Miners must act now to assess impact
Thursday, 24 March 2011 — Miners caught by the Mineral Resource Rent Tax (MRRT) must act quickly to clarify “grey” areas in the implementation announced by the Federal Government today.
Ernst & Young Australian Mining Leader Scott Grimley says while there were “no surprises” in the Government’s decision to go ahead with the design and implementation recommendations made by the MRRT Policy Transition Group in December, miners now needed to act quickly to engage on issues that need further clarification as part of the legislative process and to prepare for the tax.
“Today’s announcement provides welcome certainty and clarity on the design and timelines for the introduction of the MRRT,” says Grimley.
“In particular, the Government agreeing to honour the deal to refund all royalties, past and future, provides welcome certainty for miners. Clearly the issue of how that is implemented between the states and Federal Government is now with the implementation group to be resolved but the miners now have clarity on their positions.”
“While the tax has been factored into investment scenarios, any degree of uncertainty impacts capital investment and allocation decisions so this clarity is welcome news.”
Grimley says miners can no longer defer action in modelling the impacts on their projects.
“Assuming the tax is enacted, in 15 short months miners need to work through an array of issues to be ready for a very different form of taxation to what they have had to manage previously and this impacts on a range of business issues,” he says.
“There are significant tax, valuation, accounting and information system issues that miners need to manage now. Before 1 July 2012, miners need to address these issues, in addition to managing other significant regulatory burdens both existing and proposed, such as the carbon tax.”
“In particular there are a raft of iron ore and coal producers who will be borderline in terms of the $50 million turnover threshold who have been waiting for this announcement – like the larger producers, these businesses will have transition issues to manage so they really cannot afford to be idle.”
“They need to understand the impacts on their business and look at the opportunities and choices available to limit the negative impacts.”
Grimley says each miner needs to look at the impact on a project by project basis because it is “project specific and investor specific within that”.
“There is a small window of opportunity to raise issues before this is legislated. There is no time to be lost.”
-ends-
About Ernst & Young
Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 141,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.
Ernst & Young refers to the global organisation of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information on our organisation, please visit www.ey.com.
This news release has been issued by Ernst & Young Australia, a member firm of Ernst & Young Global Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
Contact details:
Megan Ball
Ernst & Young Australia
+ 61 2 8295 6427