Small business and the Resources Super Profits Tax


The Resources Super Profits Tax (RSPT) was announced by the Federal Government as part of their response to the Henry Tax Review earlier this month. The very public debate that has ensued since has centred on the impact of the tax to the mining industry. But what exactly is the Tax and what impact will it have on small business?

Under the proposal, which would come into effect from July 1, 2012, profits generated on Australian mining projects would be subject to a super profits tax of 40 percent.  The miners would however be allowed to recoup a special allowance (set at 6 percent of earnings) to account for their capital expenditure, and also recoup depreciation. Once the tax on super profits is removed, the miners are then subject to the ordinary corporate tax rate, which is dropping from 30 percent to 28 percent under the Government's plan.

Mining companies and interest groups believe that the tax will make the Australian mining sector one of the most highly taxed industries in the world. But the Government disagrees vehemently to that claim and has released an economic note citing research from two American academics that showed the effective tax rate paid by Australian mining companies was 17 percent.

In the meantime discussions continue from all sides about the best way to take this forward without stymieing the resources industry. The challenge for the government business is undoubtedly the impact that will be felt, particularly for small business if the legislation to introduce the tax is blocked.

If the RSPT doesn't get through, SMEs will suffer more than anyone. The $12 billion the tax will raise over the next four years is slated to pay for two initiatives for small business from July 1, 2011:

  1. A two percent cut in the corporate tax rate from 30 percent to 28 percent
  2. And an immediate asset write-off for assets under $5,000, which applies to companies with less than $2 million in turnover.

In additional small businesses that enjoy flow-on benefits from the mining sector - such as mining services businesses or even SMEs in resources rich towns and regions - could suffer if projects are either abandoned or severely reduced.

Talks between the Government and resources industry stakeholders are set to continue.

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