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1000 taxandresourcestaxationinaustralia darrenballchinabusinessteamtimluchinapractice english 1000 taxandresourcestaxationinaustralia darrenballchinabusinessteamtimluchinapractice english Presentation Transcript

  • Tax and Resource Taxation in Australia Darren Ball, SA Leader China Practice, KPMG Australia Tim Lu, National Director China Practice, KPMG Australia 12 July 2012© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 0affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  • Agenda * Australia Tax Overview * Mineral Resources Rent Tax * Petroleum Resources Rent Tax * Overview of State Royalty * R&D Tax Incentives in Mining & Energy * KPMG Australia’s China Practice© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 1affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  • Key consideration for Chinese investors FIRB and other regulatory approval Investment structure Tax planning Approach to the deal Ongoing operation and management© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 2affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. View slide
  • Key Regulators Foreign Investment Review Board (FIRB) Australian Securities & Investments Commission (ASIC) Australian Taxation Office (ATO) State Revenue Office (SRO) Australian Customs Services (ACS) Department of Primary Industries (DPI)© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 3affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. View slide
  • Starting a businessRegistration – ATO Australian business number (ABN) Goods and services tax (GST) Pay as you go withholding (PAYG withholding) Fringe benefit tax (FBT) Tax file number (TFN) Payroll tax Fuel Tax credits© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 4affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  • Running a BusinessTax Obligations Federal tax – ATO 1. Income tax 2. GST 3. Excise duties 4. Employee-related tax •PAYG withholding •Superannuation guarantee •Fringe benefit tax State tax – SRO 1. Land tax 2. Rates 3. Stamp duty 4. Payroll tax© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 5affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  • Australian and China tax overview China Australia Corporate tax 25% 30% Goods and Services Tax 17% 10% Business tax 3% - 20% NIL Stamp duty 0.005% ~ 0.1% Normally between 4.5%- 5.5% Payroll Tax NIL 4.75% - 6% Fringe Benefits Tax NIL 46.5% Individual Income Tax 45% 45% (from RMB1,200,000) (from A$180,000)© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 6affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  • Federal & State Revenue 840 Federal Tax Personal income tax 7,090 45,779 Company tax 132,650 FBT 35,456 Excise and other 3,600 indirect taxes 57,100 Superannuation taxes 1,770 State Tax Payroll tax 6,458 Land tax 16,887 4,505 Stamp duty on conveyances 5,028 Stamp duties / levies on other 5,565 transactions 691 9,534 Gambling taxes Note: 2010/11 Figures© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 7affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  • Resource taxation in Australia State royalties across many commodities Resource Income tax taxation in Excise on North West MRRT / PRRT Australia Shelf (NWS) proposals PRRT on petroleum projects in offshore / Federal waters (except NWS)© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 8affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  • Review of Australian taxation – Henry review• The Henry review made numerous recommendations to reform the Australian tax system• One of the recommendations was to reform the way resources are taxed in Australia• After much political debate and industry lobbying, the Government introduced: • Expansion of the existing Petroleum Resource Rent Tax (PRRT) • Introduction of a Minerals Resource Rent Tax (MRRT) • PRRT and MRRT are profit-based taxed and project specific, rather than production based (which is the basis of royalties) and company specific (which is the basis for income tax).© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 9affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  • Agenda * Australia Tax Overview * Mineral Resources Rent Tax * Petroleum Resources Rent Tax * Overview of State Royalty * R&D Tax Incentives in Mining & Energy * KPMG Australia’s China Practice© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 10affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  • Status of the MRRT – Assume 31 December year-end Consider accounting Commencement implications for date of MRRT financial close 21 October 31 December 1 July 2012 1 June 2013 2012 2012 First MRRT instalment Due date for first MRRT (assuming a 31 December SAP) • Applies to coal and iron ore mining project interests • Commencement date: 1 July 2012. 31 December companies will have a short MRRT first year of 1 July 2012 – 31 December 2012 • First MRRT instalment due: 21 October 2012© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 11affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  • MRRT method statement Mining revenue less Mining expenditure Mining Profit = (at valuation point) (upstream costs) less Allowances Royalty Transferred royalty Ordering = Pre-mining loss Mining loss MRRT Profit Starting base x Transferred pre-mining loss Transferred mining loss MRRT rate of 22.5% = Low profit offset for miners with mining profit less than $75 million with a ‘phase MRRT liability out’ for profits between $75 million and $125 million (tax deductible for corporate income tax)© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 12affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  • Mining profit Mining profit for a Mining revenue Mining mining project (at the valuation less expenditure interest point) (upstream costs) Upstream Valuation point Downstream• Mining expenditure includes both capital and revenue items. However, some exclusions for “indirect expenditure”, such as financing costs, hire purchase agreements and hedging / foreign exchange losses• Determined by reference to ‘mining project interests’© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 13affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  • Valuation point Upstream activities Downstream activities ROM Extract Crushing Blending Loading Transport – Rail and Port Stockpile Valuation point • The valuation point is just before the taxable resource is removed from the run-of-mine (ROM) stockpile on which it is stored • If there is no ROM stockpile, it is where the resource enters the first beneficiation process or is first moved from the immediate point of extraction • If the resource is sold prior to the above, it is the point just before first supply of the taxable resource© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 14affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  • What are your concerns on MRRT? • What is my MRRT liability? • Will I have to pay this tax? What are the forecasted losses / tax payments? • KPMG MRRT modelling tool to provide you with illustrative scenarios • What are my Accounting implications? • Impact on financial reporting • Deferred tax assets of starting base • Disclosure required • How will this change my Business processes? • Can my accounting systems and tax management procedures provide sufficient information for MRRT© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 15affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  • Agenda * Australia Tax Overview * Mineral Resources Rent Tax * Petroleum Resources Rent Tax * Overview of State Royalty * R&D Tax Incentives in Mining & Energy * KPMG Australia’s China Practice© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 16affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  • Overview of the PRRTWhat is PRRT?• PRRT is applied to taxable profit of a petroleum project.• Rate of PRRT is 40%. Deductible for corporate income tax.• PRRT is considered an income tax under AASB 112, and tax effected.Extension of PRRT• Recent amendments have expanded the coverage of PRRT to include onshore petroleum projects.• Date of effect of extension is 1 July 2012• Applies only to 30 June financial year ends (no substituted accounting period)• Credit for state and federal royalties paidPetroleum Project• Definition of Petroleum is the same as under the Offshore Petroleum and Greenhouse Gas Storage Act 2006, which is broadly any naturally occurring hydrocarbon or naturally occurring mixture of occurring hydrocarbons, whether gaseous, liquid or solid state.• This definition will cover coals seam gas (CSG)• New law specifically extends PRRT to oil shale.© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 17affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  • PRRT method statement Petroleum receipts, including sales proceeds prior to becoming a Assessable receipts = marketable commodity, e.g. Gas used as feedstock less Deductible expenditure Starting base (PRRT extension) Ordering = Exploration expenditure Taxable profit General project expenditure x PRRT rate of 40% Transferred exploration expenditure = Closing down expenditure PRRT liability (tax deductible for corporate income tax)© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 18affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  • Key PRRT issues• Assessable receipts• Sale of project natural gas – i.e., sale of CSG (possibly between related parties) from several projects to “the aggregator” before a “marketable petroleum commodity” is produced. Regulations will be introduced to enable calculating the “gas transfer price”• Assessable receipts (sale of carbon units) and deduction (purchase of units) in respect of carbon units following Clean Energy Act• General project expenditure (Development expenditure)• Expenditure directly related to petroleum project.• Indirect expenditure not deductible• General project expenditure is not transferrable to other projects• Unused expenditure is uplifted`© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 19affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  • Key PRRT issues (cont.)• Undeducted PRRT exploration expenditure• Can transfer undeducted exploration expenditure between projects and between group companies• Unused exploration expenditure is uplifted• Cut-off date as to when exploration “ceases” and development commences. No rules in the law, question of fact• Certain requirements to have ownership for the entire year to be eligible for transfers• Inherited exploration expenditure (i.e. acquired losses) are ineligible for transfer• If permit expires or is surrendered, any PRRT loss balance, if not yet transferred, would be forfeited• Closing down expenditure• Unused expenditure / credit can be applied against other liabilities owning to the Commonwealth under an Act administered by the Commissioner of Taxation.© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 20affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  • Agenda * Australia Tax Overview * Mineral Resources Rent Tax * Petroleum Resources Rent Tax * Overview of State Royalty * R&D Tax Incentives in Mining & Energy * KPMG Australia’s China Practice© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 21affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  • Overview of the state royalty regimesRoyalty rates (coal) State Method QLD 7% where the value of the coal produced does not exceed $100/tonne 10% on the value of the coal exceeding $100/tonne WA If exported - 7.5% of the royalty value If not exported - $1/tonne (CPI Indexed) - currently around $2.50 / tonne NSW Open cut mining 8.2% of value Underground mining 7.2% of value Deep underground mining 6.2% of value SA $0.027 per GJ (CPI indexed) NT 18 % of the Net Value of mineral commodities VIC Brown Coal - $0.0588 per GJ (CPI Indexed) Other than Brown Coal 2.75% of the value TAS 1.6% of Net Sales plus profit Maximum of 5% of net sales© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 22affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  • Overview of the state royalty regimesRoyalty rates (Iron ore) State Method QLD If the average price of iron ore is $100 or less - $1.25 per tonne, 2.5% of the value per tonne thereafter WA Beneficiated Ore 5% of royalty value Fine Ore 5.625% of royalty value Lump Ore 7.5% of royalty value NSW 4% of ex mine value SA $0.027 per GJ (CPI indexed) NT 18 % of the Net Value of mineral commodities Vic 2.75% of value Tas 1.6% of Net Sales plus profit Maximum of 5% of net sales© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 23affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  • Overview of the state royalty regimesRoyalty rates (petroleum) State Method QLD 10% of well head value WA 10% of well head value for primary licence 11-12.5% for secondary licences NSW 0% for first 5 years Increases from 6-10% in years 6-10 SA 10% of well head value NT 10% of well head value Vic 10% of well head value Tas 12% of well head value© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 24affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  • Agenda * Australia Tax Overview * Mineral Resources Rent Tax * Petroleum Resources Rent Tax * Overview of State Royalty * R&D Tax Incentives in Mining & Energy * KPMG Australia’s China Practice© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 25affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  • R&D Tax Incentive - overviewKey aspects include:■ New R&D Tax Incentive from 1 July 2011, with an increase in base rate benefit■ Entitlement and self-assessment program with a broad definition of R&D■ Modified definition of R&D (under the new regime), which may limit some mining claims relating to production of resources■ Companies in losses – eg exploration companies and junior miners – can cash out up to 45% of R&D spend■ Mining and energy claims account for circa 45% of total R&D claims in Australia NEW EXPLORATION ENERGY …… TECHNIQUES …… …… …… INNOVATIVE MINING NEW EQUIPMENT EFFICIENCY RENEWABLE ENERGY METHODS DESIGN WATER EFFICIENCY FLOW SHEET DESIGN …… CREATION OF NEW …… UNCONVENTIONAL GAS …… …… KNOWLEDGE© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 26 26affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  • R&D Tax Incentive – what is the benefit?Higher benefits now exist…■ Refundable 45% tax credit for companies with less than $20m group turnover ■ 15% permanent tax saving, double current benefit ■ Tax loss companies able to ‘cash out’ the credit with no cap on spend■ Non-refundable 40% Tax Credit for companies with over $20m group turnover ■ 10% permanent tax saving up from 7.5% For example, if a company incurs $1,000,000 R&D expenditure: Company Size Benefit R&D Group turnover <$20m, in losses $450,000 cash R&D Group turnover <$20m, paying tax $150,000 incentive to tax payable R&D Group turnover >$20m $100,000 incentive to tax payable© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 27 27affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  • R&D Tax Incentive – what is ‘R&D’?Definition of Research & Development…■ Experimental activities, outcome cannot be known (technical risk)■ Established science - Hypothesis, experiment, observation■ The purpose of generating new knowledge (innovation)■ Including – new or improved materials, products, devices, processes or servicesIt is important to be able to■ Demonstrate current knowledge and experience■ Evaluate what tasks form part of experimental activities Still somewhat■ Demonstrate the new knowledge uncertain how this■ Document purpose and process definition will be applied to mining© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 28 28affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  • R&D Tax Incentive – application to mining and energy Typical Mining R&D Focus Areas Typical Energy R&D Focus AreasNew mines - Categories of R&D will include: Oil and Gas1. Exploration techniques - New drilling and exploration techniques2. Metallurgy studies - New equipment design and development3. Design of processing plants – including flowsheet - Unconventional gas eg shale and coal seam4. Mining methods - LNG project development5. Environmental issues Renewable energyMature mines - Typically R&D can be identified within all - Solar, wind, geothermal, wave, bio projectsof the technical disciplines found on site, eg: - Hybrid and off-grid solutions1. Geology Power and Utilities2. Engineering - Plant performance, design and efficiency projects3. Mining - Grid connection projects4. Metallurgical/processing - Transmission efficiency and infrastructure design5. Waste areas (tailings dams and waste rock dumps) - Process design, control and efficiency© 2010 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated withKPMG International Cooperative (“KPMG partnership a Swiss entity. All rights reserved. KPMG network of independent member © 2012 KPMG, an Australian International”), and a member firm of the firms 29 29The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarksa SwissInternational rights reserved. affiliated with KPMG International Cooperative ("KPMG International"), of KPMG entity. AllCooperative ("KPMG International"). Liability limited by a scheme approved under Professional Standards Legislation.
  • Grant funding – backgroundWhat is available for the mining and energy sectors?■ The Federal and State Governments have traditionally provided a range of grant funding programs across various sectors■ Focus areas: R&D and innovation, environment and sustainability, infrastructure, regional development, social and community etc■ However, standard mining and energy projects have not been focused on■ Primary opportunities are in renewable energy, clean technology, regional and off-grid infrastructure, environmental initiatives etc© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 30 30affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  • Opportunities under the Carbon PriceThe Federal Government has announced a number of policies to deliver its climate changeaspirations■ What will the impact be on the mining and energy sectors?■ Most funding earmarked for renewable energy and clean technology New funding Centralised New programs Enhanced Expanded© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 31 31affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  • Key pointsWhere are the best opportunities?■ Innovative junior miners and explorers – particularly for the refundable R&D Tax Incentive■ Developers of alternative and clean energy technology and projects – both for grants and the R&D Tax Incentive■ Large mining companies developing innovative technologies, exploration techniques, mining and production processes etc■ All companies seeking to reduce emissionsWhat is the bottom line?■ Australia has a strong R&D Tax Incentive regime in place, which clearly benefits the mining and energy sectors■ Any existing uncertainty about the new regime will dissipate over the next 12 months■ Numerous grant opportunities are and will continue to be available for various sectors, focusing largely on regional and environmental projects© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 32 32affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  • Agenda * Australia Tax Overview * Mineral Resources Rent Tax * Petroleum Resources Rent Tax * Overview of State Royalty * R&D Tax Incentives in Mining & Energy * KPMG Australia’s China Practice© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 33affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  • KPMG Australia Overview as of FY2011 - 5000 professionals - 13 offices - FY2011 revenue A$1.064 billion -Audit A$377 million Darwin -Tax A$214 million -Advisory A$473 million CairnsChina Practice  Operates in 6 offices Sunshine Coast  Chinese speakers 300 Brisbane Gold Coast Perth Sydney Canberra Adelaide Wollongong Albury Melbourne Launceston Hobart© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 34affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  • KPMG Excellence in Energy & Resources© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 35affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
  • Contact us Darren Ball Tim Lu State Leader, China Practice in SA National Director, China Practice KPMG Australia KPMG Australia Tel +61 8 8236 3197 Tel +61 3 9288 5255 darrensball@kpmg.com.au timlu@kpmg.com.au© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms 36affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.