The Treasurer has announced that the Australian Government will make changes to the way mining, petroleum and quarrying rights are dealt with under the uniform capital allowances regime of the income tax law.
Holders of these rights, particularly those who acquire them from a former holder, will benefit from this measure.
The Commissioner of Taxation recently issued a draft taxation ruling on the operation of the uniform capital allowances regime as it applies to mining rights.
Under the current interpretation of the law, as set out in the draft ruling, holders of these rights would have to write-off a right over the whole life of the mine, petroleum field or quarry. This is irrespective of a former holder’s prior use of the mine, petroleum field or quarry as taxpayers cannot self-assess to account for these circumstances. The current interpretation also requires a holder of these rights to make an annual estimate of the economic life of their mine, petroleum field or quarry.
As a result of this measure, the law will include these rights under the general provisions of the uniform capital allowances regime which will provide holders of these rights with the option of self assessment; allowing them to write-off their right over the remaining life of the mine, petroleum field or quarry. Also, they will not be required to make an annual estimate of their asset’s economic life.
This measure will ensure that these rights are essentially treated the same as other depreciable assets that are written-off under the uniform capital allowances regime, as had been originally intended.
The legislative amendments will apply from 1 July 2001 — the date mining rights were brought into the uniform capital allowances regime as depreciating assets.
Supporting Information
Why is this important?
- The Commissioner of Taxation recently issued a draft taxation ruling on the operation of the uniform capital allowance regime as it applies to mining, petroleum and quarrying rights.
- The interpretation of the law as set out in the ruling is inconsistent with the policy intent and the amendments covered by this announcement ensure the Government’s original intent is maintained.
- This measure will ensure that these rights are essentially treated the same as other depreciable assets written-off under the uniform capital allowances regime, as had been originally intended.
Who will benefit?
- Holders of mining, petroleum and quarrying rights, particularly those who acquire these rights from a former holder.
What funding is the Government committing to the initiative?
- The measure has no revenue impact as the amendments ensure the law reflects the original policy intent.
What have we done in the past?
- The uniform capital allowances regime introduced from 1 July 2001 was an outcome of the Review of Business Tax. The regime replaced a wide variety of different write-off provisions of the income tax law, simplifying and modernising those old provisions. Mining and other resource rights are now treated as depreciating assets for the first time, replacing capital gains tax treatment. This is appropriate because the value of such rights generally decline over time.
When will the initiative conclude?
- The measures are on-going.