Accountants on watch as pollies play MRRT word bingo

THE BOURSE WHISPERER: As politicians from both sides of the House on the Hill in Canberra set sail on a point-scoring free-for-all over the passage of the MRRT on national accounting firm reminded us all of what it means.

The Minerals Resource Rent tax passed through the Australian Senate on Monday giving the perfect opportunity for Prime Minister Julia Gillard and Opposition Leader Tony Abbott to provide the nation with their respective line of reasoning for supporting or opposing its introduction.

 

Julia Gillard stated her case as often as she could in as many different ways as she could.

First up on the ABC Radio Am program she said, “We’re going through a spectacular resources boom.

“That’s good for our economy but it also means we need to share the benefits of that boom right around the country.”

Her message was fairly similar when confronting the toast and coffee audience of Today on the Nine Network.

“We’re going through a remarkable resources boom,” Gillard said.

“Those minerals belong to everyone. They belong to our nation. They belong to each of us and we want to make sure Aussies around the country get their fair share.”

 

Of course her opposite number was also hardly able to add anything new to his argument, except perhaps to take the opportunity to fit the word ‘tax’ into as many phrases as possible.

In a doorstep interview with Canberra journalists Abbot said, “I think the only people who are celebrating the mining tax are the Labor Party.

“The Labor Party always chooses to celebrate when they’re hitting us with a big new tax.

Come the 1st of July, Australians will be hit with two big new taxes, the mining tax and the carbon tax and these two big new taxes.

Speaking Perth Radio station 6PR he wasn’t holding back.

“Well, she has hit Australians with yet another big tax and if she thinks that’s something to celebrate, good luck to her, but I don’t think too many Australians will be celebrating the evil twins of tax – the carbon tax and the mining tax,” he said.

Not satisfied, Abbott went onto the Ten Network’s Breakfast show.

“We don’t need the world’s biggest carbon tax,” he said.

“We don’t need a success tax. These taxes send all the wrong signals to the world.”

Had any player of a MRRT word bingo drinking game and avid watcher or listener of television and radio political broadcasts been on their game they would have been unable to operate heavy machinery by 10am that morning.

As tiresome as the political game playing is, the realisation that the MRRT has been passed and will quickly come into operation is something national accounting firm BDO said Australia’s junior mining sector should be already gearing up for.

 

BDO said all iron ore and coal miners have been well warned in regard to the MRRT and should start preparing now in order to meet compliance and reporting obligations as well as position themselves to adopt the most tax effective structure for MRRT assessment and payment.

The accounting firm said the MRRT heralds the start of a new regime that emerging miners in particular must be prepared for.

BDO warned companies of the complicated nature of the MRRT and it requires careful consideration, as irrevocable choices made by management about their companies now will have an on-going impact upon application of the tax from 1 July 2012.

BDO corporate tax director John Murray said although concerns about the impact of the tax on smaller miners remained, affected companies had little choice but to comply.

He said his firm was concerned about the MRRT tax take from the emerging sector as opposed to the mature sector, as the Federal Government had not acted on its recommendations to address inequities in the structure of the MRRT.

“Now that it is law, it is important that companies affected by the tax get ready,” Murray said.

BDO has highlighted a range of information companies should consider prior to the introduction of the tax, noting that unless combined [at the election of the taxpayer], the tax will be imposed on a project-by-project basis.

In the lead-up to 1 July 2012, affected companies must consider:

–    Need for independent valuations (from a small number of independent valuers);

–    Resolution of potential project and business consolidations;

–    Determination of valuation methodology;

–    Structures for lodgement of returns at predetermined times; and

–    Review of record-keeping procedures.  

“It is crucial that taxpayers, particularly emerging miners, are prepared for this new regime, and have the information and structures in place to make the right choices for their companies,” Murray said.

BDO said its interest in the MRRT debate rose out of concern of the new regime’s structure, in that it grants significant cost advantages to big miners to the detriment of smaller operators.

In a discussion paper supplied to the Federal Government in October 2011, BDO recommended rate and timing proposals to provide a level tax playing field by ensuring small miners are not financially disadvantaged by the MRRT, and that the Federal Government should defer levying the MRRT on small miners until at least one of the big miners begins paying the tax.