PRRT rises from ashes of RSPT

This includes the coal seam gas-to-liquefied natural gas projects and the North West Shelf, which would otherwise have come under the RSPT.

Companies may elect to use market value as the starting base for project assets – including oil and gas rights – and will be allowed to credit all state and federal resource taxes against current and future PRRT liabilities from a project, thus avoiding double taxation.

All other features of the PRRT including the range of uplift allowances for unutilised losses and capital write-offs, immediate expensing for expenditure and limited transfer of the tax value of losses, will also apply.

The fledging CSG industry is expected to benefit from being able to recover their full capital costs before having to pay the tax, which could significantly reduce the cost of financing projects.

The federal government said in a statement that placing all oil and gas projects under the PRRT provided certainty for projects in the emerging CSG-LNG sector and ensuring equitable tax treatment between competing projects.

The mining sector will fall under the new Minerals Resource Rent Tax, which is taxed at 30%, and applies only to iron ore and coal.

“This is a better return for Australians on the things that can be dug out of the ground only once it will end uncertainty and division and allow us to move forward as a nation,” Gillard said today.

“I believe we have struck the right balance.”

She rejected suggestions that the changes showed the government would cave in to interests, saying it had still achieved much of what it wanted to do with the revamps.

Treasurer Wayne Swan said while some miners would be unhappy about paying more tax, it would still encourage investment.

“This is a very good day for economic reform in Australia.”

BHP Billiton chief executive officer Marius Kloppers welcomed the changes, saying the new tax was closer to the company’s frequently stated principles of sound tax reform.

“At the request of the prime minister, there have been constructive discussions in the last week with the deputy prime minister and the resources minister which have resulted in a material improvement from the original tax proposal,” he added.

The changes do not come without a price though. The company tax rate will now be cut to 29% from 2013-14, but will not be reduced further while the planned resource exploration rebate has been scrapped.

A planned lift in compulsory superannuation contributions – from 9% to 12% by 2020 – remains unaffected.

Federal Resources Minister Martin Ferguson and former BHP chaiman Don Argus will lead a policy transition group to oversee the transition to the new tax regime.

Friday, 2 July 2010
PetroleumNews.net
http://www.petroleumnews.net/StoryView.asp?StoryID=1137392