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The recent announcement of the Resources Super Profit Tax has caused much debate and angst within the mining sector. The tax is set to be applied at a rate of 40 percent of all mining and energy company profits and is proposed to be introduced on 1st July 2012.
It has been interesting to listen to the debate on this issue. On the one side the opposition leader, Tony Abbott, has been quoted as saying ‘that Prime Minister Rudd is killing the goose that laid the golden egg’, whilst Mr Rudd was quoted on the 7.30 Report last night as saying ‘What I believe in is that all Australians, because they actually own these resources, deserve a fair share back from these resources.’
What we do know is that the stockmarket has taken a negative view on the tax with the index of material producers on the S&P ASX 200 Index falling 4.9% since the tax was announced on May 2nd. Also it has been reported that Xstrata has suspended copper exploration in north Queensland and an American company has reduced the amount it is prepared to pay for Australian miner Macarthur due to the new tax.
David Buckingham is a former head of the Minerals Council and is supportive of the tax in his article in the Business Spectator on 10th May. His article included the table below which has been produced by Treasury and shows estimates of the effective tax rates applying to projects.
Effective tax rates on a hypothetical resource project
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Rate of return
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Effective tax rate under royalties plus 30% company tax
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Effective tax rate under RSPT plus 28% company tax
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6%
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45.4%
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28.0%
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10%
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40.9%
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39.5%
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15%
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38.7%
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45.3%
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20%
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37.6%
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48.2%
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25%
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36.9%
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49.9%
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50%
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35.5%
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53.3%
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As you can see from the table a more profitable project pays a higher rate of tax.
What we have also heard is comments along the lines of ‘when have mining executives ever given consideration to the average person - rather their bonuses are tied to profits and this is what they are most concerned about.’ What I think these people need to consider is that the resource sector provides many benefits to the community. They are one of the largest tax paying sectors in the market and provide much employment and work for many businesses of all sizes. This has the effect of stimulating other areas of the economy such as housing and retail and therefore the flow on effects are not to be underestimated.
If the Resources Super Profit Tax does have a detrimental impact on the industry this will obviously affect all Australians. The government will be collecting less tax and therefore they will be forced to spend less on such things as infrastructure and services or increase taxes, or go into more debt, or a combination of these options to make up the difference. This will essentially lead to a lower standard of living for all Australians and this I believe is the greatest danger.
It is also interesting to note that the additional spending by the government in the budget is largely dependant upon additional taxes from the resources sector however this is the sector that they are introducing a new tax on.
It will be interesting to see how it all plays out, the effect it has on the industry and whether the government is willing to compromise at all. Any major changes seem unlikely at this stage as the government would not want to be seen to be doing another backflip.
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Data matching vs the cash economy
Editor: The Tax Office is ramping up its efforts to catch out the cash economy and individuals who are using overseas jurisdictions to hide their money.
Background: How the ATO is catching up with the Cash Economy
Cash economy businesses, which are being targeted by the Tax Office, often ‘skim’ some or all of their cash takings, run part of their business off the books or don't report all their income.
The ATO uses its data matching programs to gather information from a variety of sources and cross match it with taxpayer information and the Tax Office's small business benchmarks (see the next page) to identify businesses which have not reported all their income.
Recently, the Tax Office has commenced four new data matching programs:
Merchant Payment Cards Project – data matching merchant card sales through the CBA; Westpac; ANZ; and NAB. 300,000 individuals within cash economy industries will be matched.
Plasterers Project – collecting details of taxpayers that have purchased plasterboard, etc., in NSW from Boral Ltd, CSR Limited and La Farge Plasterboard Pty Ltd. 10,000 individuals will be matched.
Motor Vehicle Data Matching Project – collecting details of taxpayers that have purchased or acquired a motor vehicle valued at $10,000 or higher from the relevant road traffic authority in every State and Territory, e.g., Vic Roads, Transport SA, etc. Approximately 2.5 million individuals will be matched.
Banking Transparency Strategy – collecting data and intelligence on Australian taxpayers that have offshore accounts in jurisdictions that are of interest to the ATO.
Transactions through (basically) every major financial institution in Australia, including the big four banks, International Financial Institutions and Credit Card providers such as American Express, Diners Card, MasterCard and Visa will be reviewed. In excess of 100,000 taxpayers will be targeted.
Cents per km car rates for 2009/10
Taxpayers whose income producing use of a car does not exceed 5,000 kms per year can deduct car expenses on a per km basis. The rates for 2009/10 are as follows:
| Kind of car |
Engine capacity |
Engine capacity |
Rate per km (cents) |
| |
Not rotary |
Royary |
|
| Small |
Up to 1,000cc |
Up to 800 |
63 |
| Medium |
1,601cc to 2,600cc |
801cc to 1,300cc |
74 |
| Large |
>2,600 |
>1,300 |
75 |
Industry benchmarks vs the cash economy
Editor: The second string to the Tax Office's assault on the cash economy is using industry benchmarks.
These benchmarks provide a snapshot of what, on average, the Tax Office believes is happening in businesses operating in a particular industry by comparing various costs to turnover.
However, those of us who thought that the benchmarks would apply only to the traditional cash economy targets, i.e., building and construction and restaurants/cafés, cleaners, etc., will be sorely disappointed with the new list of industries to be targeted.
Benchmarks to be published
The following is a list of soon to be published benchmarks issued by the Tax Office.
Architectural Services
Automotive Electrical Services
Cabinet makers
Child Care Services
Chiropractic and Osteopathic Services
Confectionary retailing
Craft Shop
Discount and variety stores
Electrical, Electronic and Gas Appliance Retailing
Entertainment Media Retailing
General Dental Services
Gift shops
Health and Fitness Centres and Gymnasia Operation
Health Food Retailing
Lawn Mowing Services
Machinery Equipment Repair & Maintenance
Musical instruments retailing
Physiotherapy Services
Picture framing
Printing
Printing Support Services
Specialist Dental Services
Sport and Camping Equipment Retailing
Sports and Physical Recreation Instruction
Veterinary Services
Editor: Clients concerned that their industry is being targeted may wish to contact our office.
FBT: Benchmark interest rate
The benchmark interest rate for the FBT year commencing 1 April 2010 is 6.65% p.a. This rate replaces the rate of 5.85% that applied for the previous FBT year.
The rate of 6.65% is used to calculate the taxable value of:
a fringe benefit provided by way of a loan; and
a car fringe benefit where an employer chooses to value the benefit using the operating cost method.
FBT: Cents per kilometre basis
The rates to be applied where the cents per kilometre basis is used for the FBT year commencing 1 April 2010 are:
| Engine capacity |
Rate per kilometre |
| 0-2,500cc |
45 cents |
| Over 2,500cc |
54 cents |
| Motorcycles |
14 cents |
Tax Office's new computer upgrade clogs refunds
Editor: The Tax Office has recently embarked on an ambitious, but much needed, upgrade to its outdated computer systems – some of which date back to the early seventies.
Back in January this year, we were informed that we might experience "temporary service delays".
In February, we were told that there was a backlog of 300,000 returns yet to be processed.
Since then 140,000 refund cheques were held up, then issued with the wrong date on them, and a whole plethora of problems emerged including penalty charges on refunds, incorrect notices of assessment and incorrect calculations made on notices of assessment.
The situation seems to be slowly coming back to normal although there are still problems coming to light.
For its part, the Tax Office has posted something of an explanation and as close as it can come to an apology on its Website. Clients who experience difficulties or who have concerns should contact our office.
Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.
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