. The resources can only be dug up and sold once.

We know we need to make the most of our opportunities while the sun is shining.

We also realise that not everyone is feeling the benefits of the boom.

Many households are struggling to make ends meet.

And many businesses are struggling with a high Australian dollar, and struggling to get the workers they need.

Some of these businesses can take heart that the expanding middle class in Asia will bring opportunities well beyond mining—in sectors like tourism and other services.

But other businesses recognise that conditions are tough.

So our nation faces a fundamental choice.

We could do nothing and sit on our hands. This would be the easy choice.

But the government has chosen the other path. We will act to seize the opportunities and respond to the challenges of our patchwork economy.

We will not let the coming boom be squandered like the last.

That is why we are building a fairer, simpler tax system and a stronger economy that delivers for all Australians.

The reforms that I present today are the cornerstone of that vision. They are an ambitious step in a long term reform agenda.

We recognise that many businesses are struggling with the pressures of a patchwork economy.

The Minerals Resource Rent Tax makes it possible to deliver a billion dollar tax break for Australia's 2.7 million small businesses and to cut company tax.

We recognise that many parts of Australia, especially our great mining regions, have infrastructure needs.

The MRRT will fund billions of dollars of new roads, bridges and other critical infrastructure, such as the Gateway project in Western Australia. Much of this infrastructure will benefit where the resources come from and where the workers and their families live, such as the great coalmining regions of New South Wales and Queensland.

We recognise that this time around Australia needs to save some of the gains of the boom.

The MRRT makes it possible to increase the superannuation guarantee from nine to 12 per cent, boosting super savings of 8.4 million workers by $500 billion by 2035.

The MRRT also makes it possible to deliver fairer super concessions for 3.6 million low income earners, who currently get little or no concession on their employer superannuation contributions.

Mining boom mark II

Australia is experiencing an unprecedented boom in our resources sector which has delivered record profits to mining companies year after year.

Mining profits have jumped 262 per cent in the last decade. Along with the coal and the iron ore, a large share of these profits are also shipped off overseas.

The current arrangements fail to provide an appropriate return for these non-renewable resources to the Australian community, who owns the resources 100 per cent.

Royalties just don't keep up with the booming profits of our mining companies.

Royalties often take a flat amount of revenues or production regardless of profitability.

Taxes on profit mean the higher your profit, the more tax you pay.

Taxes on mining profit are better for the nation and the mining industry.

Taxes on profit return more to the nation when times are good, but they also relieve the tax burden on the industry when times are bad. Taxes on profit automatically relieve struggling mines and their communities of tax when times are tough, unlike royalties.

We will see volatility in MRRT revenue, particularly as prices and investment plans change, but that is good for the industry and for the nation.

The need for improved resource charging arrangements is clear. That is why we are introducing these bills today.

The Minerals Resource Rent Tax

These reforms ensure that the Australian community receives a fairer return for its non-renewable iron ore and coal resources.

The Australian people will get a better share in the bounty of this mining boom, and the government will use this share to develop a stronger and broader economy for all Australians.

We will ensure that the dividends of the boom are directed to where they can make the greatest contribution to jobs, to infrastructure, to national savings and to sustainable economic growth.

The new resource tax arrangements also represent a cooperative approach between industry and government in the process of tax reform.

Indeed, this bill has been developed in partnership with the resource sector through one of the most comprehensive stakeholder consultation processes ever conducted by an Australian government.

Industry was directly involved in the development of these reforms through the Resource Tax Consultation Panel, the Policy Transition Group, the Resource Tax Implementation Group and numerous public submissions.

So the bill that I present, on behalf of the Treasurer, to the House today is the direct result of the strong cooperation of industry in the legislative process.

The bill before the House will provide for a robust resource rent tax regime and ensure that the long-term attractiveness of investment in Australian iron ore and coal is maintained.

You only have to look at the massive $430 billion pipeline of investment in our mining sector—$82 billion in this year alone—to see that the industry has great confidence in the future

Mining companies are investing in the future in full knowledge of the commencement of the MRRT on 1 July next year.

The MRRT will apply, at a rate of 30 per cent, to all new and existing iron ore and coal projects.

An extraction allowance of 25 per cent will recognise the miner's use of specialist skill in the extraction of resources.

Because the MRRT only taxes the most highly profitable mines, Australia will remain an attractive destination for resource investment.

At the same time, Australians will receive an appropriate return on their non-renewable resources, which they own 100 per cent.

Supporting m ining i nvestments

Unlike royalties, the MRRT recognises the massive investments that miners make.

The tax does not apply to the value added by miners through processing. It applies only to profits attributable to the resource at the valuation point just after extraction.

Under the MRRT, projects will be able to immediately write off new investment and immediately deduct expenses.

No MRRT will be payable until the project has made enough profit to pay off its upfront investment.

Supporting s mall m iners

We expect the big miners to pay the bulk of the MRRT and to pay it from year one. This is based on extensive consultations with the mining industry.

The big miners are expected to pay the most because they are the most profitable.

Small miners have been well-served by the design of the MRRT.

Companies with MRRT profits of less than $50 million a year will have a low profit offset that wipes out their MRRT liability.

Small miners who know that their profits will never exceed this threshold will not have to account for the tax or maintain MRRT records—simplifying compliance and administration.

Miners with annual MRRT profits between $50 million and $100 million will benefit from a partial reduction in their MRRT liability.

Small miners investing to grow will also benefit from the immediate deductibility of upstream capital investments.

They will only pay MRRT after the project has made enough profit to pay off these upfront investments. The government will refer this bill to the House of Representatives Standing Committee on Economics to report by 21 November, and we hope to see passage through this chamber this year.

As the Treasurer said, this is the right reform at the right time. This is a proud day for every Australian. Our nation will finally lock in the gains from our nation's mineral endowment.

We picked this challenge long before it became popular. We selected it and we acted on it.

No reform is easy, and this one has been very difficult.

But the most important reforms—those that strengthen, broaden and modernise our economy most markedly, are always the most difficult.

This was the case when far-sighted Labor governments of the past fought tooth and nail to put in place the nation-building reforms that underpin our current prosperity.

And it is so today, as the Gillard government gets on with the job of introducing major reforms like the MRRT to build a stronger economy that delivers for all Australians.

With the consent of other far-sighted members of this parliament, we shall pass it.

The bill introduced today mean that, for the first time in this nation's history, we can be sure that every Australian will benefit from our valuable mineral heritage.

Our non-renewable natural resources will finally benefit ordinary Australians.

Our coal often fires overseas furnaces, our iron ore supports towers under different stars and a large part of the profits flow to foreign shareholders.

From now on, our resources will also contribute to better infrastructure, more productive businesses and more secure retirements for ordinary Australians.

Now is the time for our nation to choose to get a fairer return for the resource wealth in the ground.

And now is the time to reinvest that return in a stronger economy, in vital regional infrastructure, and in our national savings for the future.

This landmark legislation is part of a reform package that will build and strengthen our economy.

This landmark legislation, led by our Treasurer and Minister for Resources and Energy will do so much for our nation and it deserves the full support of the parliament, the business sector and the community.

It is up to us here today to recognise that now is the time to act in the long-term interest. Now is the time to seize these opportunities for the sake of all Australians—of this generation and those to follow.

On behalf of the Treasurer and Acting Prime Minister, I commend this bill to all Australians today and for the generations to come.

Debate adjourned.