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Ian Farmer |
The much anticipated exposure draft (ED) legislation for the proposed minerals resource rent tax (MRRT) was released on June 10 2011, accompanied by detailed explanatory material. This is a significant step towards the implementation of the proposed MRRT as announced by the government on July 2 2010.
The ED is not final and the provisions in relation to some of the more complex areas of the law are yet to be drafted (similarly, consequential amendments to the income tax and tax administration legislation have not yet been developed). Submissions on the ED were due by July 14 2011.
The final ED is envisaged to be released after the consultation process is completed, with legislation expected to be introduced into parliament before the end of 2011. Notably, the draft legislation to extend the petroleum resource rent tax (PRRT) to all Australian oil and gas projects was not released simultaneously – it is expected in the near future.
Generally, the ED appears to be well drafted and to consistently reflect the Policy Transition Group's (PTG) recommendations for the design of the MRRT. However, the MRRT is a complicated tax with several technical aspects that inherently cause a degree of uncertainty for taxpayers and advisers. Further, the drafting style of the ED has created some additional technical issues (for example, in relation to the definition of mining project interest) that will need to be thoroughly considered and tested through the consultation process.
Taxpayers should closely review the draft provisions relating to the transferability of losses, the calculation and depreciation of the starting base for existing projects and the calculation of mining revenue. These rules will significantly impact net present value outcomes. Furthermore, early consideration of the financial statement impacts of the MRRT is necessary to meet reporting and continuous disclosure obligations once the legislation is substantively enacted. Therefore, it is recommended that affected taxpayers review the ED and explanatory memorandum carefully to consider its impact on all aspects of their business.
The release of the ED is an opportune time for taxpayers to revisit the planning of their response to the MRRT. This should include refreshing their MRRT modelling, re-engaging with key stakeholders and ensuring that their organisation is ready to respond to the implementation of the MRRT – which is now one step closer to reality.
Ian Farmer (ian.farmer@au.pwc.com), Sydney
PwC
Tel: +61 2 8266 2802
Fax: +61 2 8286 2802
Website: www.pwc.com/au
