This week the Treasurer and Assistant Treasurer announced the Government’s process to clear the bottleneck of announced but unlegislated tax and superannuation measures.

Minerals Resource Rent Tax

The Minerals Resource Rent Tax Repeal and Other Measures Bill 2013 proposes to repeal the MRRT from 1 July 2014. Essentially, taxpayers would not accrue any further MRRT liabilities on or after 1 July 2014.

Transitional provisions apply for taxpayers with a substituted accounting period to deem the final year end to be 30 June 2014. As such, those entities with a short MRRT year will need to ensure that the full-year threshold amounts that apply under the MRRT are proportionately adjusted.

In addition, integrity provisions are proposed to prevent companies from bringing forward  expenditure whilst rehabilitation tax offsets will only be available in relation to MRRT years ending on or before 30 June 2014.

Currently, coal seam gas extracted as a necessary incident of coal mining attracts MRRT as it is included within the definition of a taxable resource. With the repeal of the MRRT the Petroleum Resource Rent Tax will be amended to apply to all coal seam gas, unless it is recovered as an incidental result of coal mining activities, not through a petroleum production licence, exploration permit or retention lease.

As part of its clear election mandate to abolish the mining tax, the Coalition also proposes to abolish many of the tax concessions funded by the MRRT in its effort to return the budget to surplus.

Loss carry-back

The Coalition proposes to repeal the loss carry-back provisions with effect from 1 July 2013 (i.e. the beginning of the 2013/14 income year).

The loss carry-back tax concession received Royal Assent on 28 June 2013 and allowed companies to carry-back and apply tax losses to prior income years, resulting in a refundable tax offset for the losses chosen to be carried back.

In effect, the loss carry-back provisions will only be available for the 2012/13 income year.

Changes to capital allowances

Certain small businesses will also be affected by the repeal of the MRRT with the following tax concessions relating to capital allowances to be reduced or abolished:

Reduction in small business instant asset write-off

  • Threshold for the small business instant asset write-off to be reduced from $6,500 to $1,000 
  • To apply to assets that are first used or installed ready for use on or after 1 January 2014 
  • The $6,500 threshold will continue to be available up until 1 January 2014

Small business pools The Coalition will significantly reduce the deduction available to small businesses for the 2013/14 income year. An immediate deduction will be available where the small business pool balance is less than $1,000, rather than the current $6,500.
Accelerated depreciation for motor vehicles In more unwelcome news for business, from 1 January 2014 it is proposed that motor vehicles will be subject to the same depreciation rules as other depreciating assets.

Geothermal exploration The Coalition also proposes to repeal the capital allowance deduction for geothermal energy exploration expenditure incurred after 30 June 2014.

Superannuation

Rather than abolish the superannuation guarantee (SG) rates, the Coalition will re-phase the SG increase. Essentially, the SG rate will reach 12% for the year commencing 1 July 2021 rather than 1 July 2019 as illustrated below:

  • Year commencing - New SG Rate (%) - Current SG Rate (%)
  • 1 July 2013            - 9.25                       - 9.25
  • 1 July 2014            - 9.25                       -  9.5
  • 1 July 2015            - 9.25                       - 10
  • 1 July 2016            - 9.5                         - 10.5
  • 1 July 2017            - 10                          - 11
  • 1 July 2018            - 10.5                       - 11.5
  • 1 July 2019            - 11                          - 12
  • 1 July 2020            - 11.5                       - 12
  • 1 July 2021            - 12                          - 12

The low-income superannuation contribution will not be payable in respect of concessional contributions made after 1 July 2013.

Other tax concessions to be repealed

The repeal of the income support bonus and the Schoolkids bonus will apply to payments made on or after the date that the legislation commences.

Will these changes impact your business?

Submissions for the draft legislation and explanatory memorandum are due by 31 October 2013. The short submissions period demonstrates the Government’s clear intention to introduce this draft legislation at the first sitting of the new Federal Parliament on 12 November 2013.

In the event that the legislation does not pass the Senate, the Coalition will not extend the MRRT beyond 2013/14.

Companies affected by the removal of the MRRT and its associated tax concessions should consider the impact of these proposed changes on their business.