A key mining company group has launched a new advertising campaign against the federal government’s resources tax but denies it is politically motivated.

The Association of Mining and Exploration Companies (AMEC) says the Mineral Resources Rent Tax (MRRT) is skewed in favour of the three mining giants that negotiated it with the government.  The new television and radio ads say every Australian will “get whacked” by the proposed tax.  The ads have been commissioned by the AMEC, which represents smaller and mid-tier miners.

AMEC chief executive officer Simon Bennison revealed the new ads in Perth on Sunday, saying their main message was the tax would hit the broader community, not just the mining industry.

The television ads show ordinary Australians being blasted sideways to the sounds of a jingle: “You’re gonna get whacked, by the mining tax.”  The ads say the extra $10.5 billion tax on mining will cost jobs, boost electricity prices and see the value of superannuation funds fall.

In Perth last week, Treasurer Wayne Swan said the ad campaign was politically motivated and had the fingerprints of the Liberal Party all over it.  But Mr. Bennison on Sunday denied the ads were part of a campaign to oust the Labor government in favour of the coalition, which has promised to dump the MRRT.

“We’ve been opposed to this tax since May 2.

“We have been caught up in a process created by the government that started well before this election cycle,” Mr. Bennison said.  “We’re not trying to change voting patterns, we’re purely focused on the government getting the message that we don’t want this tax.”

Mr. Bennison said AMEC’s goal of having the MRRT rescinded just happened to be what the coalition was also advocating.

AMEC member and Atlas Iron managing director David Flanagan said the MRRT negotiated between the government and the three mining giants BHP Billiton, Rio Tinto and Xstrata unfairly favoured those majors.  “Those big companies got an opportunity to introduce a new barrier to entry into the industry which impacts pretty much all of the juniors wanting to get into coal, or wanting to get into iron ore.”

Mr. Flanagan said the juniors did not have access to low cost capital and did not own ports or rail lines, so had less shelter against the tax.  “There’s all this talk about a level playing field and this has just tilted it very much in favour of the majors.”  (Reprint from BusinessSpectator.com.au)

The Australian Taxation Office will launch a special crackdown on eBay sellers as it attempts to find tax dodgers who are under-reporting income or not reporting income from these sources.

The special crackdown, announced by Tax Commissioner Michael D’Ascenzo, will focus on individuals and businesses who have sold more than $20,000 worth of goods through online sales site eBay and Trading Post in any of the past three financial years.

The ATO plans to scan around 30,000 records from these sites as part of a data matching program aimed at catching those under-reporting income earned from online sales, or those who keep their online sales activity “off the books”.

“Records will be matched against different identifiers such as tax file numbers, ABN’s, addresses and date of births, which will improve the integrity of the data matching program,” D’Ascenzo said in a statement.

“When information obtained from data matching is used in an audit or review, the business or individual will be given the opportunity to confirm or contradict the information found from the data matching.”

The ATO has been trying to learn more about the online selling sector for the last few years as use of eBay and Trading Post has increased.

Back in 2008, the Tax Office targeted those who had sold more than $50,000 in either of the two preceding years. This latest crackdown will presumably catch a much larger number of users.

D’Ascenzo says any online sellers who know they have done the wrong thing can come forward voluntarily and access discounts of up to 80% on any penalties handed down by the ATO. (Reprint from SmartCompany.com.au)

The Coalition has promised it will cut the company tax rate by 1.5 per cent if it wins government.

The Opposition’s pledge, in a pitch to small business, would take the rate to 28.5 per cent, 0.5 per cent lower than what the Government has promised.

Releasing the Coalition’s small business policy today, Opposition Leader Tony Abbott said it was a “win, win” situation for small business.

“We are always going to be the low tax party,” he said.

“As far as the Coalition is concerned companies deserve a tax cut.

“We will give them [companies] a tax cut without a mining tax to pay for it.

“We’ll give them a tax cut without a carbon tax to pay for it. We will ensure that this tax cut is affordable in the longer term.”

Mr Abbott says the cut will cost $2.1 billion a year and will be funded out of Coalition savings already identified.

It will begin in July 2013.

The company tax rate has been an area of debate between the two major parties in recent months after policy decisions taken on both sides.

The Government has promised it would use revenue from its mining tax to fund a 2 per cent cut in the rate, but this was later changed to 1 per cent after the deal was changed.

The Opposition is planning to fund its paid parental leave scheme by imposing a 1.7 per cent levy on the tax rate for some of Australia’s biggest businesses.  (Reprint from Yahoo Finance)

The Government is also stepping up its attack on Opposition leader Tony Abbott’s parental leave plan, claiming the levy on large employers used to pay for the scheme will result in an increase in living costs.
Modelling released by Treasurer Wayne Swan this morning claiming consumers will pay an extra 50c on every $100 spent on groceries if Abbott’s plan came into force.

Abbott’s leave scheme would see a 1.7% levy placed on the profits of companies that earn more than $5 million in net annual income to fund up to six months of paid leave for parents.

But the Government claims the Opposition’s 1.7% levy and its promise to abandon the 1% cut in the company tax rate that has been promised under the mining tax would result in an effective 2% rise in the company tax rate.

The Government has released modelling by KMPG which shows that a 2% rise in company tax would lead to a 1% increase in consumer prices.

Swan, Prime Minister Julia Gillard and Small Business Minister Craig Emerson are now describing the leave plan as a “great big new tax” and claim it will force big employers such as Coles and Woolworths to raise their prices as the pass on new costs.

”Mr Abbott is proposing to increase company tax for most companies by 1.7%. The Gillard Labor government is proposing to cut company tax by 1%. So there is almost a 3% difference,” Swan said.
However, Abbott has attempted to counter Labor’s cost-of-living claims by announcing an extra $89 million to increase child care rebates paid to parents.

Gillard has spent the morning by continuing to focus on health and a family policy this morning, announcing $277 million for suicide prevention and the establishment of a 24-hour GP phone help line.
(Reprint from SmartCompany.com.au)

Following the Australian government’s announcement of an election to be held on August 21, the battle lines represented by the tax policies of both the government and the opposition have been quickly confirmed.

The Coalition opposition, led by Tony Abbott, the Liberal party leader, has concentrated on producing budget savings totaling AUD45.8bn (USD40bn) in the four fiscal years from 2010-11 to 2013-14. Those savings, it is said, should bring the budget back into surplus sooner than forecast by the government, thereby reducing pressure on inflation and interest rates.

The opposition has included, in its calculations, savings of over AUD9bn arising out of its cancellation of the tax reductions which the present government had programmed to fully finance from its introduction of the proposed minerals resource rent tax (MRRT).

Such savings include: AUD1.9bn as the company tax could not be lowered to 29%, or reduced at an earlier date for small businesses; over AUD1.4bn as investments could not be made into a state infrastructure fund; nearly AUD2.4bn from cancelled improvements to the country’s superannuation system; and AUD1bn as there could be no 50% tax reduction on interest income.

In fact, Abbott is proposing a rise in company tax to finance an increase from 18 weeks to 26 weeks in the paid parental leave scheme, which it is proposed would be paid for by a 1.7% annual levy on companies’ taxable profits over AUD5m.

The present government on the other hand is sticking by its previously-announced tax reforms, arising out of the Henry tax review and the 2010-11 budget announced in May this year.

In a recent interview, Wayne Swan, the Deputy Prime Minister and Treasurer, said that “we certainly won’t be changing our policy on the mining tax. We’ve made it very clear there is a revenue stream there. We’ve put a design out. We are consulting about that design and we have absolutely no intention of changing our policy.”

He told the interviewer that, in his opinion, the opposition would have to change their policy as “they are opposing a revenue stream (from the MRRT) of AUD10.5bn, which will deliver a very substantial tax cut to small business and a tax cut to the company rate as well.”

Finally, with regard to climate change policies, both sides appear to have delayed for some time any substantive dealing with the problem. For the government, the then Prime Minister, Kevin Rudd, announced earlier this year that the proposed emissions trading scheme (ETS) had been postponed until no earlier than 2013.

As far as he was concerned, Abbott confirmed that a coalition government would never introduce what he has called the “carbon tax” represented by the ETS. As global agreement on climate change policy is some way away, he has said that he would not revisit the coalition’s climate change policy before 2015. In the meanwhile, the opposition’s budget savings include the discontinuation of some planned climate change initiatives, such as AUD300m allocated to the study of carbon capture and storage. (Reprinted from Tax-News.com)

Australia’s Green party has said that it would look to increasing the revenue collected from the proposed minerals resource rent tax (MRRT), if it manages to hold the balance of power after the August 21 election.

Earlier this month, and before the new Prime Minister Julia Gillard called the election, the Australian government agreed with the larger mining companies operating in the country to replace a 40% resource super profits tax (RSPT) with a less-onerous 30% MRRT. The new tax would apply only to iron ore, coal, oil and gas projects, and the number of companies affected would reduce from 2,500 to around 320.

While the MRRT is still expected to generate only AUD1.5bn (USD1.25bn) less than the AUD12bn in additional tax revenue expected from the RSPT over the two fiscal years after its introduction in July 2012, the reduced revenue has meant that the government has had to cancel a part of the tax reforms planned to be financed from the new tax.

In that respect, it decided that, while the company tax rate would continue to be cut from the present 30% to 29% from 2013-14, it could not be further reduced to 28% in the following year, as previously planned.

Green party leader, Bob Brown, has now said that, if his party held the balance of power after the election – which could be possible, particularly in the Senate – he will try to reverse a large part of the reduced revenue from the MRRT. The increased tax collected should, he suggested, be used to reinstate the additional 1% company tax break, particularly for small businesses.

Furthermore, the Green party has stated that the party would also look to amend the MRRT to include uranium mining, so that revenue could be taken from the expected increased production of uranium from already-planned projects.  (Reprinted from Tax-News.com)

The conditions look ripe — debt markets are up, companies’ valuations soft — but foreign private equity firms eyeing deals in Australia may now have to put their plans on ice as general elections loom and a controversial tax on profits remains unresolved.

“Australia is one of a few Asian countries that are now considered problem children for foreign investors,” because of the uncertainty over the tax regime, said Mark O’Reilly, a senior partner at PriceWaterhouse Coopers, who advises buyout firms on tax issues.

“Private equity managers looking to invest funds in Australia are in a bit of a state of limbo in relation to what is an appropriate structure and tax outcome,” he said.

Foreign buyout firms, and the pension funds and sovereign wealth funds that invest in them, risk being taxed at a much higher rate on profits made in Australia after the tax office issued two draft rulings in December.

One proposed taxing gains from asset sales as income at the 30 percent company tax rate, instead of classifying them as capital gains, which are tax-exempt.

The tax office was ready to issue final rulings in May, but put that on hold until a government review was completed. The review is unlikely to be finished before the August 21 election. Tax experts said it could be six months before a new government revisits the tax proposals.

A spokesman for Assistant Treasurer Nick Sherry, whose office was conducting the review, said the government was still consulting on the impact of the tax office rulings.

“The Labor Government will also consider advice from the Treasury and the Tax Office before determining what action, if any, may be needed following the release of the final Tax Office rulings,” he said in an e-mail to Reuters.

WORST-CASE
Private equity deals are still being done in Australia’s $20 billion buyout industry but insiders say they face higher profitability hurdles in case the higher tax rate becomes law.

“Everybody is doing their numbers based on worst-case scenario outcomes” for tax, said one source with knowledge of the Healthscope deal last week, speaking on condition of anonymity.

On Monday, U.S. private equity giants TPG and Carlyle won a bidding war for hospital operator Healthscope Ltd, agreeing to pay $1.7 billion for the hospital owner.

Aside from Healthscope, private equity deals in Australia have been few and far between this year.  The proposed tax rules target offshore company structures and mainly affect foreign-based buyout firms and their investors.

For the foreign private equity players, “it might make some deals less attractive,” said Katherine Woodthorpe, the head of the Australian Private Equity & Venture Capital Association.
“It is a risk that has to be factored in,” she said.

Domestically based firms in the buyout industry won a reprieve when new laws went into effect last month governing managed investment trusts. Firms could choose to have investments classed as capital gains, which attracts a lower rate than income.

The delays to the government review are “quite unfortunate” for private equity players looking either to invest or divest assets in Australia, according to Yasser El-Ansary, tax counsel at the Institute of Chartered Accountants.

He said the tax policy was just as important from a national perspective as the debate over the mining “super profits” tax, which helped to topple former Prime Minister Kevin Rudd and brought Prime Minister Julia Gillard into office, but has received less attention.

“This issue is integral to whether Australia is an attractive place to invest,” said El-Ansary.
“There is ample scope for M and A activity to really start driving the economy forward again. For the moment it looks like the uncertainty will jeopardize an otherwise healthy sector.” (Reuters)

Small businesses are likely to feel the itch, this year, of the changes on Trusts by the Australian Taxation Office that urged business owners to complete new Taxation Plan to avoid trouble.

Matthew Schyler, Managing Partner of Elliotts, said trusts used were previously able to distribute to a range of beneficiaries including individuals and companies.

“Up until now, businesses have used this allowance as an effective tax deferral strategy. Distributing to a company means that taxable profit is taxed at 30% instead of a potential 46.5%, and accountants have been advising it as part of their client’s taxation plans.”

“Often the distribution was done on paper so the cash profit could be left in the Trust to fund business working capital.  A dividend did not have to be physically paid out of the company until the Directors determined,” Mr Schlyder said.

It was on December 16, 2009 that the ATO announced to make changes in position on such distributions and finalized its view on Trust distributions on June 2 this year, according to Schlyder.

“Significantly, the final ruling is retrospective so Trustees who have made distributions to companies which are unpaid need to determine the impact it will have on the amount payable to the tax office.”

Mr Schlyder explained that, where Trusts have made distributions to companies before 16 December 2009, there is some quarantining available, provided certain rules are met.

“If the unpaid amount is determined to be a loan, the amount that is owing may have to be repaid over a period of seven years in most circumstances, with interest at the ATO determined rate under a documented loan agreement. This can have a significant impact on tax payable so it is vital that trustees consider the implications of these earlier distributions now.”

However, all distributions made after 16 December 2009 will be subject to the new laws.

“Loan agreements will need to be entered into with specific terms depending on security offered. The ATO determines the interest rate to be charged on these loans and the minimum repayments due each year,” Mr Schlyder said.

According to Mr Schlyder, with tax time nearing, these new laws will have a major impact on the tax payable by a large percentage of small and medium sized businesses and corporates.“

In most cases, business owners will need to complete a new Taxation Plan in order to structure their affairs so that they legally pay the least amount of tax possible and retain more income.  Every business owner should have a Taxation Plan which is up to date and complies with the latest ATO rulings and taxation legislation.”  (With reprint from DynamicBusiness.com.au)

Australia’s property market is ripe for investors.  If you own a property and think property investing is out of your league, then it’s probably time to reconsider.  The past few years have seen a dramatic increase in property prices so there’s a good chance of having a nice amount of equity waiting to be used.  If, however, city median house prices are above what you can afford, why not consider a mining town?

Thanks to revisions in the RSPT and a bound back in commodities, now might be the right time to snap up property in Australia’s mining towns, said Cameron Kusher, RP Data senior analyst.  It now seems the resources sector are moving back up after a sluggish growth during the peak of the global financial crisis that began in September 2007, where many mines either scaled back or closed down.

Although mining areas were considered high risk investments, it may also have high rewards.   What makes the risks acceptable is that mining towns can have particularly high returns.

One town known for being such is Moranbah, a large coal mining town in the Bowen Basin in Queensland, which accumulated 9% in rental yields in April and the five year grown rate rests at 102%, according to RP date figures.

In RP data released on July 18, below are three regions where house prices should rise:

§  Northwest Western Australia, especially iron ore-rich towns of Karratha and Dampier;

§  Coalfield town in Queensland such as Moranbah, Dysart and Clermont, all located in the Bowen Basin;

§  Queensland’s Western Downs, popular for burgeoning coal-seam gas industry.

“There is likely to be a higher level of demand for Australian mines to pull resources out of the ground at a more rapid pace,” said Kusher. “That means more workers and more demand for housing in what are generally chronically undersupplied markets.”

In Queensland’s Bowen Basin, median prices were $405,000 and median rents for houses were a whopping $750 a week. Not a bad starting price considering predicted growth.

If you feel like burning a little more cash, WA might be the place to go where house prices fell by 9.3% last year.  Median house prices in north-west WA now sit at $880,000, 3.3% below the peak and rents are high – on average around $1575 a week.  This results in a 9.3% rent return – outstanding in anyone’s books.

While buying in a high risk area certainly has its advantages, you need to be prepared to think fast, and smart. If you’re new to the investment game, try to learn as much as you can from experts in the field and reputable publications and decide on the best investment strategy that will work for you. (With report from YourMortgage.com.au)

The Assistant Treasurer, Senator Nick Sherry, and Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen MP, announced on July 12 the Terms of Reference for a review by the Board of Taxation into the taxation arrangements that apply to collective investment vehicles (CIVs).

CIVs, currently holding an estimated $1.3 million in investments, are widely held investment vehicles that usually has long-term portfolio investors undertaking primarily investment activities.  “Collective investment vehicles are a critical part of our investment landscape and this is the first ever comprehensive review of all aspects of their tax treatment,” according to Senator Sherry.

The review which was announced by the Assistant Treasurer and Minister Bowen in May 2010, will undertake to:

-    Assess the tax treatment of CVs, having regard to the new managed investment trust (MIT) tax framework including whether a broader range of tax flow-through vehicles should be permitted;

-    Consider the nature and extent of, and reasons for, any impediments to investment into Australia by foreign investors through CIVs;

-    Consider the benefits of extending tax flow-through treatment for CIVs, including the degree to which a non-trust CIV would enhance industry’s ability to attract foreign funds under management in Australia;

-    Consider whether there are critical design features that would improve certainty and simplicity and enable harmonisation, consistency and coherence across the various CIV regimes, including by rationalisation of regimes where possible;

-    Examine the treatment of venture Capital Limited Partnership vehicles in a way that recognises its policy objectives;

“This review forms part of the Labor Government’s commitment to position Australia as a leading financial services center,” said Senator Sherry.

“It responds to a recommendation by the Australian Financial Center Forum that the Board of Tax review the scope for a broader range of collective investment vehicles,” Mr. Bowen said.

“The Government firmly believes that the design features of CIVs should be, wherever possible, simple, clear and harmonized – this will help Australian investors, make the sector more efficient and also mean international investors will find investing in Australia an easier proposition.”

A full CIV review is requested of the Board to be completed by December 31, 2011. (With reprint from TheGovMonitor.com)

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