I rise to speak today on the Minerals Resource Rent Tax Bill 2011 and associated bills. Australia is blessed with natural resources. They have played a large role in the development of our nation and my home state of Tasmania. Tin, gold, coal and iron ore are just some of the resources that hardworking Tasmanians have extracted from our soil. It is these resources, in part, that made colonial Tasmania prosperous and funded the construction of many of the heritage listed sandstone buildings that line the streets of Launceston and Hobart.
Australia once again is riding a minerals boom. Western Australia is blessed with large reserves of iron ore, and Queensland with coal and gas, much like Tasmania and Victoria were blessed with large reserves of gold in the 19th century. While big mining companies are making super profits from the extraction of these resources, it must be remembered that they belong to all Australians, and their benefits should be used to enrich the future of all Australians, not just the mining corporations that extract these resources from the ground.
The Gillard Labor government recognises that all Australians should benefit from their resources. This is why we have introduced the Minerals Resource Rent Tax Bill 2011 and the other associated bills. Australians deserve to have the money raised from the selling of their resources spent on improving conditions for small businesses to grow the economy. Australians deserve to have the money raised from the selling of their resources saved for their futures. Australians deserve to have the money raised from the selling of their resources spent on the critical infrastructure needed to increase productivity and build a better future for all Australians.
The MRRT will apply to all new and existing iron ore and coal projects and will apply at a rate of 30 per cent. A rate of 30 per cent will allow our iron ore and coal to stay internationally competitive. An extraction allowance of 25 per cent reduces the effective rate of the MRRT to 22.5 per cent. Under the MRRT, the government taxes positive cash flows, or mining profits, and allows miners to carry forward and uplift losses—unused deductions—for use in later years. The tax applies to profits attributable to the resource close to the point of extraction and therefore avoids taxing the value-adding of the miner after that point through such efforts as processing or transportation of the resource. As such, it is a tax on a limited portion of mining profits, unlike company income tax, which applies to all income.
The MRRT recognises the majority of upstream costs incurred by the miner in extracting the non-renewable resource. Under the MRRT, new upstream capital expenditure is immediately deductible. Unlike income tax, capital assets do not have to be depreciated over their effective lives. Companies that have existing projects will receive a partial tax shield, called a starting base allowance, in the form of an additional deduction. The purpose of the starting base is to recognise existing investment. The starting base for a mining project may be calculated using the miner’s choice of either the market value or book value. The MRRT is designed to provide for the taxation of above normal profits from mining iron ore and coal. The MRRT moves Australia’s resource-charging regime closer to a non-distortive, profits based tax that focuses on Australia’s most significant bulk commodities. A profits based system will get a better return for Australia from its non-renewable wealth and do it in a better and more efficient way than state royalties.
The proposal to introduce an MRRT has not damaged mining investment, despite Mr Abbott’s claim that the mining tax would ‘kill the mining boom stone dead’. A number of major projects have been entered into since the announcement of the MRRT, and I heard Senator Bishop from Western Australia in here not that long ago listing a number of those projects and announcing that they had not been jeopardised one iota by the MRRT. So Australia is clearly experiencing a massive increase in mining investment. Taken together, all the available industry statistics point to an extremely positive outlook for the mining sector. Australia’s Future Tax System review recommended implementing a resource tax regime which taxes profits rather than production in order to recognise different mining costs across projects.
Under discussion today are also changes to the petroleum resource rent tax. The Petroleum Resource Rent Tax Amendment Bill 2011 will extend the PRRT to all oil and gas projects. This will provide certainty to industry and ensure broadly equitable tax treatment between competing projects. Having all petroleum projects subject to the PRRT will over time increase the amount of tax collected from these projects, improving the return to the community from the use of these valuable non-renewable resources.
The MRRT and PRRT have benefited from an exhaustive consultation process since the announcement of the heads of agreement between the government and industry on 2 July 2010. On 1 October 2010, the Policy Transition Group, led by Don Argus and Minister Ferguson, commenced the consultation process. The PTG travelled across the country for face-to-face feedback, receiving a large number of submissions on key design and implementation details. The legislation now before parliament implements the recommendations of the PTG and the principles outlined in the heads of agreement.
The MRRT draft legislation was released for two rounds of public consultation in July and again in September 2011, and the PRRT legislation was released for public consultation in August 2011. The PTG delivered its report with 94 recommendations to the Treasurer in December 2010. The government considers its resource tax reforms to be the best way of ensuring a better return to the community for the use of its most valuable non-renewable resources: iron ore, coal, oil and gas.
The net receipts from the MRRT are estimated to be $3.7 billion in 2012-13, $3.8 billion in 2013-14, and $3.1 billion in 2014-15. The revenue raised from the MRRT will fund vital initiatives that will help small businesses and individuals. Although the mining boom is resulting in large amounts of revenue entering Australia, it is also causing cost pressures in other parts of the economy. The government recognises that it is prudent to act to support other sections of the economy. I heard Senator Pratt not that long ago discussing the cost of housing and rents in some areas in Western Australia as a result of the mining boom. Revenue from the MRRT will provide a tax break for Australia’s 2.7 million small businesses from 1 July this year. Around 2.7 million small businesses stand to benefit from the passage of the $6,500 instant asset write-off that will make their businesses grow.
One of the great reforms of the Keating Labor government was the introduction of the superannuation guarantee. This was a reform with a far-reaching vision for the future. This government also has the vision to see that an increase in the superannuation guarantee from nine to 12 per cent is a fundamental reform that is needed for an increase in the quality of living for retired Australians in the years to come. This government recognises that this is a vital reform for Australia’s future, and that is what we are here to deal with: the future of Australia.
Around 8.4 million workers will enjoy a more secure retirement with the increase in the superannuation guarantee, and communities across the country will gain new and better infrastructure. These changes will also be better for the wider economy, with an expected increase in Australia’s pool of retirement savings of $500 billion by 2035. This is a large amount of money that can be invested to benefit the economy and the Australian people. I am, however, disappointed that the opposition, the so-called ‘party of small business’, are opposed to the government’s tax breaks for small businesses. They are opposed to the $6,500 instant asset write-off that will make small businesses grow. They oppose superannuation increases—increases that will help build a more secure future for Australians retiring into the future.
They oppose all these things because they are firmly in the grip of the mining industry. Those opposite are the pawns of the mining industry. They oppose giving small business owners a tax cut so they can give Clive Palmer, Gina Rinehart and Twiggy Forrest a tax break instead. They are a party that represents billionaires and vested interests and they should hang their heads in shame that they are willing to allow the resources that belong to all Australians to be sold without a fair and equitable share going back to the Australian people. They should hang their heads in shame that they refuse to support small businesses in Tasmania, they refuse to support the retirement savings of ordinary Tasmanians and they refuse to support their own principles in reducing tax rates for small businesses.
The resource boom will not last forever. The iron ore and coal can only be dug up once, so it is vital that the Australian people get their fair share for these resources. The MRRT will ensure that they do. I commend the bills to the Senate.