Digging up some shiny details on new Minerals Resource Rent Tax

By Michael Sheng and Teresa Dyson, Ashurst
Copy link

The Minerals Resource Rent Tax (MRRT) is a complex new tax that came into effect on 1 July. It applies to iron ore and coal mining, and gas extracted as an incident of coal mining. This article will focus on some of the major MRRT issues for mining participants.

Michael Sheng Partner Blake Dawson Shanghai
Michael Sheng
Blake Dawson

Information transfers

A miner must provide an information notice to an entity that acquires a part of an interest or the interest itself as a result of the interest being transferred or split. This will typically be required within 60 days of the transfer.

However, in relation to a mining project transfer, mining project split, pre-mining project transfer or pre-mining project split that happened between 1 May 2010 and 30 June 2012, the transferor must have provided the transferee with an information notice by 21 July 2012.

MRRT instalment rate

Miners subject to the MRRT must make their first MRRT instalment payment by 21 October 2012. The MRRT instalment payable by a miner is equal to its instalment income (broadly, the gross income from iron ore and/or coal for the quarter) multiplied by its instalment rate.

For the first MRRT year, the Commissioner of Taxation will not give an instalment rate and a miner may choose its own MRRT instalment rate or take the default rate (8% for iron ore or 3% for coal), subject to a general interest charge, which may apply if the MRRT instalments paid in any quarter fall more than 15% short of the miner’s actual MRRT liability for the year.

Starting base allowance

The starting base allowance is crucial as it should provide a significant MRRT tax shield for miners. Broadly, the starting base allowance recognises investments in upstream assets that existed before 2 May 2010.

The starting base can be calculated by either the method of book value (i.e. the value recorded in the miner’s most recent audited financial accounts prior to 2 May 2010 for the upstream assets, excluding the resource) or market value (i.e. the market value of the upstream assets including the resource at that date).

Crucially, assets are never taken to have been starting base assets if the miner does not make a valid choice under the MRRT Act specifying the valuation approach, or fails to give the Commissioner a valid starting base return.

Certain expenditure incurred by miners between 2 May 2010 and 30 June 2012 will also be recognised as part of the starting base allowance.

Junior explorers

For junior explorers, the starting base allowance has implications that should be considered (given they may wish to choose to apply for the simplified MRRT method, which would effectively extinguish the starting base allowance and other attributes).

Teresa Dyson Partner Ashurst Brisbane
Teresa Dyson

Miners and junior explorers holding exploration permits may choose to write off their starting base assets under the market value approach, instead of the book value approach.

In certain circumstances, a miner may not be required to actually market value those assets, and may opt for a pre-mining project interest that existed on 2 May 2010 to make a further choice of working out the base value of its starting base assets using a “look back” approach.

The “look back” approach is intended to ease compliance costs for miners that would otherwise find it difficult to undertake a proper market valuation of these pre-mining assets.

Elections and choices

The MRRT will apply fully to miners whose profits exceed A$125 million (US$127.6 million) per year.

Miners with mining profits of less than A$75 million per year will have their MRRT liability reduced to nil (through a low profit offset). The low profit offset will phase out for miners with profits between A$75 million and A$125 million.

Miners may also choose to apply the simplified MRRT method in certain circumstances where group profit (determined in accordance with the MRRT Act) is less than A$50 million resulting in the miner’s MRRT liability being reduced to nil. In these circumstances, the miner’s group profits must be less than A$250 million and every mining project interest of the group’s entities must have state royalties that exceed 25% of their mining profit for every mining interest.

Mergers and acquisitions

Tax history inherited by the acquirer – an acquirer will inherit from the vendor the starting base that relates to the mining project interest. It will be crucial for the acquirer to confirm that the vendor has made valid elections in relation to the valuation of the starting base assets.

Liability issues for transfer year – an acquirer is liable to pay the MRRT for a mining project interest it has acquired for the entire MRRT year, including the period before the transfer.

Interaction issues with the income tax consolidation regime – an acquirer who makes an acquisition of an entity that is a member of a tax consolidated group, and that is also consolidated for MRRT purposes, will need to ensure that the target does not carry a potential liability for all or part of the MRRT liabilities of the entire tax consolidated group that it is exiting.

There are obviously a number of other issues that need to be considered by miners involved in merger and acquisition transactions. MRRT-specific due diligence is extremely important for acquirers to undertake, particularly as the “flow-through” MRRT attributes should add significant value to the interest.

Regardless of the outcome of the due diligence, it is prudent for the acquirer to ensure that the legal documents have robust tax warranties and a tax indemnity to give sufficient certainty.

The firm has changed its name from Blake Dawson to Ashurst Australia with effect on and from 1 March 2012. The Shanghai Representative Office is applying for a change of name from Blake Dawson Shanghai Representative Office to Ashurst Australia Shanghai Representative Office.

Michael Sheng is a partner at Blake Dawson in Shanghai, and Teresa Dyson is a partner at Ashurst in Brisbane, Australia




Blake Dawson Shanghai office

Suites 3408-10, CITIC Square

1168 Nanjing Road West, Shanghai

邮编 Postal code: 200041

电话 Tel: 86 21 6263 1888

传真 Fax: 86 21 6263 1999

电子信箱 E-mail:




Copy link