Instant expert

Instant expert: Mining Resources Tax

Digging up the facts of a minerals resources tax.



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What is a mining tax?

Even though mineral resources – such as iron ore, coal and natural gas – are mined in Australia, they actually add little value to the Australian economy because most of the mining companies are foreign-owned. The mining industry currently represents 9.2 per cent of our gross domestic product. However, mining companies in Australia pay less than 20 per cent of their profits as tax and royalties to state governments, whereas in 2001 this was at 40 per cent. Meanwhile, their profits are through the roof; in 2009–10 financial year the profit margin for the mining industry was 33.4 per cent, the most profitable industry in our country.

So, what’s the Government’s proposed tax?

In 2010, Kevin Rudd tried to introduce the Resource Super Profits Tax (RSPT) as part of the Henry Tax Review. As could be expected, mining lobbyists and companies were unsupportive. As part of its current policy, Labor has now proposed a mining tax that, according to their website, is designed “to lock in the benefits of the mining boom and deliver a fairer return from the nation’s mineral wealth”. This time it’s called the Minerals Resource Rent Tax (MRRT).

How would it work and where will the money go?

The MRRT is expected to raise $11 billion in the first three to four years, a percentage of which is expected to go towards schools, education and social services. The Government says the revenue will go to the 8.4 million ‘working people’ in Australia by adding three per cent to compulsory superannuation, bringing the total contribution to 12 per cent super contributed by employers. Businesses will also get a cut in the company tax rate to compensate for this, and the package of reform means that the small business instant asset write-off threshold is increased from $1,000 to $6,500.

Are there potential problems?

While the mining tax is supposed to benefit Australians, one of the criticisms is that the big mining companies may have lobbied to sway the legislation in their favour, leaving small mining companies to go bust. However, the water is muddy around who the tax will benefit and who it will damage.

When is it expected to start?

The MRRT was passed through the House of Representatives in the wee hours of the morning in late November last year, and as expected, the Greens passed the legislation through the Senate earlier this year after making a deal with Labor. The tax is due to start on July 1, 2012.

What the movers and shakers think

Bob Brown, deputy leader, Australian Greens
“The Gillard Government’s version will raise $30-odd billion over 10 years. But the Greens back the original Treasury model tax which would raise an additional $100 billion over the 10 years. So the Greens would have $100 billion extra to invest in education, hospitals, high-speed rail, indigenous wellbeing and housing – as well as affording a 5 per cent tax cut for small business.”

Matthew Wright, executive director, Beyond Zero Emissions
“The revenue should be going into high-speed rail and renewable energies to help reduce our country’s reliance on fossil fuels and mining. The profits need to be spent on ensuring that we’re heading towards a zero-carbon economy – both in Australia and overseas.”

Warren Truss, leader, The National Party
“Most of this industry that is about to be subjected to a new supertax is located in regional communities. The processing sector is also generally in regional communities. In many places, this is the major part of a regional economy. So this is a tax that is going to be particularly focused on regional Australia.”