House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)

Chapter 18 Administration of the MRRT

Outline of chapter

18.1 This chapter deals with the Minerals Resource Rent Tax (MRRT) administrative provisions and the amendments to existing taxation laws that are necessary to provide the administrative framework for the MRRT.

18.2 All legislative references in this chapter are to the Minerals Resource Rent Tax (Consequential Amendments and Transitional Provisions) Bill 2011 (MRRT (CA & TP) Bill) unless otherwise indicated.

Summary of new law

MRRT returns and starting base returns

18.3 An entity must lodge an annual MRRT return that deals with all of its mining project interests and pre-mining project interests. However, there may be circumstances in which the Commissioner of Taxation (Commissioner) will not require an entity, or class of entities, to lodge a return. MRRT returns will be lodged electronically.

18.4 In addition, some entities will need to give the Commissioner a starting base return.

Assessments

18.5 The MRRT is a full self assessment system. The Commissioner will generally accept an entity's MRRT return at face value and an assessment is deemed made when the Commissioner receives the return.

18.6 For the purposes of assessing MRRT, alternative sets of assessment provisions have been drafted. The first set is drafted on the basis that the Taxation Administration Act 1953 (TAA 1953) includes indirect tax assessment provisions that require modification for MRRT purposes. The second set is drafted on the basis that the indirect tax assessment provisions do not receive Royal Assent in time for the commencement of the MRRT. Both sets of provisions have been drafted in generic terms so that they can be used by other taxation laws in the future.

Collection and recovery

18.7 The MRRT will be supported by generic collection and recovery rules that apply generally in relation to Commonwealth taxation laws. This means that penalties can apply to outstanding MRRT obligations, and interest is payable on outstanding MRRT liabilities. The Commissioner can enforce collection of MRRT through the courts if necessary. Collection and recovery is further supported by mechanisms requiring payers to withhold MRRT from certain types of payments.

Instalments

18.8 An entity is liable to pay instalments of MRRT on a quarterly basis if it has mining revenue or pre-mining revenue or if it has a positive instalment rate. The instalments provide the entity with a credit against its MRRT liability for the year. This system ensures that an entity does not have a significant MRRT payment due on assessment.

18.9 The amount of an entity's quarterly instalment is the product of the applicable instalment rate and the entity's instalment income for the quarter. The instalment income is, broadly, the consideration for supplies of taxable resources the entity made in the quarter. Unlike the calculation of MRRT liabilities, the consideration for supplies is not apportioned and there is no deduction for mining expenditure. The accuracy of the result instead depends on the instalment rate used.

18.10 The instalment rate will usually be the rate the Commissioner gives the entity and that will usually be based on the entity's MRRT assessment for the previous year.

18.11 As with pay as you go (PAYG) instalments for income tax, the entity can choose a different rate that it believes better reflects its current trading conditions. The integrity of the system is protected by imposing the general interest charge on shortfalls if the entity chooses a rate that is too low.

18.12 When an entity transfers a mining project interest, or part of one, it can claim a credit for the part of its earlier instalments for the year that relates to the transferred interest. The entity to which the interest is transferred increases its instalment income for the quarter in which the transfer occurs to reflect the fact that it is liable to pay MRRT for the whole year, including the part before the transfer.

Record keeping

18.13 The effective administration of the MRRT requires the Commissioner to have access to the information needed to determine an entity's MRRT payable.

18.14 Fundamental to this is a requirement that entities keep records of their MRRT affairs.

18.15 The main elements of the MRRT record-keeping rules are:

•

a requirement to keep relevant records;

•

a requirement to keep the records in writing in English, or in a form that can be readily converted into writing in English; and

•

a five-year time limit for keeping the records.

18.16 The MRRT record-keeping rules are similar to those of other taxation law record-keeping regimes.

Information transfers

18.17 An entity that transfers a mining project interest or a pre-mining project interest (or part of either of them) to another entity has 60 days in which to also provide that entity with the information it will need to work out its MRRT liabilities for the transferred interest and to satisfy its MRRT obligations.

18.18 If the acquiring entity needs further particulars of the information provided to it after a mining project transfer or split (for example, to enable it to answer enquiries from the Commissioner), it can ask the original entity to provide those further particulars. That request must be answered within 60 days.

Access powers

18.19 In order to administer the MRRT, and in particular ensure compliance, the Commissioner has the power to access premises and documents, and gather information that is held domestically and in foreign jurisdictions.

Service

18.20 The Commissioner can serve documents on entities at addresses provided by them, including electronic addresses. A document is considered served when the Commissioner leaves or posts it.

Making choices

18.21 The MRRT provides a mechanism for taxpayers to make choices about a range of matters in the course of determining their MRRT liabilities.

18.22 Default rules apply to those choices, based on these principles:

•

Entities should be able to make a choice up to the earlier of the day they lodge their MRRT return for the first MRRT year for which the choice applies and the due date for lodging that return.

•

To the extent an MRRT return evidences a choice, that return is sufficient evidence of the choice.

•

A choice does not have to be notified to the Commissioner unless either the Commissioner specifically asks for it or the entity does not have to lodge a return.

•

Entities cannot revoke or vary their MRRT choices.

Rulings

18.23 The existing rulings system applies to the MRRT. Therefore, the Commissioner can issue public rulings about any aspect of the MRRT law. Entities can also apply for private rulings about how the MRRT laws apply to their particular circumstances.

Annual report

18.24 The Commissioner must provide an annual report to the Minister on the operation of the MRRT law.

Detailed explanation of new law

MRRT returns

18.25 Returns are integral to self assessment. They enable entities to inform the Commissioner of their tax position for a period.

18.26 Some conventions exist about the form and contents of returns. They must be in the form approved by the Commissioner, and lodged in a prescribed manner within a certain time limit. Failure to lodge a required return can result in penalties.

Who must give an MRRT return?

18.27 An entity that holds a mining project interest or pre-mining project interest during an MRRT year must give the Commissioner an MRRT return for that year. The return must deal with all such interests the entity had at any time during the year. [Schedule 1, item 8, subsection 117-5(1) of Schedule 1 to the TAA 1953]

18.28 This means that an MRRT return is required even if an entity is not liable to pay MRRT for the MRRT year. [Schedule 1, item 8, subsection 117-5(2) of Schedule 1 to the TAA 1953]

18.29 It also means that an entity that transfers an interest to another entity during an MRRT year will need to lodge an MRRT return covering that interest. This allows the entity to obtain a credit for MRRT instalments it paid, or amounts that were withheld, in respect of the interest.

18.30 However, there are some exceptions to the general rule. Some entities are not required to furnish MRRT returns for an MRRT year. This includes entities that have elected to use the simplified MRRT method for the year (but such entities can lodge a return in order to get a refund for paid MRRT instalments or amounts that were withheld). It also includes entities that belong to a class that the Commissioner has exempted from furnishing an MRRT return for an MRRT year. [Schedule 1, item 8, subsections 117-5(4) and (5) of Schedule 1 to the TAA 1953]

18.31 If an entity is required to lodge an MRRT return, the due date is the first day of the sixth month after the end of the MRRT year. The MRRT payable for the year is also due on that day. For entities operating on the standard MRRT year ending on 30 June, the return and the payment for the year are due on 1 December [Schedule 1, item 8, subsection 117-5(3) of Schedule 1 to the TAA 1953] . As with other tax laws, late lodgement results in penalties.

18.32 However, the Commissioner has discretion to defer lodgement for both individual entities, and classes of entities. [Schedule 1, item 8, paragraphs 117-5(3)(b) and (c), and subsection 117-5(5) of Schedule 1 to the TAA 1953]

The form and contents of the MRRT return

18.33 MRRT returns must be in the approved form. [Schedule 1, item 8, subsection 117-10(1) of Schedule 1 to the TAA 1953]

18.34 The approved form for an MRRT return must require an entity to provide information relating to its:

•

taxable mining profit for the MRRT year; and

•

MRRT payable for the MRRT year.

[Schedule 1, item 8, subsection 117-10(2) of Schedule 1 to the TAA 1953]

18.35 For these purposes a taxable mining profit for a miner for an MRRT year means the sum of the mining profits less any allowances for each of the mining project interests that the miner has for the year. [Schedule 3, item 83, definition of 'taxable mining profit' in subsection 995-1(1) of the ITAA 1997]

18.36 MRRT payable for a miner for an MRRT year means the sum of the MRRT liabilities of each mining project interest the miner has for that year, less the sum of any offsets that the miner has for that year. [Schedule 3, item 72, definition of 'MRRT payable' in subsection 995-1(1) of the ITAA 1997]

18.37 Section 388-50 in Schedule 1 to the TAA 1953, which deals with approved forms, allows the Commissioner to require that a range of other information be included in MRRT returns.

Additional MRRT returns

18.38 The Commissioner can direct an entity to give a further or fuller, or any other, MRRT return for an MRRT year or specified period, whether or not it has already furnished an MRRT return for that period. [Schedule 1, item 8, subsection 117-15(1) of Schedule 1 to the TAA 1953]

18.39 This enables the Commissioner to request a return where, for example, the original return has been lost, has not been lodged, or is otherwise unsatisfactory. It also enables the Commissioner to require a return for part of an MRRT year. It is intended as a power for use in special cases. For example, it might be used where an entity is engaged in aggressive tax planning schemes, or is abandoning its Australian mining operations. It is not intended that the Commissioner require entities to lodge multiple returns for each MRRT year as a matter of course.

18.40 The Commissioner can also request returns from entities acting in the capacity of agent or trustee for an entity. Typically, this would be used for cases where those agents act for foreign residents. [Schedule 1, item 8, subsection 117-15(1) of Schedule 1 to the TAA 1953]

Electronic lodgement

18.41 Entities must lodge their MRRT returns electronically, unless the Commissioner allows otherwise. [Schedule 1, item 8, section 117-25 of Schedule 1 to the TAA 1953]

Returns treated as being duly made

18.42 An MRRT return purporting to be made by or signed by or on behalf of an entity is treated as having been duly made by the entity or with the entity's authority until the contrary is proved. [Schedule 1, item 8, section 117-30 of Schedule 1 to the TAA 1953]

18.43 This rule allows the Commissioner to rely on the contents of an MRRT return, and for the process of self assessment to reach its natural conclusion; that is, it allows a return to become an assessment. However, if an entity proves that a return was lodged without its authority, then there is no return, and both the Commissioner and the entity must proceed as such.

Assessments and starting base assessments

Generic assessment provisions

18.44 The MRRT (CA & TP) Bill contains two alternative sets of provisions, both of which are designed to establish an assessment regime for the MRRT. The reason for this is that new assessment provisions were being written for indirect tax purposes (the indirect tax assessment provisions) at the same time as the MRRT. The indirect tax assessment provisions were being developed as generic assessment provisions that existing and future taxation laws could use. The MRRT is the first of the additional regimes to use these generic provisions.

18.45 However, the indirect tax assessment provisions have yet to be introduced into the Parliament and there is a possibility that they will not receive Royal Assent in time for the commencement of the MRRT. Therefore, a set of generic assessment provisions, based on the MRRT, were developed simultaneously. Whether this alternative set of provisions, or the set that extends the indirect tax assessment provisions to also cover the MRRT is used, depends on whether the proposed indirect tax assessment provisions commence before 1 July 2012. [Clause 2, items 3 and 4 in the table]

18.46 The objective is an MRRT assessment system that is substantively the same as the income tax assessment system (see Part IV of the Income Tax Assessment Act 1936 (ITAA 1936)). Both the Commissioner and those entities subject to the MRRT will essentially have the same rights and obligations in respect to the MRRT as they have with respect to income tax.

18.47 The following explanation proceeds on the basis that the MRRT version of the generic assessment provisions receives Royal Assent before 1 July 2012 and that the proposed indirect tax assessment provisions do not.

Assessments

18.48 An assessment crystallises the amount that an entity is required to pay, or the amount the Commissioner is required to refund.

18.49 An entity's taxable mining profit and the MRRT payable thereon is an assessable amount that is determined by assessment. [Schedule 2, item 22, Subdivision 155-A of Schedule 1 to the TAA 1953]

18.50 The term assessable amount is new. It is an adaptable term that can be leveraged by other tax regimes in the future. At this point it means an entity's taxable mining profit for an MRRT year and the MRRT payable by the entity for that year in relation to that profit.

18.51 The ascertainment of the MRRT assessable amount parallels the assessment process used in income tax. In income tax, an assessment includes the ascertainment of taxable income and the tax payable thereon. In MRRT, an assessment involves the ascertainment of a miner's taxable mining profit and the MRRT payable thereon. [Schedule 2, items 11, 12 and 22, section 155-5 and subsection 155-10(2) in Schedule 1 to the TAA 1953 and the definition of 'assessment' in subsection 995-1(1) of the ITAA 1997]

18.52 To ensure that the system is not overly rigid, the Commissioner may treat part of a tax period as the whole tax period [Schedule 2, item 22, section 155-25 in Schedule 1 to the TAA 1953] . This is equivalent to the Commissioner's power to make special assessments under section 168 of the ITAA 1936, and means that, for example, the Commissioner can assess an entity that wishes to leave Australia prior to the end of the MRRT year, or for part of a year, such as when an entity goes into bankruptcy.

18.53 After an assessment is made, the Commissioner is required to issue a notice of assessment of the assessable amount to the entity as soon as practicable. Similarly, the Commissioner must also issue notices of amended assessment in respect of amended assessments. [Schedule 2, item 22, subsection 155-10(1) in Schedule 1 to the TAA 1953]

MRRT assessments under the proposed indirect tax assessment provisions

18.54 Should the proposed indirect tax assessment provisions receive Royal Assent before 1 July 2012, the MRRT (CA & TP) Bill amends those provisions to specify that an assessable amount includes an entity's taxable mining profit for an MRRT year and the MRRT payable by the entity for that year in relation to that profit. [Schedule 2, items 2 and 3, paragraph 155-5(2)(e) and subsection 155-15(1) of Schedule 1 to the TAA 1953]

18.55 The MRRT (CA & TP) Bill also makes a number of other minor amendments to those provisions to ensure that they work for MRRT purposes. [Schedule 2, items 4 and 21, subsection 155-30(1) and the heading to Chapter 4 in Schedule 1 to the TAA 1953]

Self assessment

18.56 Under a full self assessment system, an entity assesses its liabilities, and the Commissioner generally accepts the entity's assessment at face value. A present example of full self assessment is the assessment of companies for income tax purposes, under which lodgement of a tax return effectively serves as a notice of assessment. The process for assessing MRRT is built on these foundations.

Self assessment under the MRRT assessment provisions

18.57 The assessable amount - an entity's taxable mining profit for an MRRT year and the MRRT payable by the entity for that year in relation to that profit - is treated as having been assessed by the Commissioner on the day an entity lodges its MRRT return for an MRRT year specifying the entity's taxable mining profit and MRRT payable for the year. [Schedule 2, item 22, subsections 155-15(1) and (2), paragraph 155-15(3)(a)]

18.58 The MRRT return that is lodged by an entity is deemed to be a notice of assessment signed by the Commissioner and given to the entity on the day the return is given to the Commissioner. [Schedule 2, item 22, subsection 155-15(4) of Schedule 1 to the TAA 1953]

18.59 However, it should be noted that self assessment does not apply if, for some reason, the Commissioner has issued an assessment on or before the day an entity required to lodge a return meets its obligation to do so. For example, if the Commissioner issues a default assessment. [Schedule 2, item 22, subsection 155-15(5)]

Self assessment of MRRT under the proposed indirect tax assessment provisions

18.60 Should the proposed indirect tax assessment provisions receive Royal Assent before 1 July 2012, then the MRRT (CA & TP) Bill amends those provisions with the effect described above. [Schedule 2, items 2 and 3, subsections 155-15(1) and (2) of Schedule 1 to the TAA 1953]

Default assessments

Default assessments under the MRRT assessment provisions

18.61 A full self assessment system is built on significant levels of trust. The community has demonstrated in the income tax context that that trust is well placed. However, some entities fail to meet their self assessment obligations. When this happens, the Commissioner needs to step in.

18.62 Therefore, the general power to assess may apply where an entity fails to lodge a return and the Commissioner wishes to assess an assessable amount based on information available to him or her [Schedule 2, item 22, section 155-5 in Schedule 1 to the TAA 1953] . This is the same as the Commissioner's power to make default assessments under section 167 of the ITAA 1936.

Default assessments under the proposed indirect tax assessment provisions

18.63 The version of the assessment provisions in the proposed indirect tax assessment provisions is identical to the MRRT version and does not need an amendment to make it applicable for MRRT purposes.

Amending assessments

18.64 Sometimes it is necessary to amend an assessment because a mistake has been made. Amendments can be initiated by a taxpayer or by the Commissioner. They can also be made to give effect to decisions made by courts and tribunals.

Amending assessments under the MRRT assessment provisions

18.65 The Commissioner can amend an assessment during the period of review, which commences on the day the Commissioner gives notice of the original assessment and expires four years after the day after the notice of assessment is issued (unless extended). Where an assessment is self assessed, the period of review will commence on the day the return is lodged, regardless of whether the return is lodged early or late. [Schedule 2, item 22, subsections 155-35(1) and (2) in Schedule 1 to the TAA 1953]

18.66 The period of review ensures that tax disputes have finality and cannot extend indefinitely. The period of four years is consistent with the timeframe applicable to amending the income tax assessments of medium and large business taxpayers.

18.67 However, due to the complexity of some tax disputes, it can be difficult to reach resolution within four years. Therefore, there is scope for the period of review to be extended (including more than once), but this can only be done by way of a Federal Court order or with the entity's consent. A Federal Court order can only be granted if the Court is satisfied that the entity under examination has not played a role in delaying the assessment process. This rule ensures that there is no incentive for entities to stall an examination of its affairs. [Schedule 2, item 22, subsections 155-35(4) to (6) in Schedule 1 to the TAA 1953]

18.68 The term 'examination' is a very broad concept and takes its ordinary meaning; which includes audits, reviews, investigations or enquiries.

18.69 There are also some circumstances in which the Commissioner can amend an assessment after the period of review has expired. For example, if an entity applies for an amendment within the period of review, the Commissioner can amend outside the period of review to give effect to that application [Schedule 2, item 22, section 155-45 in Schedule 1 to the TAA 1953] . In addition, if an entity applies for a private ruling within the period of review and the Commissioner issues the ruling, an assessment can be amended outside the period of review in order to give effect to the private ruling [Schedule 2, item 22, section 155-50 in Schedule 1 to the TAA 1953] .

18.70 Equally, the Commissioner can amend an assessment at any time to give effect to certain types of declarations and determinations. This would include a determination to make a compensating adjustment under the general anti-avoidance rule in the Minerals Resource Rent Tax Bill 2011 (MRRT Bill) [Schedule 2, item 22, section 155-55 in Schedule 1 to the TAA 1953] . That is, where an entity has been involved in an MRRT avoidance scheme that has negatively impacted a second entity's MRRT liabilities, the Commissioner can compensate the second entity.

18.71 The Commissioner can also amend an assessment at any time to give effect to the anti-profit shifting rules in Division 205 of the MRRT Bill [Schedule 2, item 22, section 155-57 in Schedule 1 to the TAA 1953] . This power recognises the complexity of these types of transactions, and the timeframes involved in examining them. Moreover, the power is consistent with income tax law, where the Commissioner has an unlimited timeframe to amend to give effect to transfer pricing rules.

18.72 Importantly, the Commissioner retains a right to amend an assessment at any time to curtail fraud or evasion [Schedule 2, item 22, paragraph 155-60(c) in Schedule 1 to the TAA 1953] . This rule protects the integrity of the MRRT revenue base by ensuring that serious non-compliance is not rewarded.

18.73 The amendment of an assessment - for any of the reasons outlined above - raises a question about the period of review for amending an amended assessment. An amendment to an assessment gives rise to a refreshed period of review for the particular that is amended. A separate refreshed period of review exists for each amended particular. [Schedule 2, item 22, subsection 155-70(1) in Schedule 1 to the TAA 1953]

18.74 However, an amendment to give effect to:

•

a taxpayer-initiated amendment;

•

a private ruling application;

•

anti-avoidance compensating adjustment; or

•

a review, objection or fraud,

does not give rise to a refreshed period of review because the Commissioner can make amendments for these purposes at any time. [Schedule 2, item 22, subsection 155-70(1) in Schedule 1 to the TAA 1953]

18.75 The refreshed period of review starts immediately after the day the Commissioner gives the entity a notice of amended assessment for the last amendment made to the particular during the period of review, and ends four years after that day. The refreshed period of review cannot be extended. [Schedule 2, item 22, subsection 155-70(2) in Schedule 1 to the TAA 1953]

18.76 If the period of review (applicable to the original assessment) has lapsed, and the Commissioner wishes to amend an amended assessment within the refreshed period of review, he or she can only amend in respect to a particular covered by the refreshed period of review [Schedule 2, item 22, subsection 155-70(2) in Schedule 1 to the TAA 1953] . A 'particular' is a constituent element that affects an increase or decrease in the assessable amount.

18.77 An amended assessment can only be amended once in relation to a particular during the refreshed period of review. However, an entity has its rights to object under Part IVC of the TAA 1953. [Schedule 2, item 22, sections 155-70 and 155-90 in Schedule 1 to the TAA 1953]

18.78 Moreover, there may be more than one refreshed period of review if different particulars are amended in the period of review. The amendments giving rise to a refreshed period of review can be initiated either by the Commissioner or on application by the entity. [Schedule 2, item 22, section 155-70 in Schedule 1 to the TAA 1953]

18.79 Finally, it should be noted that the requirements applying to assessments, such as the requirement that the Commissioner issue a notice of assessment for each assessment, also apply to amended assessments. [Schedule 2, item 22, sections 155-80 in Schedule 1 to the TAA 1953]

Amending MRRT assessments under the proposed indirect tax assessment provisions

18.80 Should the proposed indirect tax assessment provisions receive Royal Assent before 1 July 2012, then the MRRT (CA & TP) Bill amends those provisions to specify that assessments of MRRT can be amended. [Schedule 2, items 5 to 7, 14 and 15, sections 155-55, 155-57 and 155-95 in Schedule 1 of the TAA 1953, definitions of 'original assessment' and 'period of review' in subsection 995-1(1) of the ITAA 1997]

General rules

18.81 A range of general rules are necessary for consistency with the rest of the tax system, and to support self assessment; these concern refunds of overpaid amounts, the validity of assessments, and the rights of entities to have taxation decisions reviewed.

General rules under the MRRT assessment provisions

18.82 First, if an amendment of an assessment results in an entity's tax-related liability being reduced, the amount by which the liability is reduced is treated as though it was never payable and the Commissioner must apply that amount in accordance with the rules for running balance accounts under Divisions 3 and 3A of Part IIB of the TAA 1953. [Schedule 2, item 22, section 155-75 in Schedule 1 to the TAA 1953]

18.83 Second, the validity of an assessment is not affected by any non-compliance with the provisions of any other taxation law [Schedule 2, item 22, section 155-85 in Schedule 1 to the TAA 1953] . This rule is consistent with section 175 of the ITAA 1936 and has the effect of ensuring that tax disputes focus on the issue that really matters. That is, has the entity paid the appropriate amount of tax?

18.84 Third, the question of whether an entity has paid the appropriate amount of tax requires a dispute settlement mechanism; as such, assessments are reviewable taxation decisions under Part IVC of the TAA 1953 [Schedule 2, item 22, section 155-90 in Schedule 1 to the TAA 1953] . An entity that is dissatisfied with an assessment has four years after notice of the original assessment is issued to object against the assessment [Schedule 2, item 18, paragraph 14ZW(1)(bg) of the TAA 1953] .

18.85 With respect to an amended assessment, an entity may lodge an objection either within four years of the notice of the original assessment, or 60 days after the relevant notice of amended assessment was given, whichever is later. It should be noted that section 14ZV of the TAA 1953 limits any objection to an amended assessment to the particular or particulars that have been amended. [Schedule 2, item 20, paragraph 14ZW(1B)(b) of the TAA 1953]

18.86 The fact that entities can have MRRT decisions reviewed under Part IVC of the TAA 1953 means that, consistent with the approach taken to other tax laws, decisions in relation to assessments are not reviewable decisions under the Administrative Decisions Judicial Review Act 1977 [Schedule 2, item 10, paragraph (e) of Schedule 1 of the Administrative Decisions Judicial Review Act 1977] .

Applicability of the general rules to MRRT under the proposed indirect tax assessment provisions

18.87 If the proposed indirect tax assessment provisions receive Royal Assent before 1 July 2012, then additional amendments are made to the Administrative Decisions Judicial Review Act 1977 to ensure that MRRT decisions are not reviewable under that Act. [Schedule 3, items 1 and 2, paragraph (e) of Schedule 1 to the Administrative Decisions Judicial Review Act 1977] They will have objection rights under Part IVC [Schedule 2, items 6 and 7, section 155-90 in Schedule 1 to the TAA 1953] .

Miscellaneous consequential amendments under the MRRT assessment provisions

18.88 The Commissioner has a power to retain an amount until an entity has given the Commissioner a notification that affects the refund, or until he or she makes an assessment of the amount. A minor amendment ensures that the Commissioner can retain an amount until he or she makes or amends an assessment. [Schedule 2, item 17, subsection 8AAZLG(2) of the TAA 1953]

Evidence

18.89 The Commissioner issues an extraordinarily large number of documents to give force to decisions. As such, special evidentiary rules exist to protect the validity of those documents and decisions. These rules are consistent with section 177 of the ITAA 1936.

18.90 The purpose of these rules is similar to that regarding the validity of an assessment; that is, these rules ensure that the focus of a dispute about MRRT payable focuses on the key question: has the relevant entity paid the appropriate amount of MRRT? These rules also ensure that where an entity has a tax debt, the Commissioner can have that debt enforced in a Court by producing the relevant assessment.

Evidence rules under the MRRT assessment provisions

18.91 The amount included in an assessment will be conclusive evidence of the assessment of the entity's assessable amount, other than in proceedings commenced under Part IVC of the TAA 1953, such as an objection against the assessment. [Schedule 2, item 25, subsection 350-10(1) in Schedule 1 to the TAA 1953]

18.92 In addition, the production of a:

•

Gazette notice purporting to be issued by the Commissioner is conclusive evidence that the notice was so issued;

•

document, copy of a document, or an extract from a document, issued under the hand of the Commissioner, a Second Commissioner, a Deputy Commissioner or delegate of the Commissioner for the purposes of a taxation law, is conclusive evidence that the document was so issued;

•

notice of assessment is conclusive evidence that the assessment was properly made and is correct, except in Part IVC proceedings; and

•

a determination under the MRRT anti-avoidance or anti-profit shifting rules is conclusive evidence that the determination was properly made and is correct, except in Part IVC proceedings.

[Schedule 2, item 25, subsection 350-10(1) in Schedule 1 to the TAA 1953]

18.93 The production of a certificate that is signed by the Commissioner, a Second Commissioner, a Deputy Commissioner, or a delegate of the Commissioner, and which states that an amount is payable under a taxation law, is prima facie evidence that the amount is payable from the time stated in the certificate, and that the particulars stated in the certificate are correct. [Schedule 2, item 25, subsection 350-10(2) in Schedule 1 to the TAA 1953]

18.94 The production of a document that appears to be a copy of, or extract from, an original document made or given by or to an entity for the purposes of a taxation law, and is signed by the Commissioner, a Second Commissioner, a Deputy Commissioner or a delegate of the Commissioner, is evidence in the same way as the original would have been evidence. [Schedule 2, item 25, subsection 350-10(3) in Schedule 1 to the TAA 1953]

18.95 Judicial notice must be taken of the signature of the Commissioner, a Second Commissioner, a Deputy Commissioner or a delegate of the Commissioner if the signature is attached to an official document. [Schedule 2, part 2, item 19, section 350-15 in Schedule 1 to the TAA 1953]

Applicability of the evidence rules to MRRT under the proposed indirect tax assessment provisions

18.96 If the proposed indirect tax assessment provisions receive Royal Assent before 1 July 2012, then amendments are made to those provisions to ensure that they apply to MRRT-specific documents. [Schedule 2, items 8, 9, 13 and 16, section 350-5 and subsection 350-10(1) in Schedule 1 to the TAA 1953, definitions of 'Deputy Commissioner' and 'Second Commissioner' in subsection 995-1(1) of the ITAA 1997]

Starting base returns and assessments

18.97 The MRRT starting base has been brought into the assessment regime to ensure certainty with respect to starting base allowances. This has benefits for miners and the Commissioner - it means that disputes about starting base valuations cannot extend into the distant future.

18.98 Because of the necessity to assess the starting base, it is also necessary that relevant entities furnish a starting base return.

Starting base returns

18.99 The starting base return is integral to the idea of a starting base assessment, and an entity's capacity to claim a starting base allowance.

18.100 If an entity makes a starting base choice in relation to its mining project interest or pre-mining project interest, then the entity must give the Commissioner a starting base return for the first MRRT year. [Schedule 1, item 8, subsection 117-20(1) of Schedule 1 to the TAA 1953]

18.101 The starting base return must relate to every starting base asset (or thing that may become a starting base asset) relating to the mining project interest, or pre-mining project interest. [Schedule 1, item 8, subsection 117-20(2) of Schedule 1 to the TAA 1953] .

18.102 Generally, if an entity is required to lodge a starting base return, it is due on the first day of the sixth month after the end of its first MRRT year. However, where the project interest is transferred after 1 July 2012 and before a choice is made, the transferee must make the choice and lodge the starting base return by the same time the transferor would have been required to if it had continued to have the interest. Failure to lodge by this date will affect the validity of the return. However, the Commissioner can extend the period for lodgement. [Schedule 1, item 8, subsection 117-20(3) of Schedule 1 to the TAA 1953]

18.103 As is the case with the MRRT return, the starting base return must be in the approved form, which requires the provision of information relating to the base value of each starting base asset an entity has and what would be the base value of notional starting base assets. [Schedule 1, item 8, subsections 117-20(4) and (5) of Schedule 1 to the TAA 1953]

18.104 The return needs to contain enough information to disclose the total of base values, but it does not require that the base value of each asset be recorded separately. As it will not be practical in many circumstances to include asset by asset information in the starting base return it is anticipated that the Commissioner will request summary information of some classes of assets.

18.105 Where a miner has chosen the market value approach, it is required to include the rights and interests that constitute the mining project interest, any mining information, any improvements to land in the project area and any goodwill in a single starting base asset. In addition, the mining project interest itself may be made up of a number of constituent interests that are combined because they are upstream integrated. In these cases, the starting base return requires information about the base value of the composite starting base asset, not necessarily the individual elements of that asset.

Starting base assessments

18.106 A starting base assessment crystallises the starting base available for use in an entity's first MRRT return.

18.107 In accordance with the assessment rules, the base value of a starting base asset for the first MRRT year is an assessable amount. This amount is treated as having been assessed on the day an entity lodges its starting base return for that MRRT year. [Schedule 4, item 15]

18.108 In addition, all of the rules regarding assessments, including those about:

•

self assessment;

•

default assessments;

•

original assessments;

•

amending and amended assessments;

•

refunds of overpaid amounts;

•

the validity of the assessment;

•

objections and judicial review; and

•

evidence,

apply to the starting base assessment in the same way as they apply to an assessment of an entity's taxable mining profit and the MRRT payable.

Collection and recovery

18.109 In order to ensure that taxpayers meet their liabilities under a self assessment system, the system is supported by a range of collection and recovery provisions. The Commissioner can recover unpaid tax (even where a dispute is pending), release taxpayers from their liabilities because of hardship, apply penalties and interest, issue notices to third parties owing money to or holding money for a taxpayer, issue departure prohibition orders, and apply for mareva injunctions.

18.110 Further support comes in the form of withholding provisions, which impose obligations on the payers of certain types of payments to withhold tax on behalf of payees, and by requiring certain classes of taxpayers to pay instalments during the tax year, and by a running balance account that enables the Commissioner to offset credits and debits. The regime also recognises that sometimes taxpayers overpay their liabilities, or pay them early, and interest can be payable on such amounts.

Generic collection and recovery rules

18.111 The following MRRT liabilities are tax-related liabilities for the purposes of the generic collection and recovery rules:

•

assessed MRRT;

•

shortfall interest charge on a shortfall in MRRT; and

•

quarterly MRRT instalments.

[Schedule 1, items 9 and 10, subsection 250-10(2) of Schedule 1 to the TAA 1953]

Withholding tax

Withholding from natural resource payments

18.112 Entities that are foreign residents may have MRRT withheld from natural resource payments - that is, payments that are of a nature described by section 12-325 of Schedule 1 to the TAA 1953. [Schedule 1, item 4, paragraphs 12-330(1)(b) and 12-335(2)(a) of Schedule 1 to the TAA 1953]

Crediting withheld amounts

18.113 If an entity receives a natural resource payment from which an amount has been withheld for MRRT purposes, then the recipient of the natural resource payment is entitled to a credit equal to the amount withheld. [Schedule 1, items 6 and 7, sections 18-10 and 18-49 in Schedule 1 to the TAA 1953]

18.114 Consequential amendments were made to the objects of the PAYG withholding provisions, and the heading of the subdivision dealing with the crediting of withheld amounts. [Schedule 1, items 3 and 5, paragraph 11-1(g) and Subdivision 18-A in Schedule 1 to the TAA 1953]

Shortfall interest charge

18.115 Existing provisions have been modified to make the shortfall interest charge applicable to shortfalls in MRRT. [Schedule 1, items 11, 12 and 14 to 16, sections 280-1, 280-50 and 280-170, paragraph 280-105(1)(a), subsection 280-110(1) of Schedule 1 to the TAA 1953]

18.116 An entity will be liable to pay shortfall interest charge on an additional amount of MRRT that it is liable to pay because the Commissioner amends its assessment for an MRRT year [Schedule 1, item 13, subsection 280-101(1) of Schedule 1 to the TAA 1953] . Shortfall interest charge accrues for each day beginning on the day the entity's first assessment of MRRT for that year was due to be paid, or would have been due if there had been any, and ending the day before the day on which the Commissioner gave the entity notice of the amended assessment [Schedule 1, item 13, subsection 280-101(2) of Schedule 1 to the TAA 1953] .

18.117 However, if an amended assessment reinstates all or part of a liability in relation to a particular that had been reduced by an earlier amendment, the period for the reinstated liability begins on the day on which MRRT under the earlier amended assessment was due to be paid, or would have been due to be paid if there had been any. [Schedule 1, item 13, subsection 280-101(3) of Schedule 1 to the TAA 1953]

General interest charge

18.118 The general interest charge is payable on:

•

the late payment of assessed MRRT or shortfall interest charge;

•

the late payment of MRRT instalments; and

•

any shortfall in MRRT instalments worked out on the basis of a varied rate.

[Schedule 1, items 1 and 2, subsection 8AAB(4) of the TAA 1953]

Interest on overpayments and early payments

18.119 The MRRT has been included as a relevant tax so that interest can be paid on overpayments and early payments. [Schedule 3, items 86 to 89, subsection 3(1) and section 3C of the Taxation (Interest on Overpayments and Early Payments) Act 1983]

Liability to penalty

18.120 The administrative penalty provisions apply to the MRRT. Such penalties apply when entities make false or misleading statements, take positions that are not reasonably arguable, enter into schemes, and refuse to provide documents to the Commissioner.

18.121 Minor amendments were required to ensure that entities which take MRRT positions that are not reasonably arguable are subject to higher administrative penalties when they have a shortfall in their MRRT payable. [Schedule 1, items 17 to 23, sections 284-30 and 284-35, paragraphs 284-75(2)(a) and (b), subsections 284-80(1) and 284-90(1) in Schedule 1 to the TAA 1953]

Instalments

18.122 The MRRT instalments system provides for paying quarterly instalments towards the annual MRRT liability of entities with mining project interests or pre-mining project interests, in the same way that companies pay instalments towards their income tax liability. Unlike income tax, no entities will pay MRRT instalments annually or half-yearly.

18.123 Like the PAYG instalments system for income tax, MRRT instalments are intended to ensure the efficient collection of MRRT by providing entities with a simple and convenient way to meet their annual MRRT liability as their mining revenue is derived. A quarterly payment system avoids the problems of large end-of-year MRRT debts and provides the Commonwealth with revenue throughout the year. The instalments are not precise calculations of ultimate liability but aim to get as close as possible to the ultimate liability, within a system that is simple and convenient. [Schedule 1, item 8, section 115-5 of Schedule 1 to the TAA 1953]

Liability for instalments

18.124 Entities are liable to pay an MRRT instalment for an instalment quarter if they have mining revenue, pre-mining revenue, or an instalment rate greater than nil, for the quarter. [Schedule 1, item 8, subsection 115-10(1) of Schedule 1 to the TAA 1953]

18.125 An instalment quarter is a period of three months in the year. For an entity using a standard financial year, the quarters would be:

•

First quarter : July, August and September.

•

Second quarter : October, November and December.

•

Third quarter : January, February and March.

•

Fourth quarter : April, May and June.

[Schedule 1, item 8, subsection 115-10(2) of Schedule 1 to the TAA 1953]

18.126 An entity using a substituted accounting period would also usually have four three-monthly quarters, although the months would differ from the standard. When an entity changes accounting periods, the transitional period could be longer or shorter than 12 months, leading to more or fewer than four quarters in the year and a final quarter that could be shorter than three months. [Schedule 1, item 8, section 115-110 of Schedule 1 to the TAA 1953]

18.127 Each quarterly instalment is due on the 21st day of the month after the end of the quarter. [Schedule 1, item 8, section 115-25 of Schedule 1 to the TAA 1953]

Example 18.192 : Due date for instalment

For an entity using a standard MRRT year (1 July to 30 June), the instalment for the first quarter, which ends on 30 September, would be due on 21 October.

18.128 As with most other late payments of tax, the general interest charge applies on a daily basis if an MRRT instalment is not paid on time. The general interest charge ensures that the Commonwealth is compensated for late payments of tax and discourages entities from treating Commonwealth tax debts as a form of interest-free loan. [Schedule 1, item 8, section 115-30 of Schedule 1 to the TAA 1953]

Credit for instalments

18.129 An entity's instalments payable for an MRRT year are credited against its final MRRT liability, once an assessment is made following the end of the MRRT year. The crediting process is handled through the running balance account regime in Division 3 of Part IIB of the TAA 1953, which offsets credits against a taxpayer's tax liabilities and refunds any excess credits. [Schedule 1, item 8, subsection 115-20(1) of Schedule 1 to the TAA 1953]

18.130 The amount of the credit is the total of the entity's instalments payable for the year, less any credits already claimed because it transferred a mining project interest (or pre-mining project interest) or because it varied its instalment rate. In effect, the entity gets a credit for the net amount of its instalments payable for the year. [Schedule 1, item 8, subsection 115-20(2) of Schedule 1 to the TAA 1953]

18.131 An entity gets a credit for its instalments even if it has not yet paid them. That ensures that there is no double collection of a liability (once for the annual MRRT liability and again when the unpaid instalment is collected). Unpaid instalments remain debts due to the Commonwealth. [Schedule 1, item 8, paragraph 115-20(2)(a), subsections 115-20(1) and (3) of Schedule 1 to the TAA 1953]

The amount of an instalment

18.132 The MRRT instalment an entity is liable to pay for a quarter is:

The entity's MRRT instalment income for the quarter x the entity's applicable instalment rate

[Schedule 1, item 8, section 115-35 of Schedule 1 to the TAA 1953]

Example 18.193 : Amount of an instalment

Under Mines Pty Ltd has instalment income for a quarter of $75 million and an applicable instalment rate of 7 per cent. Its instalment for the quarter will be $75million x 0.07 = $5.25million.

Instalment income

18.133 The instalment income for a quarter is the sum of the following amounts that arise because of mining revenue events that happen during the quarter:

•

consideration for supplies of taxable resources or things produced using the taxable resources;

•

what would be the consideration for supplies of taxable resources, or things produced from taxable resources, that are exported before they are supplied; or

•

what would be the consideration for supplies of something produced from taxable resources that is used instead of being supplied or exported.

[Schedule 1, item 8, section 115-40 of Schedule 1 to the TAA 1953]

18.134 The instalment income includes the gross consideration arising from mining events in the quarter that will result in an amount being included in mining revenue or pre-mining revenue. It does not include the mining revenue itself (which is the part of the gross consideration that is attributed to the valuation point) and it does not include some other amounts (such as recoupments of expenditure). This is done deliberately to make it easier for entities to calculate their instalments. In most cases, entities will only need to track the consideration for supplies of resources during the quarter. The reduction of the gross consideration to produce an instalment that is close to the eventual MRRT liability is achieved by the application of the entity's instalment rate.

Applicable instalment rates

18.135 Three possible instalment rates could apply to an entity:

•

A rate the Commissioner gives the entity.

•

A rate the entity chooses for the quarter.

•

The default instalment rate.

[Schedule 1, item 8, subsection 115-45(1) of Schedule 1 to the TAA 1953]

18.136 If more than one possible rate applies, the rate that the entity uses (the applicable instalment rate ) is (in this order):

•

A nil rate the Commissioner has given the entity.

•

A rate the entity has chosen for the quarter (or an earlier quarter in the same MRRT year).

•

A rate the Commissioner has given the entity that is not a nil rate.

•

The default rate.

[Schedule 1, item 8, subsection 115-45(1) of Schedule 1 to the TAA 1953]

The Commissioner's instalment rate

18.137 The Commissioner will usually give entities an instalment rate based on their previous year's MRRT liability. This is similar to the system used for PAYG instalments. It assumes that the ratio between an entity's revenue and its expenditure and MRRT allowances will be fairly consistent from year to year.

18.138 That assumption, however, may not always hold true. For example, an entity might incur unusually large capital expenditure in one year or the consideration for supplying taxable resources could vary considerably relative to the entity's costs from one year to the next. Nevertheless, it is a reasonable basis on which to build a collection system that is only intended to collect something close to the entity's final MRRT liability.

18.139 A rate the Commissioner gives an entity will apply for the quarter in which it was given and will continue to apply until the Commissioner gives the entity a new rate. It will apply even if it was given some years ago (although the Commissioner's usual practice is to provide a new rate each year). [Schedule 1, item 8, item 3 in the table in subsection 115-45(1) of Schedule 1 to the TAA 1953]

18.140 The Commissioner usually works out the rate by using a formula that determines the rate that would have produced instalments for the previous MRRT year equal to the entity's total MRRT liability. That is:

The entity's MRRT liability for the previous MRRT year / The entity's instalment income for the previous MRRT year

[Schedule 1, item 8, subsection 115-75(2) of Schedule 1 to the TAA 1953]

18.141 The 'instalment income' used in the formula does not include amounts that related to mining project interests and pre-mining project interests that were transferred or split to another entity during the previous MRRT year [Schedule 1, item 8, section 115-105 of Schedule 1 to the TAA 1953] . If either part of the formula is zero, the rate will be nil [Schedule 1, item 8, subsection 115-75(4) of Schedule 1 to the TAA 1953] .

18.142 If the entity did not have an MRRT assessment for the previous MRRT year, the Commissioner would use the most recently assessed MRRT year instead. [Schedule 1, item 8, subsection 115-75(3) of Schedule 1 to the TAA 1953]

Example 18.194 : Commissioner's instalment rate

In the 2014-15 MRRT year, Like Mines Pty Ltd, an iron ore miner, had an MRRT liability of $14.5 million. Its consideration for the ore it supplied in that year was $207 million. The Commissioner would usually provide Like Mines with a rate for the 2015-16 MRRT year of 14.5m/207m = 7%.

18.143 The Commissioner can modify the MRRT liability used to calculate the rate in order to reflect changes in the law after the MRRT year (the 'base year') used for working out a rate. For example, if the law were changed to allow expenditure to be deducted that had previously been excluded expenditure, the entity's MRRT liability for the base year would have been lower. In working out a rate, the Commissioner can use the MRRT liability that would have applied if the change in the law had applied for that year. This ensures that the MRRT instalments system functions effectively relative to the current state of the law with the intention that it neither over nor under collects instalments. [Schedule 1, item 8, subsection 115-75(5)and section 115-80 of Schedule 1 to the TAA 1953]

18.144 The Commissioner can also modify the MRRT liability for the previous year to work out an entity's instalment rate if the law has not changed but, in the Commissioner's opinion, is likely to be changed in time to apply to relevant instalments. In that case, the Commissioner can only vary the rate to reduce it. That protects entities against paying instalments that are too high if the anticipated law change does not eventuate. [Schedule 1, item 8, section 115-80 of Schedule 1 to the TAA 1953]

18.145 The Commissioner may be aware of other circumstances that would mean the rate calculated in the normal way would not be appropriate. For example, the Commissioner might become aware that the entity had made significant one-off capital expenditure in the previous year. In all such cases, the Commissioner can work out an instalment rate on a different basis if, having regard to the entity's circumstances, he or she considers it reasonable to do so and if it would produce instalments that are closer to the entity's likely MRRT liability for the year. [Schedule 1, item 8, subsections 115-75(5) and (6) of Schedule 1 to the TAA 1953]

18.146 If the Commissioner believes an entity is unlikely to be liable to pay MRRT for an MRRT year, the Commissioner can give the entity a nil rate. [Schedule 1, item 8, subsection 115-45(2) of Schedule 1 to the TAA 1953]

18.147 There are two differences between a nil rate and any other rate the Commissioner gives an entity:

•

A nil rate is the applicable instalment rate even if the entity has chosen a different rate [Schedule 1, item 8, item 1 in the table in subsection 115-45(1) of Schedule 1 to the TAA 1953] ;

•

A nil rate applies for the quarter in which it is given and for any later quarters in the same MRRT year ; it does not apply to quarters after that MRRT year [Schedule 1, item 8, subsection 115-45(4) of Schedule 1 to the TAA 1953] .

18.148 The Commissioner can give a whole class of entities a nil rate if the Commissioner believes no member of the class will be liable to pay MRRT for the year. [Schedule 1, item 8, subsection 115-45(3) of Schedule 1 to the TAA 1953]

18.149 A nil rate stops applying from the quarter the Commissioner gives the entity a different instalment rate. Unlike the nil rate, the entity could substitute its chosen rate for that replacement Commissioner rate. [Schedule 1, item 8, subsections 115-45(1) and (5) of Schedule 1 to the TAA 1953]

18.150 If the Commissioner gives an entity a rate, he or she must notify the entity in writing [Schedule 1, item 8, subsections 115-45(2) and 115-75(1) of Schedule 1 to the TAA 1953] . If the Commissioner gives a class of entities a nil rate, the Commissioner does so by legislative instrument and does not have to separately notify the entities in that class [Schedule 1, item 8, subsection 115-45(3) of Schedule 1 to the TAA 1953] .

The entity's chosen instalment rate

18.151 An entity can choose a different instalment rate for each quarter but can only choose one rate for a quarter and cannot change it. [Schedule 1, item 8, section 115-50 of Schedule 1 to the TAA 1953]

18.152 A rate an entity chooses for a quarter will continue to apply for each later quarter in the MRRT year unless the entity chooses a different rate for a later quarter. However, a rate an entity chose for a quarter will not apply to a quarter in a later MRRT year , even if a new rate is not chosen. The rate given by the Commissioner (or the default rate if the Commissioner has never given the entity a rate) would become the applicable rate in that later year. [Schedule 1, item 8, item 2 in the table in subsection 115-45(1) of Schedule 1 to the TAA 1953]

The default instalment rate

18.153 If the Commissioner has not given the entity a rate, and the entity has not chosen a rate, for a quarter, the applicable instalment rate for the quarter will be the default rate. [Schedule 1, item 8, item 4 in the table in subsection 115-45(1) of Schedule 1 to the TAA 1953]

18.154 The default instalment rate for an entity that only has instalment income relating to iron ore is 8 per cent [Schedule 1, item 8, paragraph 115-85(1)(a) of Schedule 1 to the TAA 1953] . The default instalment rate for an entity that only has instalment income relating to other taxable resources (coal or gas) is 3 per cent [Schedule 1, item 8, paragraph 115-85(2)(a) of Schedule 1 to the TAA 1953] .

18.155 For quarters after the 2012-13 MRRT year, those default rates can be changed by regulation. That allows the default instalment rate to be altered quickly to reflect any global changes to profit levels in the mining industry after the first MRRT year. After that first year, existing miners will be given an annual rate by the Commissioner, so regulations changing the default rate will only affect entities new to the MRRT and only for their first MRRT year. Of course, those entities new to the MRRT will be able to choose their own instalment rate in the usual way if the default rate is not suitable for them. [Schedule 1, item 8, paragraphs 115-85(1)(b) and (2)(b) and subsection 115-85(4) of Schedule 1 to the TAA 1953]

18.156 If an entity has instalment income relating to iron ore and to coal or gas, its default instalment rate is an amalgam of the two prescribed rates. It would multiply the iron ore default rate by the proportion of its instalment income for the quarter that relates to iron ore and multiply the coal and gas default rate by the proportion of the quarter's instalment income that relates to coal or gas. Adding the two results and rounding it to two decimal places would give the entity its default instalment rate for that quarter. [Schedule 1, item 8, subsection 115-85(3) of Schedule 1 to the TAA 1953]

Example 18.195 : Default rate for diverse interests

Merry Quest Co has several iron ore mines and one coal mine. Eighty per cent of its instalment income for a quarter relates to iron ore and the other 20 per cent relates to coal. The default rate for iron ore for the quarter is still 8 per cent but the regulations have changed the coal default rate to 2.5 per cent. Merry would work out its default rate for the quarter as (8% x 80%) + (2.5% x 20%) = 6.9%

Consequences of choosing an instalment rate

18.157 As with the PAYG instalments system, an entity can choose to use a rate that is different from the rate the Commissioner has given the entity (or the default rate if the Commissioner has not yet given the entity a rate). That allows the entity to take into account the circumstances it expects will affect its end of year MRRT liability.

18.158 An entity that uses the default rate, or a rate the Commissioner has given it, has the security of knowing it cannot be liable for the general interest charge if that rate results in instalments that are too low. An entity that chooses its own rate must be careful to ensure its chosen rate accurately reflects its expected MRRT liability for the year because the general interest charge will apply if the entity chooses a rate that is too low. As with PAYG instalments, there is a 15 per cent margin so that entities are not penalised simply because their chosen rate is not 100 per cent accurate.

Credit for earlier quarters when an entity chooses a low instalment rate

18.159 When an entity chooses a lower rate than it was using in the previous quarter, it can claim a credit for instalments for earlier quarters in the year. It can claim a credit even if it has not yet paid those earlier instalments. It would remain liable to pay the original instalment amounts (although, in practice, the credit and the liability would usually be offset). [Schedule 1, item 8, subsections 115-60(1) and (3) of Schedule 1 to the TAA 1953]

18.160 The entity does not have to claim a variation credit through the instalments process. If it does not, it would get a full credit for its instalments when an assessment is made at the end of the MRRT year [Schedule 1, item 8, paragraph 115-20(2)(a) of Schedule 1 to the TAA 1953] . If it does claim the credit through the instalments process, the credit for its instalments at the end of the year will be correspondingly reduced to reflect the earlier credit it claimed [Schedule 1, item 8, paragraph 115-20(2)(b) of Schedule 1 to the TAA 1953] .

18.161 A claim for a credit must be made in the approved form and can only be made on or before the day the instalment is due for the quarter That will usually be on or before the 21st day after the quarter but could be later if the Commissioner has deferred the time for paying the instalment (see section 255-10 of Schedule 1 to the TAA 1953). [Schedule 1, item 8, subsection 115-60(2) of Schedule 1 to the TAA 1953]

Amount of the credit

18.162 The credit is equal to the difference between the instalments for the earlier quarters in the year and what those instalments would have been if they had used the new (lower) rate instead of the previous higher rate. The amount of the credit is adjusted to reflect any credits already claimed for the year. [Schedule 1, item 8, paragraph 115-60(1)(d) of Schedule 1 to the TAA 1953]

Example 18.196 : Claiming variation credits

In the first instalment quarter of its MRRT year, Grayte Mines Pty Ltd has instalment income of $80 million and an applicable instalment rate of 15 per cent that was given to it by the Commissioner. It is liable to pay an instalment of $12 million for the quarter.

In the second instalment quarter, Grayte Mines has instalment income of $75 million and chooses an instalment rate of 12 per cent. It is liable to pay an instalment for the quarter of $9 million. Because the rate is lower than the rate it used in the previous quarter, it can also claim a variation credit.

The variation credit is the difference between its instalment for the first quarter and what that instalment would have been if it had used the 12 per cent rate. At 12 per cent, the first quarter's instalment would have been $9.6 million, so Grayte Mines can claim a credit of the $2.4 million difference. It would still remain liable to pay $12 million for the first quarter instalment but it would be offset by the $2.4 million credit if it remained unpaid.

In its third quarter, it again has instalment income of $75 million and decides to use a rate of 10 per cent, for an instalment of $7.5 million. Because Grayte Mines has again reduced its rate, it can again claim a variation credit.

In this case, the credit is the difference between the total instalments for the previous two quarters, less the credit it claimed in the second quarter ($21m - $2.4m = $18.6m), and what those instalments would have been using the new rate (($80m + $75m) x 10% = $15.5m). Therefore, Grayte Mines can claim a variation credit of $3.1 million.

General interest charge for choosing too low a rate

18.163 An entity that chooses its own instalment rate for a quarter is liable to pay the general interest charge if the rate it chooses is below 85 per cent of the year's benchmark instalment rate. [Schedule 1, item 8, subsection 115-65(1) of Schedule 1 to the TAA 1953]

18.164 An entity's benchmark instalment rate for an MRRT year is the rate that would mean the year's instalments added up exactly to the entity's MRRT liability for the year. It can only be worked out at the end of the year, when the entity's MRRT liability and total instalment income for the year (excluding amounts that related to mining project interests and pre-mining project interests that were transferred or split to another entity during the year) are determined. [Schedule 1, item 8, sections 115-70 and 115-105 of Schedule 1 to the TAA 1953]

Example 18.197 : Benchmark instalment rate

Bee Mines Pty Ltd has instalment income of $60 million for each quarter of the 2014-15 MRRT year. Its MRRT liability for the year is $28.8 million, so its benchmark instalment rate for 2014-15 is:

($28.8m / $240m) = 12%

18.165 Imposing the general interest charge when an entity chooses too low an instalment rate is intended to discourage entities inappropriately dropping their instalment rates to defer paying their MRRT liability until their annual assessment is made. The Commissioner has a discretion under section 8AAG of the TAA 1953 to remit general interest charge. The Commissioner could use that discretion to remit the whole or part of the general interest charge for an entity that took reasonable steps based on the information available to it to ensure that the varied rate was accurate relative to the entity's expected MRRT liability for the year. The Commissioner may also use that discretion to remit the general interest charge if the entity had also made a reasonable effort to remedy a rate it realised was too low when new information came to light.

18.166 The general interest charge for choosing an instalment rate that is too low is imposed on the difference between what the instalment was for the quarter and what it would have been if the entity had not varied its rate that was too low. If the difference would have been less if the year's benchmark instalment rate had been used instead, then the charge is only imposed on that lesser difference. [Schedule 1, item 8, subsection 115-65(2) of Schedule 1 to the TAA 1953]

Example 18.198 : General interest charge for choosing a low rate

Continuing the previous example, Bee Mines Pty Ltd was given a rate of 10 per cent by the Commissioner in the 2013-14 MRRT year and it continues to use that rate into the first quarter of its 2014-15 year. In the second quarter, the Commissioner provides a new rate of 13 per cent. Bee Mines decides to use a lower rate and chooses 10 per cent.

Bee Mines' benchmark rate for 2014-15 is 12 per cent. If it chooses a rate lower than 85 per cent of that (that is, below 10.2 per cent), it will be liable for the general interest charge. Its rate in the first quarter was below 10.2 per cent but, as it was a rate given by the Commissioner, the charge does not apply for that quarter. However, it does apply in the second quarter because, even though the rate is still 10 per cent, it is now using a rate it chose rather than a rate the Commissioner gave it (because the Commissioner has now provided a rate of 13 per cent).

Its actual instalment for the second quarter is $6 million (10 per cent of $60 million). The instalment liability it would otherwise have had (using the most recent Commissioner rate) would have been $7.8 million (13 per cent of $60 million). However, using the benchmark instalment rate, the instalment liability would have been only $7.2 million (12 per cent of $60 million). As that is lower, the liability for the general interest charge is worked out on the difference from the liability using the benchmark instalment rate. Bee Mines will therefore be liable to pay the general interest charge on $1.2 million ($7.2m - $6m).

18.167 The amount on which the general interest charge is imposed is increased to take into account any credits the entity has claimed for the year (which effectively reduce the instalment rate for earlier quarters). [Schedule 1, item 8, subsection 115-65(2) of Schedule 1 to the TAA 1953]

18.168 There is a lower increase in the amount on which the general interest charge is imposed if the credit claimed by the entity related to a transfer of some or all of a mining project interest or pre-mining project interest. [Schedule 1, item 8, section 115-105 of Schedule 1 to the TAA 1953]

18.169 The general interest charge for choosing too low an instalment rate is worked out using the normal general interest charge rules. The charge applies from the due date for the instalment for the quarter for which the rate was reduced to the due date for paying the MRRT for the year [Schedule 1, item 8, subsection 115-65(3) of Schedule 1 to the TAA 1953] . The Commissioner will give the entity notice in writing of the amount of the charge and the entity will have 14 days after being given the notice to pay the charge [Schedule 1, item 8, subsection 115-65(4) of Schedule 1 to the TAA 1953] . If the charge is not paid within that 14 days, the general interest charge will also apply to the unpaid amount and will continue to apply until the full amount is paid [Schedule 1, item 8, subsection 115-65(5) of Schedule 1 to the TAA 1953] .

Special rules for transferring or splitting a mining project interest

18.170 The MRRT uses an 'inherited history' approach, under which annual liability for MRRT on a particular mining project interest or pre-mining project interest falls onto the entity holding it at the end of the year. That approach has three broad categories of implications for the instalment rules:

•

implications for earlier quarters' instalments;

•

implications of acquiring an interest; and

•

implications of transferring an interest.

Implications for earlier quarters' instalments

18.171 An entity's MRRT instalment for a particular quarter is not affected by the fact that a mining project interest or pre-mining project interest is transferred or split in a later quarter of the year. This means that, in working out an entity's MRRT instalments for the quarter:

•

the entity's instalment income remains its instalment income even though the MRRT liability in relation to some or all of it will fall onto another entity because the interest was transferred or split later in the year (although the entity may be able to claim a credit after the transfer or split for some part of the earlier instalments); and

•

the entity's instalment income for the quarter is not increased because it acquires a new interest after the end of that quarter (although there may be an increase in the instalment income for the quarter in which the interest is acquired).

[Schedule 1, item 8, subsection 115-90(1) of Schedule 1 to the TAA 1953]

Implications of acquiring an interest

18.172 An entity that acquires a mining project interest or pre-mining project interest during a quarter will count the instalment income of that quarter that relates to that interest when working out its instalment for the quarter. That instalment income could include amounts relating to mining revenue events that occurred during the quarter but before the transfer or split. [Schedule 1, item 8, subsection 115-90(2) of Schedule 1 to the TAA 1953]

18.173 The entity also increases its instalment income in the instalment quarter in which it acquires the interest to reflect any instalment income relating to its new interest for earlier quarters of the MRRT year. [Schedule 1, item 8, subsection 115-95(1) of Schedule 1 to the TAA 1953]

18.174 The amounts included for the earlier quarters are the usual amounts of instalment income that relate to mining revenue events in those quarters that will lead to an amount being included in the acquiring entity's mining revenue or pre-mining revenue. [Schedule 1, item 8, subsection 115-95(2) of Schedule 1 to the TAA 1953]

18.175 In other words, the amounts that were, or would have been, instalment income for the transferring entity for previous quarters of the MRRT year become instalment income of the acquiring entity in the instalment quarter in which the transfer occurs. [Schedule 1, item 8, subsection 115-90(2) and section 115-95 of Schedule 1 to the TAA 1953]

Example 18.199 : Additional instalment income for an acquiring entity

Sedgley Sand Mining Pty Ltd decides to branch out into iron ore mining and buys some hematite mines from Francis Freerange Mining Pty Ltd in the third quarter of its MRRT year. Francis had made supplies from the mine in the first and second quarters for consideration of $60 million and $75 million respectively. In the third quarter, Francis had made supplies for consideration of $10 million and Sedgley made further supplies, for $55 million, during the remainder of the quarter.

To the $55 million instalment income for its own supplies in the third quarter, Sedgley would add amounts of $60 million, $75 million and $10 million to reflect the amounts that arose in the year during the Francis era. Sedgley's total instalment income for the third quarter would be $200 million.

Implications of transferring an interest

18.176 An entity that transfers all or part of a mining project interest or a pre-mining project interest in a quarter (the original entity) will not count the instalment income for the quarter relating to that interest (or the part of the interest transferred) when working out its instalment for the quarter. [Schedule 1, item 8, subsection 115-90(2) of Schedule 1 to the TAA 1953]

18.177 The original entity will also be entitled to a credit once an assessment has been made at the end of the MRRT year for instalments payable by it in relation to that interest (or the part of the interest transferred) for quarters in the year before the transfer. [Schedule 1, item 8, section 115-20 of Schedule 1 to the TAA 1953]

18.178 Some entities will not want to wait until the end of the year to get that credit when they know their eventual MRRT liability will be reduced because of the transfer or split. Accordingly, such entities can claim an early credit through the instalments process. [Schedule 1, item 8, subsection 115-100(1) of Schedule 1 to the TAA 1953]

18.179 The credit can only be claimed in the approved form on or before the day the instalment is due for the quarter in which the transfer occurs. [Schedule 1, item 8, subsection 115-100(2) of Schedule 1 to the TAA 1953]

Amount of the early credit

18.180 The credit is equal to the difference between:

•

the instalments the transferring entity was liable to pay for earlier quarters in the MRRT year (reduced by credits claimed because of other transfers or because of a reduction in the entity's instalment rate); and

•

the instalments that would have been due for those earlier quarters if the entity had not had the mining revenue events from the transferred interest (or part interest).

[Schedule 1, item 8, subsection 115-100(1) of Schedule 1 to the TAA 1953]

Notification requirements

Quarterly instalment notices

18.181 An entity liable to pay an instalment for a quarter must notify the Commissioner of the amount of its instalment income in the approved form [Schedule 1, item 8, subsections 115-15(1) and (2) of Schedule 1 to the TAA 1953] . The Commissioner can determine the content of an approved form and the manner in which it is given to the Commissioner, including by electronic means (see section 388-50 of Schedule 1 to the TAA 1953).

18.182 The notification is due on or before the day the instalment is due (that is, on or before the 21st day after the end of the quarter). This information notifies the Commissioner of how an entity's instalment for the quarter was calculated and further allows the calculation of any general interest charge that may be imposed if the entity chose an instalment rate that was too low. [Schedule 1, item 8, subsections 115-15(1) and (2) of Schedule 1 to the TAA 1953]

18.183 The Commissioner can exempt taxpayers (or classes of taxpayers) from having to provide this notification if the Commissioner has given them a nil instalment rate. [Schedule 1, item 8, subsections 115-15(3) and (4) of Schedule 1 to the TAA 1953]

Choosing a new instalment rate

18.184 An entity that chooses an instalment rate for a quarter must notify the Commissioner of that choice in the approved form. Once again, the approved form could be electronic. The choice must be notified on or before the day the instalment for that quarter is due. [Schedule 1, item 8, section 115-55 of Schedule 1 to the TAA 1953]

Consequential amendments

18.185 A number of consequential amendments are made to definitions in the income tax law to cover new terms added for the MRRT instalments regime. [Schedule 3, items 49, 52 to 55, definitions of 'applicable instalment rate', 'base year', 'benchmark instalment rate', 'instalment income' and 'instalment quarter' in subsection 995-1(1) of the ITAA 1997]

18.186 Amendments are also made to the TAA 1953 to update non-operative lists of provisions that either apply the general interest charge or create a tax-related liability, to reflect the addition of such provisions in the MRRT instalments regime. [Schedule 1, items 1, 2 and 10, subsection 8AAB(4) of the TAA 1953 and subsection 250-10(2) of Schedule 1 to the TAA 1953]

Record keeping

18.187 Entities conducting mining or pre-mining operations are required to keep and retain records which are relevant to the operation of the MRRT. [Schedule 1, item 8, subsection 123-5(1) of Schedule 1 to the TAA 1953]

18.188 As with other taxes, the effective administration of the MRRT requires the Commissioner to be able to ask taxpayers to provide evidence supporting their self-assessed liabilities or entitlements.

18.189 In addition, the design of the MRRT necessitates that taxpayers be required to keep records which might no longer relate to their own mining operations or MRRT liability.

18.190 For example, the seller of a mining project interest or pre-mining project interest is required to keep relevant records which support the MRRT history of the interest, because, once this history is inherited by the buyer of the interest, it is used in determining the buyer's MRRT liability.

18.191 Accordingly, these record-keeping rules apply to all taxpayers who have conducted mining or pre-mining operations for the purposes of the MRRT.

The records which are to be kept

18.192 A taxpayer must keep records of every act, transaction, event or circumstance relating to their mining or pre-mining operations that are relevant to working out their MRRT position, or that of another entity. [Schedule 1, item 8, subsection 123-5(1) of Schedule 1 to the TAA 1953]

18.193 In this context a relevant MRRT position includes:

•

the amount (if any) of the taxpayer's MRRT liability (or that of another entity) for an MRRT year; and

•

the amount of any offset to which the taxpayer or another entity is entitled under the low profit offset or rehabilitation tax offset provisions.

[Schedule 1, item 8, paragraphs 123-5(1)(a) and 123-5(1)(b) of Schedule 1 to the TAA 1953]

18.194 Accordingly, relevant records could include such things as audited statements of mining revenue and expenditure, documents detailing State royalty payments and evidence of the date when a mine ceased commercial production.

18.195 An important issue for the MRRT is the fact that the records you have to keep need not be relevant only to your own mining operations or pre-mining operations. If you have a loss (for example) that you transfer to an associate, the record will be relevant to applying the MRRT to that other entity's mining operations. Or, you might transfer a mining project interest to another entity, which will inherit the relevant MRRT history for that interest from you. An entity will therefore need to keep records that might no longer relate to its own mining operations or MRRT liability.

18.196 If such records do not already exist, the taxpayer is obliged to create them. If such records no longer exist, the taxpayer must reconstruct them. [Schedule 1, item 8, subsection 123-5(2) of Schedule 1 to the TAA 1953]

18.197 This circumstance might arise if, for example, an earlier holder of the project interest failed to keep the records they should have. This rule also covers cases where there was no obligation to keep the records at the time (for example, records relating to pre-MRRT periods).

18.198 However, this rule is not intended to allow taxpayers to fail to keep records with a view to reconstructing them at some later time.

18.199 A taxpayer must also keep a record of each choice, estimate, determination and calculation they have made under an MRRT law, along with (in the case of estimates, determinations and calculations) the basis and method used to arrive at each amount. [Schedule 1, item 8, subsection 123-5(3) of Schedule 1 to the TAA 1953]

18.200 This requirement is the same as the existing rules for records relating to indirect tax laws, contained in paragraph 382-5(4)(a) of Schedule 1 to the TAA 1953.

The form in which records are to be kept

18.201 The records which a taxpayer is required to keep must be in such a form as to enable the relevant MRRT position (of either the taxpayer or another entity) to be readily ascertained. [Schedule 1, item 8, paragraph 123-5(4)(b) of Schedule 1 to the TAA 1953]

18.202 These records must be in English, or readily accessible and easily convertible into English. [Schedule 1, item 8, paragraph 123-5(4)(a) of Schedule 1 to the TAA 1953]

18.203 The records can be kept electronically or in hard copy form.

The time for which records are to be kept

18.204 The records which a taxpayer is required to keep in relation to the MRRT must be retained until the latest of the following:

•

five years after the conclusion of the matters which are the subject of the record;

•

five years after the taxpayer made or obtained the record; or

•

the end of the period of review for an assessment of MRRT for an MRRT year (if the record is relevant to that assessment).

[Schedule 1, item 8, section 123-10 of Schedule 1 to the TAA 1953]

18.205 This is in line with other requirements in the tax law to retain records, generally for either five or seven years.

18.206 Requiring records to be kept until the end of any relevant assessment period is designed to ensure that records that could be used to verify the correctness (or otherwise) of an MRRT assessment are available if necessary, in the event of an audit by, or a dispute with, the Commissioner.

Example 18.200 : Keeping records of a royalty payment

On 1 May 2013, Buzz Coal Co makes a royalty payment to a State Government in respect of coal extracted during the period 1 October to 31 December 2012. Buzz Coal Co receives a written receipt for this payment a week later, on 8 May 2013. Buzz Coal lodges its return for the 2012-13 MRRT year on 1 November 2013.

The documentary receipt is a relevant record because it records a transaction used in calculating Buzz Coal's royalty allowance, which in turn is a factor in determining its MRRT liability.

How long is Buzz Coal required to keep these records?

Buzz Coal must keep the records relating to this royalty payment until the latest of these dates, which is 8 May 2018.

The penalties for not keeping relevant records

18.207 It is an offence to fail to keep or retain a record in accordance with the provisions discussed in this chapter. [Schedule 1, item 8, subsection 123-15(1) of Schedule 1 to the TAA 1953]

18.208 An entity does not commit an offence if the Commissioner has notified it that it no longer needs to keep the record or if the entity is a company that has been finally dissolved. [Schedule 1, item 8, paragraphs 123-15(1)(c) and (d) of Schedule 1 to the TAA 1953]

18.209 The offence is one of strict liability within the meaning of section 6.1 of the Criminal Code . Broadly, this means that the intent of the taxpayer is not considered when assessing whether an offence has occurred (although a defence of mistake of fact may be available). This is consistent with similar offences elsewhere in the tax law. [Schedule 1, item 8, subsection 123-15(2) of Schedule 1 to the TAA 1953]

18.210 The penalty for failing to keep or retain a record is 30 penalty units, which is currently equal to $3,300. [Schedule 1, item 8, subsection 123-15(1) of Schedule 1 to the TAA 1953]

18.211 Alternatively, an administrative penalty of 20 penalty units (currently $2,200) may apply, as a failure to keep an MRRT record would also breach the general requirement to keep or retain relevant tax records (see section 288-25 of the TAA 1953). However, a taxpayer cannot be subject to both of these penalties in respect of the same offence (see section 8ZE of the TAA 1953).

18.212 However, a taxpayer is not penalised, under either the tax law or the Criminal Code , for not retaining a record beyond the time of either of the following occurrences:

•

the Commissioner notifying them that they do not need to retain the record; or

•

if the taxpayer is a company, that company being finally dissolved.

[Schedule 1, item 8, subsection 123-15(3) of Schedule 1 to the TAA 1953]

Information transfers

18.213 MRRT liabilities are worked out for mining project interests and pre-mining project interests rather than for entities. The MRRT liability for an interest is met by the entity that has the interest at the end of an MRRT year, even if that entity only acquired the interest during the year.

18.214 This will mean that an entity that acquires an interest during a year will usually need information possessed by the entity that transferred the interest. The MRRT information transfer provisions require the original entity to supply the information so that the acquiring entity is able to work out its MRRT liability relating to the acquired mining project interest and to satisfy its MRRT obligations. [Schedule 1, item 8, section 121-5 of Schedule 1 to the TAA 1953]

18.215 An entity with a mining project interest or a pre-mining project interest must provide an information notice to any entity that acquires the interest, or part of the interest, as a result of the interest being transferred or split. [Schedule 1, item 8, subsection 121-10(1) of Schedule 1 to the TAA 1953]

18.216 The entity must also provide the acquiring entity with a further information notice when anything happens after the transfer or split that affects the transferred interest. [Schedule 1, item 8, subsection 121-10(3) of Schedule 1 to the TAA 1953]

Example 18.201 : Further notice about post-transfer occurrences

Smarter Mining Ideas Pty Ltd transfers its Farragut 5 mining project interest to On-The-Edge Investments. Later, Smarter Mining sells some taxable resources it had extracted from the Farragut 5 mine before the transfer. That supply of taxable resources from the interest will generate mining revenue for whoever has the interest at the end of the MRRT year. Therefore, Smarter Mining would have to notify On-The-Edge that a supply had occurred and provide the information that On-The-Edge would need to work out the related mining revenue.

Before it received the notification from Smarter Mining, On-The-Edge had already transferred Farragut 5 to Schofield Mining Properties. On-The-Edge would in turn have to provide Schofield with notice of the information about Smarter Mining's supply of resources from Farragut 5.

18.217 A notice can always be provided in writing but, if both parties are willing, it can be provided in any other form they wish. This will often be electronically, and could even be orally. [Schedule 1, item 8, paragraph 121-10(4)(a) of Schedule 1 to the TAA 1953]

18.218 A notice must be given with 60 days of the transfer or split. A notice of later occurring events must be provided within 60 days of those events. [Schedule 1, item 8, paragraphs 121-10(4)(b) and (c) of Schedule 1 to the TAA 1953]

18.219 The existing taxation offence provisions would apply to an entity that did not provide a notice it was required to provide on time (see section 8C of the TAA 1953). If it is convicted of the offence, the court could order the entity to comply with the notice obligation (see section 8G of the TAA 1953). A failure to provide a notice on time could instead be subject to an administrative penalty (see section 286-75 of Schedule 1 to the TAA 1953). There may also be penalties for providing information that is false or misleading.

What should an information notice contain?

18.220 In broad terms, the information notice must provide the new entity with all the information it needs to work out its MRRT liability for the interest it has acquired and to comply with its related MRRT obligations.

18.221 The information needed would include:

•

the amount of any allowance components that come with the interest [Schedule 1, item 8, paragraph 121-10(2)(a) of Schedule 1 to the TAA 1953] ; and

•

the information necessary to work out future starting base losses for the interest [Schedule 1, item 8, paragraph 121-10(2)(b) of Schedule 1 to the TAA 1953] .

Example 18.202 : Information about future starting base losses

Little Big Horn Pty Ltd transfers a mining project interest to Crazy Horse Mining Co. It has 60 days to provide Crazy Horse with the values of the mining right and other starting base assets transferred with the interest. This would include the valuation method chosen for those assets, their base values at the start of the transfer year, the basis on which their decline in value was being worked out, and their upstream usage histories within the interest. It would also have to inform Crazy Horse of the amount of the interest's starting base losses carried over from the previous MRRT year. It would also have to inform Crazy Horse of the base values, termination values and usage histories of any assets that experienced a starting base adjustment event in the transfer year, so that Crazy Horse could work out how much mining revenue or mining expenditure to include in the year from those adjustment events.

18.222 The information needed would include the amount of the interest's mining revenue, pre-mining revenue, mining expenditure and pre-mining expenditure for the year. [Schedule 1, item 8, paragraphs 121-10(2)(b) of Schedule 1 to the TAA 1953]

Example 18.203 : Information about revenue and expenditure

Continuing the previous example, Little Big Horn would have to provide Crazy Horse with details of the year's mining revenue and expenditure for the transferred interest because Crazy Horse would be liable to pay MRRT for the year in relation to the interest and would need that information to work out its liability. Crazy Horse may be able to work out its mining revenue using the alternative valuation method, so Little Big Horn would need to advise it of the tonnes of resources extracted in relation to the interest for the year, so that Crazy Horse could determine whether it came within the 10 million tonnes threshold for eligibility for that method.

18.223 The information needed would include information about assets transferred with the interest that could give rise to future revenue or expenditure (such as their original cost and assumptions that were made about the extent of their upstream use in the interest). [Schedule 1, item 8, paragraphs 121-10(2)(c) and (d) of Schedule 1 to the TAA 1953]

Example 18.204 : Information about other assets

Continuing the previous example, Little Big Horn would also have to provide Crazy Horse with information about the non-starting base assets transferred with the interest. If Crazy Horse later sold those assets, the adjustment rules would require it to work out how much to include in the interest's mining revenue. If it changed the upstream usage of the assets, it could include a further amount in revenue or expenditure as a result of a mining adjustment. To work those things out, Crazy Horse would need to know the original cost of the assets, the assumptions made when they were acquired about the extent of their upstream usage in the interest, and any later adjustments made to revenue and expenditure because of a change in their upstream usage. Therefore, Little Big Horn would have to provide Crazy Horse with that information about the transferred assets.

18.224 The information needed would also include:

•

the information needed to work out the amount of any rehabilitation offset for the interest (including any amounts that have been deposited on trust or as a bond to secure future rehabilitation of the site, any rehabilitation expenditure incurred in the year, and the total amount of MRRT that has ever been paid in relation to that interest) [Schedule 1, item 8, paragraph 121-10(2)(b) of Schedule 1 to the TAA 1953] ;

•

in the case of a transfer of part of an interest, the transferee's split percentage [Schedule 1, item 8, paragraph 121-10(2)(c) of Schedule 1 to the TAA 1953] ; and

•

the information needed to work out the instalment income of the transferee in the transfer quarter (including instalment income related to the transferred interest that it will inherit) [Schedule 1, item 8, paragraph 121-10(2)(d) of Schedule 1 to the TAA 1953] .

Substantiation

18.225 The entity to which an information notice is provided may later need further particulars of the information provided. For example, while it might be enough for the original information notice to provide just a gross figure for the amount of the year's mining revenue up to the date of the transfer of the interest, the new entity may need to know how that figure was arrived at if the Commissioner queries it.

18.226 In such cases, the new entity can request the transferor to provide further particulars to justify the information given in the original notice. In particular, the transferee can ask for an explanation of how an amount in the original notice was calculated and to see the underlying document or other information on which the original notice was based. [Schedule 1, item 8, subsection 121-15(1) of Schedule 1 to the TAA 1953]

18.227 The transferor has 60 days to comply with a request. [Schedule 1, item 8, subsection 121-15(2) of Schedule 1 to the TAA 1953]

18.228 As with the original information notice, failing to comply with any reasonable request for further particulars could be an offence or be subject to an administrative penalty.

Consequential amendments

18.229 The administrative penalty provisions are amended to ensure that an entity that does not satisfy its obligation to provide an MRRT information notice, or satisfy a request for further particulars, within time is subject to the administrative penalty provisions. [Schedule 1, items 24 and 25, paragraph 286-80(2)(a), subsection 286-75(2AA) of Schedule 1 to the TAA 1953]

Access powers

18.230 In order to provide for the proper administration of the tax system, including by reviewing the affairs of taxpayers, the Commissioner can ask taxpayers to provide additional information. Normally the Commissioner does this informally. However, there are occasions when it proves more difficult to access required information. For such cases, the Commissioner is given the power to access premises and documents, and gather information, whether held domestically or in foreign jurisdictions.

18.231 The existing access powers the Commissioner has in relation to indirect tax laws and the administration of taxation laws are extended to also apply to the MRRT law. [Schedule 1, items 28 to 31, sections 353-15 and 353-17, subsection 353-10(1) of Schedule 1 to the TAA 1953]

Commissioner's power

18.232 For the purpose of the administration or operation of the MRRT, the Commissioner can provide any entity with a notice requiring it to provide information, evidence or documents. [Schedule 1, item 28, section 353-10 of Schedule 1 to the TAA 1953]

18.233 This means that the Commissioner can obtain information, evidence, or documents from governments and government bodies. Such powers are important to the administration of tax laws, as demonstrated by the following examples.

Example 18.205

Mr Diligent, an Australian Taxation Office (ATO) auditor, is examining Outback Mining's MRRT affairs. Mr Diligent has concerns about the veracity of a document that had been submitted by Outback Mining in the course of the audit. In particular, Mr Diligent thought Outback Mining may have claimed that its royalty payments to a State government were higher than they in fact were. Mr Diligent approached Mr Conscientious, an official from the relevant State department, and asked if he could obtain information about Outback Mining's royalty payments. Mr Conscientious replied that he would be happy to help, but because of a combination of statutory and commercial confidentiality requirements, the department would be unable to provide the information unless the Commissioner required it under a formal notice. Mr Diligent duly issues a notice to the State department requiring it to provide the relevant information. The State department complied.

Example 18.206

Mr Meticulous, an ATO auditor, is examining the affairs of a number of entities that are closely held and operated by Mr Difficult in order to determine the entities' goods and services tax (GST) liabilities. Mr Meticulous has sought information from the entities, but Mr Difficult has thus far lived up to his name. He also informed Mr Meticulous that even if he wanted to cooperate, all of the relevant business records had been seized by a Commonwealth agency in relation to an investigation into non-tax matters. Mr Meticulous had heard about Mr Diligent's experience as detailed in Example 18.14, and thought that approach would work in his case. Mr Meticulous approaches and subsequently issues the Commonwealth agency with a notice requiring provision of the relevant information. The Commonwealth agency complied.

Access to premises

18.234 The Commissioner can access premises for the purpose of administering the MRRT. [Schedule 1, items 29 and 30, section 353-15 of Schedule 1 to the TAA 1953]

Offshore information notices

18.235 The Commissioner can request the provision of information that is held offshore for the purpose of administering the MRRT. [Schedule 1, item 31, section 353-17 of Schedule 1 to the TAA 1953]

Service

18.236 In order to deal with full self assessment taxpayers, the Commissioner may need to serve documents from time to time. Although full self assessment taxpayers do not actually receive notices of assessment, the Commissioner may need to serve documents to amend assessments, deal with outstanding liabilities, and participate in legal proceedings.

Address for service

18.237 For the purposes of the MRRT law, the Commissioner can serve documents at a physical address or postal address in Australia, or at an electronic address an entity has provided as its address for service for the purposes of an MRRT law. [Schedule 1, item 8, subsection 125-1 of Schedule 1 to the TAA 1953]

18.238 Where an entity has provided the Commissioner with more than one address, the Commissioner can serve documents at the address considered reasonable in the circumstances. [Schedule 1, item 8, subsection 125-1(2) of Schedule 1 to the TAA 1953]

18.239 Where an entity has not provided the Commissioner with an address, documents can be served at the address the Commissioner reasonably believes to be the entity's address for service for the purposes of an MRRT law. [Schedule 1, item 8, subsection 125-1(3) of Schedule 1 to the TAA 1953]

18.240 The Commissioner can serve a document in the manner specified by section 28A of the Acts Interpretation Act 1901 , or, where the entity is being served electronically, by sending it to that email address or other electronic address. [Schedule 1, item 8, subsection 125-1(4) of Schedule 1 to the TAA 1953]

18.241 A document served by the Commissioner is taken to be given at the time the Commissioner leaves or posts it. This is designed to override section 29 of the Acts Interpretation Act 1901 and to ensure that there is no room for confusion about when documents are served. [Schedule 1, item 8, subsection 125-1(5) of Schedule 1 to the TAA 1953]

18.242 This provision also overrides paragraphs 9(1)(d) and 9(2)(d) of the Electronics Transactions Act 1999 to the effect that if the entity has provided the Commissioner with an electronic address for service, the Commissioner does not need to seek the entity's permission to serve notice electronically. [Schedule 1, item 8, subsection 125-1(6) of Schedule 1 to the TAA 1953]

Making choices

18.243 A choice made by an entity under an MRRT law must be made in accordance with the general rules described below, except to the extent that a more specific rule in the MRRT law applies. [Schedule 1, item 8, section 119-15 of Schedule 1 to the TAA 1953]

18.244 This approach balances the benefits of simplicity and consistency in these matters with the recognition that variations from the general rules are appropriate in some cases.

18.245 Each of the following is an example of a choice under the MRRT which may be available to a taxpayer, depending on their circumstances:

•

Whether the book value or market value approach is used to value starting base assets.

•

The order in which transferred mining losses that arose at the same time are applied.

•

Whether to use the simplified MRRT method.

•

Whether to consolidate for MRRT purposes.

18.246 The general rules for MRRT choices cover three matters.

•

The time by which a choice must be made.

•

The manner in which a choice must be recorded, and in certain cases communicated to the Commissioner.

•

The irrevocability of a choice.

When a choice must be made

18.247 In order to be valid, a taxpayer must make a choice about a matter by a certain time.

18.248 If the taxpayer is required to lodge an MRRT return for the first MRRT year for which the choice applies, then the choice must be made by the earlier of the day they lodge that MRRT return and the due date for lodging that return. [Schedule 1, item 8, subparagraph 119-5(1)(a)(i) of Schedule 1 to the TAA 1953]

18.249 If the taxpayer is not required to lodge an MRRT return for that MRRT year, the choice must be made by the day such a return would have been due. [Schedule 1, item 8, subparagraph 119-5(1)(a)(ii) of Schedule 1 to the TAA 1953]

18.250 Generally, the Commissioner has the ability to provide the taxpayer with more time to make a valid choice. [Schedule 1, item 8, paragraph 119-5(1)(b) of Schedule 1 to the TAA 1953]

18.251 This provides the Commissioner with broad discretion to take into account circumstances which would otherwise prevent a taxpayer from making a choice by the required time.

18.252 For example, the Commissioner may provide additional time to make a choice to a taxpayer who is temporarily incapacitated after an accident, or to a taxpayer who lives in an area badly affected by a natural disaster around the time the choice would normally have been made.

18.253 A similar discretion already exists in other similar rules in the tax law (for example, in subsection 148(4) of the ITAA 1936).

How a choice is made and communicated

18.254 The way a taxpayer prepares their MRRT return for an MRRT year will generally be sufficient evidence of the choice(s) they have made. [Schedule 1, item 8, subsection 119-5(2) of Schedule 1 to the TAA 1953]

18.255 This is consistent with the standard approach to choices applying elsewhere in taxation laws. Under the self-assessment system, the Commissioner has no need to see the records for all choices taxpayers make.

18.256 However, there are some circumstances in which a taxpayer must provide the Commissioner with the details of certain choices they have made. These circumstances are:

•

if the taxpayer is not required to lodge an MRRT return for that MRRT year;

•

if the MRRT law expressly requires further information to be provided to the Commissioner; or

•

if the Commissioner requests the information.

[Schedule 1, item 8, subsection 119-5(3) of Schedule 1 to the TAA 1953]

18.257 The first of these cases cover situations where a taxpayer's choice could not be identified because there is no MRRT return to examine. The second is an expression of the principle that any specific rules in the MRRT law take precedence over the general rules for choices to the extent there is any conflict between them. The ability for the Commissioner to request further information about the choices a taxpayer makes is a standard provision used throughout the tax law.

MRRT choices are irrevocable

18.258 A choice made under the MRRT law is irrevocable. [Schedule 1, item 8, section 119-10 of Schedule 1 to the TAA 1953]

18.259 This requirement is largely dictated by the features of the MRRT, in particular by the way in which the MRRT history of a mining project interest (or a pre-mining project interest) is transferred to a new entity acquiring the interest.

18.260 For example, in working out the amount of a transferred royalty allowance, an entity can choose the order in which to apply royalty credits that arise at the same time. After choosing to apply royalty credits from one of its mining project interests (rather than from others), a taxpayer may then sell one of its other interests (with the unapplied royalty credit attached). If the original taxpayer were to be permitted to revisit their earlier choice and unwind the decision about which royalty credit to apply, the purchaser would be at risk of losing the royalty credit they paid for.

18.261 Making choices made under the MRRT law irrevocable prevents this sort of unfair and unreasonable outcome.

18.262 However, the irrevocability of a choice only applies to a choice that was made. In some cases, choices an entity did not make because it was operating under a mistake of fact about its ability to make the choice, cannot later be made because of timing restrictions on when a choice has to be made. When there is such a case, the Commissioner could exercise the discretion to allow further time to make that choice. In such cases, the Commissioner would decide whether to exercise the discretion after taking into account matters such as the law requiring the choice to be made and whether the need to make the further choice arise because of the Commissioner's advice or actions.

Example 18.207 : Allocating losses when mining profits increase

Revisao Mining has three mining project interests: A and B make losses and C makes a mining profit in the 2012 MRRT year. In that year, Revisao chooses to transfer losses from A to reduce the profits of C to nil.

After auditing Revisao, the Commissioner amends its 2012 assessment to include further mining profits in interest C. Revisao is required by the MRRT law to transfer further losses to the extent of those extra mining profits. Where the losses come from is a new choice; Revisao is not remaking its previous loss transfer choice. Because the law requires the further losses to be transferred, the Commissioner exercises the discretion to allow Revisao the extra time to make that choice. There are further transferable losses both in A and in B. Therefore, Revisao can choose how much of those losses are transferred from A and how much from B.

18.263 The irrevocability of a choice only applies to the extent that it was validly made in the first place. If any part of a choice was invalid, that part was never made, and so undoing it does not breach the rule about choices being irrevocable. To the extent that there is an alternative about what part of a choice was invalid, the entity would be able to decide which parts of the original choice were valid and which were not.

Example 18.208 : Allocating losses when mining profits decrease

The Commissioner amends the 2014 assessment of Disfaccia Resources to reduce the mining profits of its Union mine. Disfaccia had transferred 2014 losses to the Union mine from both its Vista and its Wishfish mines.

To the extent that Union's profits have been reduced, the original choice to transfer losses to it was invalid. Disfaccia can decide the extent to which it did not validly transfer losses from Vista and Wishfish. It decides to treat all the invalidly transferred losses as coming from Vista. Those losses would be restored to Vista and uplifted, just as if they had not been 'transferred' in the first place.

Rulings

18.264 The Commissioner provides a range of advice and guidance to taxpayers to explain his or her view on how the law applies. These products include manuals and fact sheets, as well as rulings.

18.265 The rulings system enables taxpayers to self assess tax positions with enhanced certainty.

18.266 A ruling provides taxpayers with the Commissioner's views about how particular tax laws apply in certain situations. Public rulings address priority technical issues. Private rulings explain how the law applies, or would apply, in a particular situation.

18.267 The Commissioner is generally bound by the position taken in a ruling.

18.268 A minor amendment extends the rulings system to the MRRT law. [Schedule 1, item 32, paragraph 357-55(faa) of Schedule 1 to the TAA 1953]

18.269 However, entities cannot apply for an oral ruling about MRRT provisions. In the general course of things, such rulings can only be sought by individuals seeking quick answers to simple questions about income tax. [Schedule 1, item 33, subsection 360-5(1) of Schedule 1 to the TAA 1953]

18.270 Where an entity is dissatisfied with a private ruling that relates to MRRT, it can object to the ruling either within four years of the due date for the relevant MRRT return, or 60 days after the ruling was made, whichever is later. [Schedule 2, item 1 and 19, subsections 14ZW(1AB) and (1AC) of Schedule 1 to the TAA 1953]

Annual report

18.271 The Commissioner must prepare an annual report on the working of the MRRT law, including a report on any breaches or evasions of the MRRT law the Commissioner knows about. The report must be given to the Minister as soon as practicable after 30 June in each year. The Minister must table the report in each House of the Parliament within 15 sitting days of that House after receiving the report. [Schedule 1, item 27, section 352-10 of Schedule 1 to the TAA 1953]

18.272 A consequential amendment is made to the guide about the Commissioner's accountability in respect to indirect tax laws so that it now covers the MRRT. [Schedule 1, item 26, section 352-1 of Schedule 1 to the TAA 1953]