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Minerals resource rent tax

Last updated 8 December 2016

The minerals resource rent tax (MRRT) is a tax on certain profits generated from the extraction of taxable resources during the period 1 July 2012 to 30 September 2014. These resources include iron ore, coal and certain associated by-products.

The MRRT was only applicable for the first three months of the 2014–15 financial year. There was no MRRT reported as payable for 2014–15.

Petroleum resource rent tax

The petroleum resource rent tax (PRRT) is a profits-based tax that only taxes profits above a specified rate of return. PRRT revenue is highly volatile and variable due to a number of factors, including commodity prices and foreign exchange rates.

PRRT revenues are also affected by key design features of the PRRT. PRRT will only arise when a project has recovered all eligible outlays associated with the project (after deducting eligible exploration expenditure transferred from other projects), including the achievement of a threshold rate of return on the outlays. This means that projects tend to pay no PRRT for some years even after production has commenced.

Unlike income tax, where many capital costs are deductible over a defined life, all deductible expenditure for PRRT purposes is immediately deductible, whether capital or revenue.

Total PRRT payable

There are 12 corporate entities in the 2014–15 PRRT transparency population, with total PRRT payable of $1.2 billion.

The number of entities paying PRRT remained constant at 12; one new entity became PRRT payable while another entity no longer had a PRRT liability. There was a decrease in PRRT payable of $576 million (32%).

The decline in PRRT payable reflects the lower profitability of PRRT liable companies in 2014–15 and the key design features of the tax. Oil prices are a key driver of PRRT payable and in 2014–15 global oil prices declined by 33% due to lower demand for energy resources. The decline in oil prices more than offset the 9% decline in the Australian dollar, which generally has a positive impact on the profitability of PRRT liable companies.