The Gillard Government’s highly contentious Mineral Resources Rent Tax (MRRT) will come into effect on July 1 after a narrow victory in the senate and lawyers are already preparing for its arrival. “It will definitely require attention when any of the big mining groups are selling interest in their mines,” said tax partner at Allens Arthur Robinson, Martin Fry. “Any purchaser will want to ensure that what they pay for is appropriately allocated to the resource that they are purchasing.”
The MRRT has been on the cards for some time and according to Fry many of the firm’s mining and resource clients are prepared for the introduction of the tax. “It is an entirely new tax, which will probably be in place for a long time,” he said. “We are proceeding on the basis that it has been enacted.”
In addition to impacting on M&A deals in the sector, the tax is also likely to generate a reasonable amount of work for lawyers involved in contracts. “There will be contract reviews, particularly in the disposal and acquisition space, and also in the context of farm-in farm-out agreements,” he said.
Fry also predicts that the tax will generate a range of dispute work following its first year of implementation as a result of the various options available to tax payers as to how they calculate the tax. “I can foresee there being disputes between the taxpayers and the revenue collectors in relation to the valuation methodology,” he said. “But the disputes will not occur for some time, we would not see a dispute over valuations until a tax return is lodged, and that will not be until 2013.”
The tax will only come into effect when a coal or iron ore miner generates a profit above A$75 million in one financial year. Profit above that amount will be taxed at 30 percent.
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