SA Mines and Energy Journal : August-Sept 2010
AUGUST/SEPTEMBER 2010 SA MINES & ENERGY JOURNAL 4 CEO'S REPORT BROUHAHA AND BACKFLIPS A word from the Chief Executive Jason Kuchel They say a week is a long time in politics, but based on recent events, we could safely say a day is a long time. The political landscape has been transformed since the controversial Resources Super Profits Tax (RSPT) was announced by the Rudd Labor Government in May. The Prime Minister was suddenly replaced on June 24, the Government and industry advertising campaigns were suspended the same day, and a week later the same Treasurer who had been defending the RSPT had negotiated a new resources tax with representatives of the mining industry. The proposed Mineral Resources Rent Tax (MRRT) has a number of the same features as the RSPT, but has a much lesser impact than its disastrous predecessor. It is certainly good news for South Australia that the proposed MRRT announced on July 2 excludes all commodities except coal and iron ore. The other key aspect is that the headline tax rate under the MRRT has dropped from 40 per cent to 30 per cent, and the 25 per cent extraction rebate effectively reduces this headline rate to 22.5 per cent. In addition to the MRRT, the existing Petroleum Resources Rent Tax (PRRT) applying to offshore oil and gas projects will be extended to onshore projects, including coal seam gas. For a list of what SACOME has been calling for and what has been achieved to date, see page 12. The public may think the dust has settled on the resources taxation frenzy of the past two months, but there is still much negotiation needed between government and industry. While the MRRT is a vast improvement on the previously proposed RSPT, the range of unresolved issues means there is considerable work ahead as we endeavour to protect the interests of the SA resources industry. As the peak industry body for the South Australian resources sector, the South Australian Chamber of Mines and Energy (SACOME) represents all the companies that are still affected, including explorers who find themselves without an incentive for investors to invest, such as a flow-through shares (FTS) scheme. SACOME and other bodies have been calling for an FTS scheme for many years now and one was promised at the last election by the current government. This may be a side argument, but it is one we cannot afford to let slide if we are to keep finding enough ore bodies for Australia to maintain its level of commodity exports. We are also working through questions about how profit is calculated and how the taxing of iron ore will affect companies mining hematite or magnetite (which require greater processing), and in particular those companies where a non- taxable commodity is included within the iron ore. While the principle of taxing at the proverbial mine gate makes sense, the calculation of the value and/or profit at that point is a minefield, if you'll excuse the pun. Equally, the extension of the PRRT to onshore projects is not necessarily as straightforward as it might seem and opinions are divided on the merits of this. The PRRT needs to be looked at to ensure it takes into account the differences between onshore and offshore projects. I have highlighted just a few of the myriad of details to be resolved. The sudden emergence of this policy issue and its complexity highlights the importance of industry coming together through state representative bodies such as SACOME to protect the interests of the sector. In fact, for South Australia, where the issues are vastly different to most other states, our input on taxation reform has been important and had a substantial effect on the outcome. As we continue our representation to all levels of Government on this issue and many others, we very much welcome your input. The bigger and better the picture we create, the more effective our lobbying efforts will be. SACOME members show their commitment to the continued success of our sector through their continuing membership. As we move into the 2010-11 financial year, I thank those of you who have renewed your membership. You can be assured we are working hard on your behalf and I invite you to contact me with your views and concerns on tax reform or any other issue your company faces. I would also like to acknowledge the many years of service to the chamber by our industry stalwart and friend, Bev Janssan, who has retired after almost 25 years with SACOME. I know I can speak for many members and staff who have come to know her over the years when I say she will be missed. It is also with some sadness we say goodbye to Anne Walker, Director Industry Marketing and editor, whose work has been of immense value over the past three years. Farewell from the editor This is the last edition of the SA Mines and Energy Journal I will bring you as editor, as I leave to embark on new adventures in communicating about science. It has been a privilege to establish and edit this magazine. I have enjoyed marvellous support from the publishing team at Solstice Media and insightful editorial guidance from the industry members who comprise our editorial committee. The magazine is now two years old and I believe the model we have established is one that will continue to provide you with informed, credible and comprehensive information and views on the South Australian resources industry long after my departure. I am proud the magazine takes a lead in certain debates, while not shying away from alternative points of views. I thank the SACOME members, secretariat and other readers for their positive responses and involvement in the magazine during my time at the chamber. -- Anne Walker.