MELBOURNE, July 2 -- Australia’s new Prime Minister Julia Gillard has dropped the Resources Super-Profits Tax for coal seam methane projects proposed by former PM Kevin Rudd and has instead extended the existing Petroleum Resource Rent Tax (PRRT) to cover all onshore oil and gas projects in the country as well as the offshore projects not already covered.
This will include the CSG-LNG projects and the offshore North West Shelf gas project. The tax rate will be 40%.
Companies may elect to use market value as the starting base for project assets and will be able to credit all state and federal resource taxes against current and future PRRT liabilities from a project. This avoids double taxation.
All other features of the PRRT such as the range of uplift allowances for unutilized losses and capital write-offs, immediate expensing for expenditure and limited transfer of the tax value of losses, will also apply.
A government statement stated that by placing all oil and gas projects under PRRT provides certainty for projects in the emerging CSG-LNG sector and will ensure equitable tax treatment between competing projects.
The changes do come at a price, as the company tax rate will be cut to 29% from 2013-14, but will not be reduced further. In addition the planned resource exploration rebate has been scrapped.
Federal Resources Minister Martin Ferguson and former BHP Chairman Don Argus will lead a policy transition group to oversee the transition to the new regime.
The new tax regime will also include a Minerals Resource Tax on the country’s iron ore and coal projects. Other minerals remain outside the scheme.
Despite today’s announcement, there is uncertainty about the future of the scheme because a Federal election is likely to be called within 3 months and there is no guarantee that the Labor Party will be reelected.
The Opposition Liberal-National Party Coalition does not support the new tax scheme.