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Tax changes following carbon tax and mining tax repeal

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On 13 November 2013, the government introduced into the House of Representatives a number of Bills to repeal the carbon tax and the mining tax. The Bill to repeal the mining tax also proposes to repeal or revise various tax and superannuation measures related to the mining tax. Key details are as follows.

Carbon tax repeal Bills introduced

The Prime Minister and the Minister for the Environment introduced a package of 11 Bills into the House of Representatives to repeal the carbon tax from 1 July 2014 and make related tax and other amendments. The Bills are:

Among other things, the Bills provide that:

  • 2013–2014 will be the last financial year in which the carbon tax will apply, even if the Parliament does not pass the carbon tax repeal bills until after 1 July 2014;

  • liable businesses and other entities must meet all carbon tax liabilities incurred up to 30 June 2014 under the carbon pricing mechanism, the fuel tax credit system, excise or excise-equivalent customs duties, or synthetic greenhouse gas (SGG) levies;

  • liable businesses and other entities must pay the amount of their final carbon tax compliance obligations at the next payment time under the current legislated arrangements; and

  • industry assistance provided under the Jobs and Competitiveness Program and the Energy Security Fund will continue in 2013–2014 for the purpose of helping industry to meet carbon tax liabilities, and will then cease.

The government intends that the Clean Energy Regulator, the ATO, Australian Customs and the Department of the Environment will have the necessary powers to collect any outstanding carbon tax liabilities for 2012–2013 and 2013–2014 for as long as is necessary.

The Bills also propose to:

  • remove the equivalent carbon price imposed through the fuel tax credit system, through excise and excise-equivalent customs duties and through SGG levies;

  • make arrangements for the management of the last financial year in which the carbon tax will apply (2013–2014) and for the collection of any outstanding carbon tax liabilities; and

  • provide new powers to the Australian Competition & Consumer Commission (ACCC) to ensure that price reductions relating to the carbon tax repeal are passed on.

Tax-related amendments

The Clean Energy (Income Tax Rates and Other Amendments) Bill 2013 proposes to repeal the personal income tax cuts that were legislated to commence on 1 July 2015, and to repeal the low income tax offset (LITO) that was legislated to commence on 1 July 2015.

The amendments proposed by this Bill would have the following implications:

  • the tax-free threshold would remain at $18,200 (instead of increasing to $19,200 from 1 July 2015);

  • the second personal marginal tax rate would remain at 32.5% (instead of increasing to 33% from 1 July 2015);

  • the maximum value of the LITO would remain at $445 (instead of falling to $300 from 1 July 2015);

  • the withdrawal rate of the LITO would remain at 1.5% (instead of falling to 1%); and

  • the threshold below which a person may receive the LITO would remain at a taxable income of $66,667 (instead of increasing to $67,000 from 1 July 2015).

The package of Bills has been referred to the Senate Environment and Communications Legislation Committee for inquiry and report by 2 December 2013.

Mining tax repeal Bill introduced

The Treasurer has introduced into the House of Representatives the Minerals Resource Rent Tax Repeal and Other Measures Bill 2013 www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r5142. It proposes to repeal the Minerals Resource Rent Tax Act 2012 (MRRTA), the Minerals Resource Rent Tax (Imposition – Customs) Act 2012, the Minerals Resource Rent Tax (Imposition – Excise) Act 2012, and the Minerals Resource Rent Tax (Imposition – General) Act 2012. As a result of the repeal, taxpayers would not incur liabilities for minerals resource rent tax on or after 1 July 2014.

The definition of "petroleum" in the Petroleum Resource Rent Tax Assessment Act 1987 (PRRTAA 1987) would be amended to remove the exclusion for "taxable resources" within the meaning of the MRRTA. Amendments are also proposed to be made to other provisions in the PRRTAA 1987 to exclude coal seam gas recovered under licences that do not permit the commercial use or development of coal seam gas resources, and to clarify that only exploration expenditure for the purpose of finding and commercially developing petroleum resources is deductible exploration expenditure.

Consequential tax-related amendments

The Minerals Resource Rent Tax Repeal and Other Measures Bill 2013 also proposes to repeal or revise a number of tax-related measures. Specifically, the Bill proposes to:

  • repeal company loss carry-back – following the changes, companies would only be able to carry their tax losses forward to use as a deduction for a future year;

  • repeal the low income superannuation contribution – the contribution would not be payable in respect of concessional contributions made after 1 July 2013;

  • repeal the geothermal expenditure deduction – if a geothermal exploration right is exchanged for a geothermal energy extraction right relating to the same area, or a similar area, a capital gains tax (CGT) roll-over would apply to defer the liability until the sale of the extraction right;

  • repeal the income support bonus;

  • repeal the schoolkids bonus;

  • revise capital allowances for small business entities – under the proposed changes:

- small business entities would be able to claim a deduction for the value of a depreciating asset that costs less than $1,000 (rather than the current $6,500) in the income year in which the asset is first used or installed ready for use;

- small business entities would be able to claim a deduction for an amount included in the second element of the cost of a depreciating asset that was first used or installed ready for use in a previous income year, provided the amount is less than $1,000 (rather than the current $6,500);

- small business entities would be able to allocate depreciating assets that cost $1,000 (rather than the current $6,500) or more to their general small business pool and claim a deduction for the depreciation of the assets in the pool;

- assets allocated to the general small business pool would depreciate at a rate of 15% in the year in which they are allocated, and a rate of 30% in subsequent income years; and

- if the value of a small business entity's general small business pool is less than $1,000 (rather than the current $6,500) at the end of the income year, the small business entity would be able to claim a deduction for the entire value of the pool. Motor vehicles would be subject to the same rules as other depreciating assets; and

  • delay the superannuation guarantee (SG) charge percentage increase – the phased-in increase in the SG charge percentage to 12% is proposed to be delayed by two years until 2021. The SG charge percentage would: pause at 9.25% for the years starting on 1 July 2014 and 1 July 2015; increase to 9.5% for the year starting on 1 July 2016; and gradually increase by half a percentage point each year until it reaches 12% for years starting on or after 1 July 2021.

The Bill has been referred to the Senate Economics Legislation Committee for inquiry and report by 2 December 2013.

Date of effect

As a result of the repeal, taxpayers would not incur liabilities for minerals resource rent tax on or after 1 July 2014. The amendments would not affect the rights, powers and obligations of taxpayers and the Commissioner in respect of minerals resource rent tax liabilities that arise before 1 July 2014.

For the other tax-related measures:

  • The repeal of the loss carry-back measure would apply from the 1 July 2013.

  • The changes made to capital allowances for small business entities would generally apply on and after 1 January 2014.The repeal of the geothermal expenditure deduction measure would apply on and after 1 July 2014.

  • The pause in the increase to the SG charge percentage would apply to quarters starting on and after 1 July 2014 and ending before 1 July 2016.

  • The repeal of the low income superannuation contribution would apply to concessional contributions for financial years starting on and after 1 July 2013.

  • The repeal of the income support bonus would apply to new instalments of the bonus after Royal Assent is received. The next instalment of the income support bonus would be paid to recipients in March 2014.

  • The repeal of the schoolkids bonus would apply to new instalments of the bonus after Royal Assent is received. The next instalment of the schoolkids bonus would be in respect of the bonus test day occurring on 1 January 2014.

 

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