Taxation Administration Act 1953 – Exemption for lodgment of 2014 or 2015 Minerals Resource Rent Tax (MRRT) Returns – Large volume non-payers’ Instrument (No. 1) 2014

Explanatory Statement

General Outline of Instrument

1. This instrument is made under paragraph 117‑5(5)(b) of Schedule 1 to the Taxation Administration Act 1953 (TAA).

2.      The instrument exempts entities from having to lodge an MRRT return for the 2014 or 2015 MRRT years:

• where they are required to lodge an MRRT return for that MRRT year,
• where they did not pay[1] an MRRT instalment in respect of any instalment quarter during that MRRT year, and

• where the Commissioner has made a determination, in writing, that the entity is a large volume non‑paying entity for that MRRT year.

3.      The instrument is a legislative instrument for the purposes of the Legislative Instruments Act 2003.

Date of effect

4.      The instrument commences on the day after its registration.

What is this instrument about:

5.      The purpose of the instrument is to exempt entities from having to lodge an MRRT return for an MRRT year for which they are covered by this instrument in light of the repeal of the MRRT law. This instrument can apply to an entity for one or both of its 2014 and 2015 MRRT years.

What is the effect of this instrument:

6.      The effect of this instrument is that entities do not have to lodge an MRRT return for an MRRT year if it is for the 2014 or 2015 MRRT year and they are covered by this instrument for that MRRT year. The instrument applies to each MRRT year separately. In determining whether they are covered by this instrument for a particular MRRT year, entities need to consider their circumstances in relation to that MRRT year.

7.      The Minerals Resource Rent Tax Repeal and Other Measures Act 2014, received royal assent on 5 September 2014. Schedule 1 to this Act, which repeals the MRRT law, commences on 30 September 2014. Therefore entities will not accrue further MRRT liabilities after this date. Following the repeal of the MRRT law, the Commissioner is exempting entities from having to lodge their 2014 or 2015 MRRT return if they are covered by this instrument for the MRRT year to which the MRRT return relates as the Commissioner has no ongoing need for the information contained in them. In doing so this instrument relieves entities of the compliance costs in return preparation which they now do not need to incur.

8.      An assessment of the compliance cost impact indicates that this legislative instrument will have no additional impact to that already assessed for the repeal of the MRRT.

Background:

9.      Paragraph 117‑5(5)(b) of Schedule 1 to the TAA provides that the Commissioner may, by legislative instrument, exempt a class of entities from having to provide an MRRT return for an MRRT year.

10.  Returns are an integral part of the administration of taxes that are self‑assessed as they enable entities to inform the Commissioner of their liability to pay MRRT for the MRRT year. While a taxpayer may not be liable to pay MRRT in a particular year, the information contained in the return is important to the Commissioner to inform the Commissioner about that entity. This enables the Commissioner to make administrative decisions, both in relation to the entity itself and more generally about the current and future administration of the tax.

11.  However it is also recognised that the requirement to prepare and lodge MRRT returns has an impact on compliance costs for entities.

12.  The Minerals Resource Rent Tax Repeal and Other Measures Act 2014 received royal assent on 5 September 2014. Schedule 1 to this Act, which repeals the MRRT law, commences on 30 September 2014 meaning that entities will not accrue further MRRT liabilities after this date. Therefore the MRRT does not have any ongoing operation.

13.  To simplify administrative requirements and to make participation in the tax and superannuation systems as easy and seamless as possible, the Commissioner will exempt entities from having to lodge MRRT returns for MRRT years for which this instrument applies to them. As the MRRT does not have ongoing operation, the Commissioner does not have a need for the information contained in these MRRT returns as there is no need to make the administrative decisions that would have otherwise have to be made. This approach aims to relieve taxpayers’ compliance costs in meeting their MRRT return obligations where they are unlikely to be liable to pay MRRT for an MRRT year.

14.  The entities receiving an exemption from having to lodge MRRT returns under this legislative instrument are likely to be key taxpayers. The community and the Australian Government expect that all taxpayers, but particularly key taxpayers, pay the correct amount of tax and that the Commissioner takes appropriate action to ensure this occurs. Given this high level expectation it is appropriate for the Commissioner to put in place an additional level of assurance that these entities are unlikely to be liable to pay MRRT before giving them an exemption from having to lodge MRRT returns for the 2014 or 2015 MRRT years by considering their particular circumstances.

15.  It is also not possible to put in place a set of criteria on a one size fits all basis that would be appropriate for determining whether key entities are unlikely to be liable to pay MRRT for an MRRT year. This is because factors such as the size and scale of their operations, the manner in which they conduct their business, the markets to which they sell their product and their terms of trade, alone and in combination, can have a significant bearing on whether or not they are unlikely to be liable to pay MRRT for an MRRT year.

16.  Therefore, in deciding whether to exempt an entity that is a key entity from having to lodge an MRRT return for the 2014 or 2015 MRRT year, regard must be given to the entity’s particular circumstances. This is achieved through a two-step process. Under the first step, entities seeking to be covered by this instrument apply for a large volume non-paying entity determination from the Commissioner. These entities will need to provide sufficient information in order for the Commissioner to be satisfied that they are unlikely to be liable to pay MRRT for the relevant MRRT year(s). If the Commissioner is satisfied that this is the case, the Commissioner will then make a determination, in writing, that the entity is a large volume non-paying entity. The second step is for entities to confirm that they satisfy the other requirements set out in paragraph 4 of this instrument. If they do, then this instrument applies to exempt the entity from having to lodge an MRRT return for that MRRT year.

Consultation:

17.  Consultation occurred with the Resource Rent Tax working group (recently renamed the Energy and Resources working group). The working group’s membership includes representatives of the major tax, law and accounting associations, representatives of resource industry associations, including the Minerals Council of Australia, and the ATO.

18.  Wider consultation was not considered necessary as this instrument only applies to entities who are members of the mining industry.

Legislative references:

Minerals Resource Rent Tax Act 2012

Taxation Administration Act 1953

Human Rights (Parliamentary Scrutiny) Act 2011

Legislative Instruments Act 2003

Statement of compatibility with human rights

This statement is prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Taxation Administration Act 1953 – Exemption for lodgment of 2014 or 2015 Minerals Resource Rent Tax (MRRT) Returns – Large volume non payers’ Instrument (No.1) 2014

This instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of this instrument

This instrument is made under paragraph 117‑5(5)(b) of Schedule 1 to the Taxation Administration Act 1953 (TAA).

The instrument exempts entities from having to lodge an MRRT return for the 2014 or 2015 MRRT years:

• where they are required to lodge an MRRT return for that MRRT year, and
• where they did not pay an MRRT instalment in respect of any instalment quarter during that MRRT year,
• where the Commissioner has made a determination, in writing, that the entity is a large volume non‑paying entity for that MRRT year.

The Minerals Resource Rent Tax Repeal and Other Measures Act 2014 received royal assent on 5 September 2014. Schedule 1 to this Act, which repeals the MRRT law, commences on 30 September 2014. Therefore entities will not accrue further MRRT liabilities after this date.

Consultation has been undertaken in making the decision to exempt entities from having to lodge MRRT returns for those of the 2014 and 2015 MRRT years for which they were large volume non‑paying entities.

Human rights implications

This instrument does not engage any of the applicable rights or freedoms as its purpose is to provide for further time for entities to comply with an administrative obligation and is machinery in nature.

Conclusion

This instrument is compatible with human rights as it does not raise any human rights issues.

[1] The payment of an MRRT instalment requires an entity to pay an amount of money to the Commissioner. An instalment is paid even if the amount concerned is subsequently refunded. A liability to pay an MRRT instalment of a nil amount is not the payment of an MRRT instalment.