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Repeal of the Minerals Resource Rent Tax and Associated Measures – Regulation Impact Statement – Treasury

On 13 November 2013 the Treasurer introduced the Minerals Resource Rent Tax Repeal and Other Measures Bill 2013 into Parliament. The Minerals Resource Rent Tax (MRRT) is a profits tax which is levied at an effective rate of 22.5 per cent of the mining profit of coal and mining projects within Australia. The MRRT applied from 1 July 2012 to taxable resources (broadly iron ore and coal) after they were extracted from the ground but before they underwent any significant processing or value adding. Miners with an annual mining profit of less than $75 million are exempted from paying MRRT. The Bill repeals the Minerals Resource Rent Tax Act 2012 from 1 July 2014. The Bill also repeals or revises a number of related measures, the costs of which were intended to be met by revenue from the MRRT, including the: company tax loss-carry back arrangements; geothermal expenditure deduction; low income superannuation contribution; low income support bonus; schoolkids bonus; capital allowances for small business entities; and the superannuation guarantee charge percentage increase. The Regulation Impact Statement (RIS) found that the MRRT imposed a significant regulatory and compliance burden on the iron ore and coal mining industries, which was exacerbated by its complex design. The RIS concluded that the legislative package to repeal the MRRT will reduce the compliance cost on industry and promote activity in the mining sector by abolishing the MRRT. The RIS noted that while there will be some once off adjustment costs estimated at $800 per company (($243,000 in total for the industry (a ten year average of $24,300 per annum)) to adjust their systems for the repeal of the MRRT, the ongoing compliance savings are estimated as $35,000 per company per annum, or $10.5 million per annum for the industry. A single-stage RIS was prepared by the Treasury, certified at the Deputy Secretary level, and has been assessed as adequate by the Office of Best Practice Regulation.