Explanatory Memorandum
(Circulated by the authority of the Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)Chapter 19 Miscellaneous consequential amendments
Outline of chapter
19.1 This chapter explains any consequential amendments arising as a result of the Minerals Resource Rent Tax Bill 2011 that are not explained in earlier chapters.
19.2 All legislative references in this chapter are to the Minerals Resource Rent Tax (Consequential Amendments and Transitional Provisions) Bill 2011 unless otherwise indicated.
Consequential amendments
Provision ensuring coverage in the Crimes (Taxation Offences) Act 1980
19.3 A consequential amendment extends the Crimes (Taxation Offences) Act 1980 so that fraudulent evasion and involvement in certain tax evasion schemes related to a Minerals Resource Rent Tax (MRRT) can give rise to criminal offences. These amendments ensure that the Act operates in the same way for MRRT as it does for the Petroleum Resource Rent Tax (PRRT). [ Schedule 3, items 3 to 6, Part II (note), Part XI and subsection 3(1) of the Crimes (Taxation Offences) Act 1980]
Wording and defined terms changes
19.4 The MRRT introduces a number of concepts and defined terms which are new to Australian taxation law. It also uses some terms that were already in use in different contexts with potentially different meanings.
19.5 Hence, a number of entries have been included and modifications made to the Dictionary definitions in the Income Tax Assessment Act 1997 (ITAA 1997) to ensure that terms are defined consistently in the income tax law and the MRRT law. In many cases the Dictionary definitions point to definitions in the MRRT law. [ Schedule 3, items 48 to 87, definitions of 'allowance component', 'applicable instalment rate', 'arm's length consideration', 'base value', 'base year', 'benchmark instalment rate', 'hold', 'instalment income', 'instalment of MRRT', 'instalment quarter', 'long term bond rate', 'miner', 'mining and quarrying operations', 'mining expenditure', 'mining loss', 'mining profit', 'mining project interest', 'mining project split', 'mining project transfer', 'mining revenue', 'mining revenue event', 'MRRT', 'MRRT allowance', 'MRRT law', 'MRRT liability', 'MRRT payable', 'MRRT return', 'MRRT year', 'pre-mining expenditure', 'pre-mining project interest', 'pre-mining revenue', 'rehabilitation tax offset', 'split percentage', 'starting base asset', 'starting base return', 'start time', 'taxable mining profits', 'taxable resource' and 'termination value' in subsection 995-1(1) of the ITAA 1997]
19.6 The amendments make some corresponding adjustments to use defined terms in other parts of the income tax law. [ Schedule 3, items 10 to 31 and 33 to 38, subparagraphs 40-80(1)(c)(i), 40-735(1)(a)(i) and 40-840(1)(c)(i), paragraphs 40-80(1)(a), 40-630(1)(b), (1A)(b), (1B)(b) and (3)(b), 40-650(3)(a), 40-730(1)(a), 40-740(1)(a) to (c) and (e), 40-860(1)(a) and (3)(a) and (c) and 40-870(1)(a) and (2)(a), subsections 40-70(3), 40-72(1) and (3), 40-95(10 ) ( items 1 to 3 in the table), 40-102(4 ) ( item 9 in the table), 40-630(1 ) ( note), 40-730(1) and (7), 40-730(4), 40-735(4), 40-740(2) and 40-860(2), and sections 40-40 (item 8 in the table) and 40-725 of the ITAA 1997]
19.7 Definitions of 'Deputy Commissioner' and 'Second Commissioner' are added to the income tax law and existing uses of those terms are marked with an asterisk to indicate that they are defined. [Schedule 2, items 13, 16, 23, 24 and 26 to 28, definition of 'Deputy Commissioner' and 'Second Commissioner' in subsection 995-1(1) of the ITAA 1997, subsection 255-5(2) and paragraphs 255-45(1)(b), 355-30(2)(a), 355-55(1)(c) and 357-100(b) in Schedule 1 to the TAA 1953]
Interaction with income tax law
Income tax deductions
19.8 Payments of MRRT and payments of MRRT instalments are deductions under the income tax law. This is the same income tax treatment as payments of PRRT and PRRT instalments (see section 40-750 of the ITAA 1997). [ Schedule 3, item 32, subsection 40-751(1) of the ITAA 1997]
Example 1.1 : Timing of deductions for MRRT payments
Richardson Resources Co has a standard 1 July to 30 June accounting period. It pays its MRRT instalments for the four quarters of the 2012-13 MRRT year on the due dates (21 October 2012, 21 January 2012, 21 April 2013 and 21 July 2013). It can deduct the first three of those instalment payments for its 2012-13 income year because the payments are made in that income year. It can deduct the final instalment for the 2013-14 income year in which the payment is made.
19.9 The deductions arise for the payments, but not for the credits that become attributable to those payments when the MRRT assessment is made. This ensures that the payments do not produce double deductions. [ Schedule 3, item 32, subsection 40-751(2) of the ITAA 1997]
19.10 The non-operative index of deduction provisions is amended to include the deductions for payments of MRRT. [ Schedule 3, item 8, section 12-5 of the ITAA 1997]
Assessable income
19.11 Payments of MRRT are deductible for income tax purposes, so refunds or other recoupments of MRRT payments are assessable income. This is the same treatment as that for recoupments of PRRT.
19.12 As deductions for MRRT payments are provided for by Division 40 of the ITAA 1997, the existing recoupment rules apply to recoupments of MRRT (see subsection 20-30(1) of the ITAA 1997, item 1.9 in the table). [ Schedule 3, item 32, subsection 40-751(1) of the ITAA 1997]
Example 1.2 : Timing of assessment of recoupments
Continuing the previous example, Richardson Resources Co is assessed as having an MRRT liability for the 2012-13 MRRT year that is below the total of the four MRRT instalments it has paid for that year, so it is entitled to a refund of the excess. If the Commissioner of Taxation (Commissioner) pays that refund to Richardson in 2013-14, or applies it in that year against another of Richardson's tax liabilities, it would be included in its assessable income of the 2013-14 income year.
19.13 Rehabilitation offsets that cannot be used to reduce another MRRT liability are refunded to the miner. As with credits for closing-down expenditure under the PRRT, refunded rehabilitation offsets are assessable income in the income year in which the Commissioner pays the amount to the miner. [ Schedule 3, item 9, section 15-85 of the ITAA 1997]
19.14 The non-operative index of assessable income provisions is amended to include the assessment of refunds of MRRT rehabilitation credits. [ Schedule 3, item 7, section 10-5 of the ITAA 1997]
Long term bond rate
19.15 Previously 'long term bond rate' (LTBR) was defined in the Petroleum Resource Rent Tax Assessment Act 1987 . As the LTBR is also relevant for uplifting allowance components under the MRRT, the definition has been updated and moved into the Dictionary definitions in the ITAA 1997.
19.16 The definition has been updated to reflect the terminology currently used by the Reserve Bank of Australia. That terminology is apt to allow for the calculation of the LTBR for any period, not just a 12-month period. [ Schedule 3, item 56, definition of 'long term bond rate' in section 995-1 of the ITAA 1997]
19.17 A consequential amendment has also been made to section 250-105 of the ITAA 1997. [ Schedule 3, item 39, subsection 250-105(1) of the ITAA 1997]
Example 1.3 : Calculation of LTBR
Shaun is required to calculate the LTBR for the 12-month period from 1 July 2012 - 30 June 2013. Shaun adds up all the daily assessed Australian Government bond capital market yields in respect of 10 year non-rebate Treasury bonds that have been published by the Reserve Bank Australia. There have been 261 daily assessed yields published by the Reserve Bank Australia for that 12-month period. The average of these published yields is 4.765258 per cent.
Therefore, the LTBR for this 12-month period is 4.7653 per cent (rounding up as the 5th decimal place is more than 5).