Revised revenue projections and associated expenditure for the Minerals Resource Rent Tax (MRRT)

Budget Review 2013–14 Index

Kai Swoboda

Background

When it announced the introduction of a Resource Super Profits Tax (RSPT) in May 2010, the Government directly linked the revenue from the tax to a number of expense measures including funding the income tax forgone from lifting the superannuation guarantee from 9 per cent to 12 per cent and the introduction of a $500 low income superannuation contribution (LISC) for those earning $37,000 or less to compensate for the 15 per cent superannuation contributions tax paid.[1]

Following a period of consultation in the second half of 2010 and negotiations in early 2011 between the Government and some mining companies the proposed RSPT was modified to what became the Minerals Resource Rent Tax (MRRT), with the linked measures retained. Of course there is no practical hypothecation of MRRT revenue to linked measures.[2] While legislation that has been passed by the Parliament to implement some measures was dependent on the passage of the MRRT legislation, future revenues and expenses are simply put through the Consolidated Fund.

As part of the 2012–13 Budget, the Government revised its revenue estimates for the MRRT and announced that several linked measures would be deferred or abandoned. The Parliamentary Library estimated that the combined impact of these revised revenue estimates and changes to measures notionally funded by the MRRT were an overall impact on the budget of – $43 million in 2011–12, +$2,068 million in 2012–13 and – $619 million in 2013–14.[3]

The 2013–14 Budget has also seen further revisions to MRRT revenue and some changes to linked expenditures. So what is the overall impact taking into account further revisions to revenue estimates and 2013–14 Budget announcements relating to measures linked to the MRRT?

MRRT revenues

Estimates of revenue raised by the MRRT have been revised down several times since the introduction of the MRRT-related Bills in Parliament in November 2011. The Treasurer revealed on 8 February 2013 that revenue from the MRRT was only $126 million over the first two quarters of 2012–13,[4] so it is perhaps no surprise that revenue for the full 2012–13 financial year is only expected to be $200 million, $1.8 billion less than at October 2012 (Table 1).

Table 1: Changes in Minerals Resource Rent tax revenue projections ($ billion)

 

2012–13

2013–14

2014–15

2015–16

2016–17

May 2010 announcement of Resource Super Profits Tax

3.0

9.0

Not available

Not available

Not available

November 2011 introduction of MRRT Bills

3.7

4.0

3.4

Not available

Not available

November 2011 MYEFO

3.7

3.8

3.1

Not available

Not available

2012–13 Budget

3.0

3.5

3.2

3.7

Not available

October 2012 MYEFO

2.0

2.4

2.1

2.6

Not available

2013–14 Budget

0.2

0.7

1.0

1.4

2.2

Sources: Australian Government, Budget measures: budget paper no. 2: 2010–11, p. 45, accessed 9 May 2013; Revised Explanatory Memorandum, Minerals Resource Rent Tax Bill 2011, p. 4, accessed 15 May 2013; Australian Government, Mid-year economic and fiscal outlook 2011–12, p. 264, accessed 9 May 2013; Australian Government, Budget strategy and outlook: budget paper no. 1: 2012–13, p. 5–20, accessed 9 May 2013; Australian Government, Mid-year economic and fiscal outlook 2012–13, p. 357, accessed 15 May 2013; Australian Government, Budget strategy and outlook: budget paper no. 1: 2013–14, 2013, pp. 3–18 and 9–21, accessed 14 May 2013.

Changes to MRRT-related expenses in the 2013–14 Budget

There were four changes announced in the 2013–14 Budget to measures that were linked to MRRT revenue:

  • the abandonment of a proposed increase to Family Tax Benefit Part A (FTB-A) from 1 July 2013
  • an increase in the concessional superannuation contributions cap from $25,000 per year to $35,000 per year for those aged 50 and over from 1 July 2014 with a start date of 1 July 2013 for those aged 60 and over[5]
  • a minor change to the LISC so that those with an entitlement below the $20 minimum receive at least $10 and
  • reduced funding for stream 2 of the Regional Infrastructure Fund (RIF) of $2 billion (with $1 billion of this relating to 2018–19 and 2019–20).[6]

Of these measures, the Government attributed the reduced allocation for the RIF to the change in revenue estimates for the MRRT, while the Government’s reasons for abandoning the increase in FTB-A referred to broader revenue write downs.[7] The combined net gain to the budget as a result of these changes is almost $2.9 billion over the forward estimates (table 2):

Table 2: 2013–14 Budget MRRT-related revenue and expense measures 2012–13 to 2016–17 ($ million)

Measure

2012–13
($ million)

2013–14
($ million)

2014–15
($ million)

2015–16
($ million)

2016–17
($ million)

Abandon increasing rate of FTB-A

 

615.8

623.3

632.0

646.4

Concessional contributions cap increase for over 50s

-0.2

-195.3

104.9

230.8

225.9

Technical change to low income superannuation contribution

-3.0

-3.0

-3.0

-3.0

-3.0

Reduced funding for Regional Infrastructure Fund

 

150

50

 

678

Total net impact

-3.2

567.5

775.2

859.8

1547.3

Source: Australian Government, Budget measures: budget paper no. 2, 2013–14, p. 41, 150, 225–227 and 266, accessed 15 May 2013.

Net impact of MRRT revenue and linked expenses

Taken as a package, the net cost of the MRRT and associated measures can be calculated for three financial years, 2011–12, 2012–13 and 2013–14. In these years, based on the latest revenue forecasts and the cost of associated measures, the net cost of the package is $43 million in 2011–12, $560 million in 2012–13 and $3,471 million in 2013–14 (table 3).

Table 3: Net MRRT package cost 2011–12 to 2016–17 ($ million)

Measure

2011–12
($ million)

2012–13
($ million)

2013–14
($ million)

2014–15
($ million)

2015–16
($ million)

2016–17
($ million)

Revised MRRT revenue

0

200

700

1 000

1 400

2 200

Revised MRRT-related expenditures

-43

-760

-4 4171

Not available

Not available

Not available

Net cost of MRRT package

-43

-560

-3 471

Not available

Not available

Not available

Source: Table 1 for revenue and Parliamentary Library analysis of Table 4.

Table 4: Impact of 2013–14 Budget and intervening policy announcements on Minerals Resource Rent Tax-linked expenditures

Measure

2011–12

2012–13

2013–14

2014–15

2015–16

Company tax rate cut to 28 per cent and then revised to 29 per cent

 

Original cost adjusted for (a)

 

300

1400

Not available

Impact of 2012–13 Budget and intervening policy announcements

Reduced to nil

Reduced to nil

Reduced to nil

Reduced to nil

Reduced to nil

Early company tax rate cut for small business

 

Original cost (b)

50

100

50

Not available

Not available

Impact of 2012–13 Budget and intervening policy announcements

Reduced to nil

Reduced to nil

Reduced to nil

Reduced to nil

Reduced to nil

Superannuation guarantee increase from 9 per cent to 12 per cent

 

Original cost (c)

 

240

500

Not available

Impact of 2012–13 Budget and intervening policy announcements

 

Legislated – no impact

Legislated – no impact

Legislated – no impact

Raising the superannuation guarantee age limit from 70 to 75

 

Original cost (d)

 

-22

27

Not available

Impact of 2012–13 Budget and intervening policy announcements

 

Legislated – no impact

Legislated – no impact

Legislated – no impact

Low income government superannuation contribution

 

Original cost (e)

1

20

892

976

Not available

Impact of 2012–13 Budget and intervening policy announcements

 

-25.6

-26.6

-25.6

Not available

Impact of 2013–14 Budget

 

3

3

3

3

Higher superannuation caps for people aged 50 or more with a superannuation balance of less than $500 000

 

Original cost (f)

 

545

785

Not available

Not available

Impact of 2012–13 Budget

 

-580

-730

-130

-10

Impact of 2013–14 Budget

 

0.2

195.3

-104.9

-230.8

Instant asset write-off for small business ($5000 threshold)

 

Original cost (g)

 

1030

Not available

Not available

Impact of 2012–13 Budget and intervening policy announcements

 

Legislated – no impact

Legislated – no impact

Legislated – no impact

Standard work-related deduction

 

Original cost (h)

 

410

Not available

Not available

Impact of 2012–13 Budget and intervening policy announcements

 

Reduced to nil

Reduced to nil

Reduced to nil

Phasing down interest withholding tax on financial institutions

 

Original cost (i)

 

70

Not available

Impact of 2012–13 Budget and intervening policy announcements

 

-70

-70

Not yet legislated – no impact

50 per cent refund on tax paid on savings

 

Original cost (j)

 

470

480

Not available

Not available

Impact of 2012–13 Budget and intervening policy announcements

 

Reduced to nil

Reduced to nil

Reduced to nil

Reduced to nil

Regional Infrastructure Fund

 

Original cost

42

794

867

665

Impact of 2013–14 Budget and intervening policy announcements

No impact

No impact

-150

-50

No impact

Expanding the definition of exploration to include geothermal energy

 

Original cost

 

5

5

Impact of 2012–13 Budget and intervening policy announcements

No impact

No impact

No impact

No impact

No impact

Supplementary income support for low income earners

 

Original cost

Not applicable

Not applicable

Not applicable

Not applicable

Not applicable

Impact of 2012–13 Budget and intervening policy announcements

 

153

299

306

313

Increase in the rate of Family Tax Benefit A

 

Original cost (k)

Not applicable

Not applicable

Not applicable

Not applicable

Not applicable

Impact of 2012–13 Budget

 

603

615

626

Impact of 2013–14 Budget

 

 

-615.8

-623.3

-632

Tax loss carry-back

 

Original cost

Not applicable

Not applicable

Not applicable

Not applicable

Not applicable

Impact of 2012–13 Budget and intervening policy announcements

 

150

250

300

Notes: Measures can be linked to the MRRT through a number of mechanisms, including the packaging of measures in the initial announcement of the RSPT and by subsequent announcements by Government members. Measures can also be linked to the MRRT if they were part of negotiations with non-Government parties and members in finalising the MRRT Bills for passage through the House of Representatives. The cost of measures does not include associated administrative costs that were allocated to agencies (a) Original cost as presented in the 2010–11 Budget and subsequently changed by the announcement on 2 July 2010 which changed the proposed cut to 29 per cent; (b) The early start for the small business company tax rate reduction to 28 per cent was amended to 29 per cent in the 2 July announcement. (c) Original estimates updated were updated in the Supplementary Explanatory Memorandum for the Bill to introduce the measure; (d) Original cost for this measure was to include increasing the age limit to 75. This was amended during the Bill’s passage through Parliament. Original costs were updated by Supplementary Explanatory Memorandum for the Bill and amended by the Revised Explanatory Memorandum; (e) Cost estimates as provided in the Explanatory Memorandum. The measure was refined in the November 2011 MYEFO to include additional income eligibility tests and a minimum $20 payment requirement. This was further modified in the 2013–14 Budget so as to introduce a $10 minimum payment requirement even where contributions are less than this amount. (f); This measure was deferred in the 2012–13 Budget by two years to commence from 1 July 2014. The measure was then revised in the 2013–14 Budget for a higher cap of $35,000 but without reference to total superannuation account balance (g) Cost of original proposal excluding the further increase to $6500 under the Clean Energy Future package; (h) Original cost amended in the November 2011 MYEFO by being deferred by 1 year; (i) Original proposal to commence from 2013-14 but deferred in November 2011 MYEFO to commence in 2014–15; (j) Original estimates updated by three subsequent policy changes until decision to abandon the proposal in the 2012–13 Budget; (k) Original cost for this measure as announced in the 2012–13 Budget. The measure was abandoned in the 2013–14 Budget.

Source: Parliamentary Library estimates based on Australian Government, Budget measures: budget paper no. 2: 2010–11, accessed 16 May 2013; Supplementary Explanatory Memorandum; Superannuation Guarantee (Administration) Amendment Bill 2011, accessed 16 May 2013; Revised Explanatory Memorandum, Superannuation Guarantee (Administration) Amendment Bill 2011, accessed 16 May 2013; B Shorten (Minister for Financial Services and Superannuation), One-year deferral of interest withholding tax phase down, media release, 23 November 2011, accessed 16 May 2013; Australian Government, Economic statement July 2010, accessed 16 May 2013; Australian Government, Mid-Year Economic and Fiscal Outlook: 2011–12, pp. 167, 319, accessed 16 May 2013; Australia Government, Budget strategy and outlook: budget paper no. 1: 2012–13, pp. 1–18, accessed 16 May 2013; Revised Explanatory Memorandum, Tax Laws Amendment (Stronger, Fairer, Simpler and Other Measures) Bill 2011, p. 5, accessed 16 May 2013; Australian Government, Budget measures: budget paper no. 2: 2013–14, pp. 150 and 266, accessed 16 May 2013.



[1].       W Swan (Treasurer) and C Bowen (Minister for Financial Services, Superannuation and Corporate Law), Stronger, fairer, simpler superannuation banking the benefits of the boom, joint media release, 2 May 2010, accessed 16 May 2013; W Swan (Treasurer) and K Rudd (Prime Minister), Stronger, fairer, simpler: a tax plan for our future, joint media release, 2 May 2010, accessed 16 May 2013.

[2].       Measures can be linked to the MRRT through a number of mechanisms, including the packaging of measures in the initial announcement of the RSPT and by subsequent announcements by Government members. Measures may also be linked to the MRRT if they were part of negotiations with non-Government parties and members in finalising the MRRT Bills for passage through the House of Representatives.

[3].       K Swoboda, Minerals Resource Rent Tax: changes to revenue and expenditure estimates, Budget Review 2012–13, Research Paper, 9, 2011–12, Parliamentary Library, Canberra, 11 May 2012, accessed 14 May 2013.

[4].       W Swan (Treasurer), Minerals Resource Rent Tax revenue, media release, 8 February 2013, accessed 15 May 2013.

[5].       The impact of increasing the concessional contributions cap to $35,000 for those aged 50 and over reflects the incremental adjustments from previous budget announcements rather than the full cost of this policy. The higher cap was originally included in the 2010–11 Budget for those aged 50 or more with a superannuation balance of less than $500,000 from 1 July 2012. This measure was then deferred two years in the 2012–13 Budget. As a result, the 2013–14 Budget impact reflects the change in timing for those aged 60 or more (July 2013 rather than July 2014), change to the cap ($50,00 down to $35,000) and the broadening of the measure (all persons aged 50 or more regardless of accumulated superannuation account balance).

[6].       Australian Government, Budget measures: budget paper no. 2, 2013–14, pp. 40, 150, 225–227 and 266, accessed 15 May 2013.

[7].       Budget measures: budget paper no. 2, 2013–14, op. cit., p. 150 and 227.

For copyright reasons some linked items are only available to members of Parliament.


© Commonwealth of Australia

In essence, you are free to copy and communicate this work in its current form for all non-commercial purposes, as long as you attribute the work to the author and abide by the other licence terms. The work cannot be adapted or modified in any way. Content from this publication should be attributed in the following way: Author(s), Title of publication, Series Name and No, Publisher, Date.

To the extent that copyright subsists in third party quotes it remains with the original owner and permission may be required to reuse the material.

Inquiries regarding the licence and any use of the publication are welcome to webmanager@aph.gov.au.

This work has been prepared to support the work of the Australian Parliament using information available at the time of production. The views expressed do not reflect an official position of the Parliamentary Library, nor do they constitute professional legal opinion.

Feedback is welcome and may be provided to: web.library@aph.gov.au. Any concerns or complaints should be directed to the Parliamentary Librarian. Parliamentary Library staff are available to discuss the contents of publications with Senators and Members and their staff. To access this service, clients may contact the author or the Library‘s Central Entry Point for referral.

Facebook LinkedIn Twitter Add | Email Print
Back to top