House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Treasurer, the Hon J. B. Hockey MP)

General outline

Repeal of the Minerals Resource Rent Tax

Schedule 1 to this Bill repeals the Minerals Resource Rent Tax (MRRT) by repealing the:

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Minerals Resource Rent Tax Act 2012;

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Minerals Resource Rent Tax (Imposition-Customs) Act 2012;

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Minerals Resource Rent Tax (Imposition-Excise) Act 2012; and

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Minerals Resource Rent Tax (Imposition-General) Act 2012.

The Schedule also makes consequential amendments to other legislation, including the Income Tax Assessment Act 1997 and the Taxation Administration Act 1953, required as a result of the repeal of the MRRT.

Date of effect: As a result of the repeal, taxpayers do not incur liabilities for MRRT from the day to be fixed by proclamation. The amendments do not affect the rights, powers and obligations of taxpayers and the Commissioner of Taxation (Commissioner) in respect of MRRT liabilities that arise before the repeal.

Proposal announced: In a joint media release dated 24 October 2013, the Treasurer, together with the Minister for Industry and the Minister for Finance, released draft legislation to repeal the MRRT that gives effect to an election commitment of the Government.

In a joint press release dated 18 July 2014, the Treasurer and the Minister for Finance announced that the Government was committed to the repeal of the MRRT and the related spending measures.

Human rights implications: Schedule 1 is compatible with human rights. See Statement of Compatibility with Human Rights - Chapter 4, paragraphs 4.1 to 4.7.

Compliance cost impact: The repeal of the MRRT removes significant regulatory and compliance costs imposed on the iron ore and coal mining industries.

The regulation impact statement and supplementary regulation impact statement are included in this explanatory memorandum in the forms in which they were approved and consulted on. As a result, they do not reflect the impact of subsequent policy or technical changes contained in this Bill as a result of the delay in the expected enactment of the measures from when both statements were prepared in the context of the Minerals Resource Rent Tax Repeal and Other Measures Bill 2013.

Summary of regulation impact statement

Regulation impact on business

Impact: Medium

Main points:

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Repealing the MRRT results in a reduced tax burden for some iron ore and coal miners.

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It also removes the significant compliance and administrative burden imposed by the complex MRRT legislation. There are approximately 300 companies registered or required to register for the MRRT but only a very small number of companies have an MRRT liability.

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The one-off adjustment costs are estimated at $800 per company ($243,000 in total for the industry) to adjust record systems, and the ongoing compliance savings are estimated as $35,000 per annum per company ($10.5 million per annum for the industry).

Repeal and rephasing of MRRT-related measures

This Bill repeals or revises MRRT-related measures. The Bill repeals the following measures:

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loss-carry back (Schedule 2);

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geothermal expenditure deduction (Schedule 5);

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low income superannuation contribution (Schedule 7);

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the income support bonus (Schedule 8); and

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schoolkids bonus (Schedule 9).

This Bill also revises the following MRRT-related measures:

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capital allowances for small business entities (Schedules 3 and 4); and

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the superannuation guarantee (SG) charge percentage increase (Schedule 6).

Date of effect: Schedules 2 to 5 and 7 to 9 commence on a day or days to be fixed by proclamation. Schedule 6 commences on Royal Assent. Additional details on the date of effect of each Schedule, and associated transitional rules, is set out in paragraphs 2.75 to 2.112.

Proposal announced: In a joint media release dated 24 October 2013, the Treasurer, together with the Minister for Industry and the Minister for Finance, announced the release of draft legislation to repeal or revise a number of spending measures linked to the MRRT. The repeal and revisions give effect to an election commitment of the Government.

In a joint press release dated 18 July 2014, the Treasurer and the Minister for Finance announced that the Government was committed to the repeal of the MRRT and the related spending measures. In the 2014-15 Budget, the Government announced changes to the schedule for increasing the SG charge percentage.

Human rights implications: Schedules 2 to 9 are compatible with human rights. See Statement of Compatibility with Human Rights - Chapter 4, paragraphs 4.8 to 4.104.

Compliance cost impact: Overall, Schedules 2 to 9 result in a negligible impact on compliance costs.

The regulation impact statement and supplementary regulation impact statement are included with this explanatory memorandum in the form that they were approved and consulted on. As a result, they do not reflect the impact of subsequent policy or technical changes made to this Bill as a result of the delay in the enactment of the measures contained therein.

Summary of regulation impact statement

Regulation impact on business

Impact: Low

Main points:

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The superannuation measures impose negligible compliance costs on businesses. Employers face a change in the SG rate only. The termination of low income superannuation contributions results in superannuation funds having to receive and process fewer payments.

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Reducing the instant asset write-off threshold and discontinuing the accelerated depreciation arrangements for motor vehicles may have a small temporary compliance cost to businesses but in later years, this will be offset by the marginal simplification of the motor vehicle depreciation, the loss carry-back and the geothermal legislation. The net impact on compliance costs has been estimated to be negligible.

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Abolishing the income support bonus and the schoolkids bonus will have no regulatory impact on business activity, the not-for-profit sector, or individuals.