Such a tax, possibly at a rate of about 40 percent, would be levied by the federal government on a different basis from the current state-based mining royalties. Mining royalties are usually payable on the basis of volume of production, regardless of the profitability of a particular mining or resources project.
A resources rent tax, similar to the current 'petroleum resources rent tax', could be based on the 'profitability' of a mining project. A deduction could be made from the project's income for 'deductible expenditure' (such as project exploration and development costs). Additionally, any resources rent tax paid may be a tax-deductible expense for calculating company tax payable.
With the government yet to release the Henry tax review report, no one really knows exactly what will be included in the report and how the government will respond to it, despite recent newspaper articles.
With pressure on government revenue, it is likely that the changes recommended by the Henry tax review that end up becoming law will result in increased tax bills for businesses. This will particularly be the case for mining and resources businesses if the speculated resources rent tax is introduced.
Any increase in government revenue may not only come from direct taxes on business (such as resources tax) but may also target business owners and employees. Extra revenue may come from higher 'employment taxes', such as fringe benefits tax, taxation of employee equity arrangements and changes to how superannuation is taxed. For businesses that employ relatively large and well remunerated workforces, any such changes are likely to be controversial.
Whatever the government response is to the Henry review, now is a good time to review current taxation arrangements and make any necessary changes based on the current law. Judging by our experience, it is possible that any changes arising from the Henry tax review may not apply retrospectively.
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