From 1 July 2012 the minerals resource rent tax (MRRT) applies to certain profits from coal or iron ore extracted in Australia. These resources are called taxable resources. The MRRT is a project based tax. Entities with mining project interests (MPIs) or pre-mining project interests (PMPIs) may have a number of considerations and choices to make in relation to MRRT. Some choices are irrevocable and require careful consideration.
For MRRT purposes, an explorer is an entity who explores for taxable resources under an authority or right granted under an Australian law.
An explorer needs to consider potential MRRT obligations and make choices even if they do not presently sell minerals or are winding-down or selling a PMPI.
Significant expenditure costs are incurred during mine development. All taxpayers with PMPIs or MPIs involved in developing a mine need to consider potential MRRT obligations and make choices, even though they are not currently producing taxable resources. These taxpayers may need to register for MRRT and lodge annual MRRT returns.
They may also lodge a starting base return to maintain a starting base allowance which may reduce their future MRRT liability. Alternatively, these taxpayers may choose to apply the simplified MRRT method if threshold requirements are met. There are potentially significant consequences flowing from the choice to use the simplified MRRT method that will need to be considered before making the choice.
Taxpayers with an MPI producing taxable resources may have MRRT obligations. These taxpayers may need to register for MRRT, and lodge a starting base return and annual MRRT returns.
Taxpayers with a group mining profit of less than $125 million have access to a low-profit offset.
Taxpayers with a group mining profit of less than $75 million may have access to a simplified MRRT method. Certain other eligibility requirements need to be satisfied.
An alternative valuation method to determine mining revenue is available for taxpayers who have group production of taxable resources of less than 10 million saleable tonnes in the year, and/or carry on a vertically integrated transformative operation that existed before 2 May 2010.
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A joint venture participant who is entitled to share in taxable resources extracted from a mining venture will have an MPI for MRRT purposes. This participant may also be the joint venture operator.
The head company of a consolidated group or multiple entry consolidated (MEC) group or a provisional head company of a MEC group for income tax purposes that has notified the Commissioner of the formation of their income tax consolidated group or MEC group can choose to be consolidated for MRRT purposes.
The MRRT consolidated group or MEC group must be the same as the consolidated group or MEC group for income tax purposes.
If a head company or provisional head company chooses to consolidate for MRRT purposes the choice must be made in writing and is irrevocable.
The Commissioner needs to be notified of the choice made to consolidate. This is done on the form Notification of choice made to consolidate for minerals resource rent tax.
Both the choice to consolidate and the notification of the choice need to be made within certain dates.
The MRRT taxes trusts, partnerships and unincorporated associations as entities. As they are not legal persons, the liability for paying amounts owed by a trust, partnership or unincorporated association, and for satisfying other MRRT obligations, is imposed on the trustees, partners and members of the association's management committee respectively.
A contractor providing services or accommodation to a mining venture for a fee is not a participant in the mining venture, and therefore does not have an MPI.
To be subject to MRRT, the contractor must have an MPI by participating in the mining venture (that is, sharing in the risk of extracting the resource) and being entitled to a share of the output of the venture.
Generally, an MRRT liability will not exist for a royalty recipient as the mere receipt of royalties is not an entitlement to share in the output of a mining venture.
A royalty recipient may have an MRRT liability if they have an MPI by participating in a mining venture and sharing in the output of that venture.
The MRRT recognises that, towards the end of a PMPI's or MPI's life, the activities of the interest will change. From that time on, special rules treat the interest differently.
A rehabilitation tax offset may be available where an MPI or PMPI ends.
Last Modified: Wednesday, 24 April 2013