TAX NEWS - JUNE 2010

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Australia Will Resolve Resource Tax Design Issues, Sherry Says

The Australian government will resolve issues raised by industry about the design of the proposed 40 percent tax on the "super profits" of resource projects, Assistant Treasurer Nick Sherry said.

The Treasury-led consultation panel looking at the tax is talking to companies "to resolve design issues in a way that will best deliver on the aims of the super profits tax," Sherry said in e-mailed speech notes for an address to the Institute of Chartered Accountants in Australia forum in Adelaide today.

The levy defines "super profits" as returns above the long-term Australian government bond rate of about 6 percent. BHP Billiton Ltd. and Rio Tinto Group are leading a campaign to raise that threshold and negotiate some exemptions for existing projects. Prime Minister Kevin Rudd has said the 40 percent rate is "right" and talks with companies will continue on the design of the tax and "generous transitional arrangements."

The levy, scheduled to take effect from 2012 after legislation is introduced to parliament in late 2011, will raise A$12 billion ($9.9 billion) in its first two years, Treasurer Wayne Swan said it was announced May 2. The move to better tap into the nation's mining boom, fueled by commodities demand from China and India, comes as Rudd trails Tony Abbott's opposition Liberal-National coalition in opinion polls before a national election due by April.

The Australian government will use "about a third" of revenue raised from the levy, which will "effectively replace multiple royalty regimes with one tax," to build ports, roads and rail needed to support the industry and economic growth, Sherry said.
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