The RSPT will apply a 40 per cent tax to profits from resource projects after allowing for extraction costs and recouping capital investment.

Federal Treasurer Wayne Swan said that the RSPT, to apply from 1 July 2012 will “be a better way to tax resources because it only taxes profits and fully recognises the large investments made in resource projects.”

Federal Minister for Resources and Energy Martin Ferguson said “Under the RSPT, the Government will provide a refundable credit to resource entities for state royalties.”

Consultations will be conducted over the year to resolve detailed design issues, in particular the transition for existing projects. This will include the establishment of a Resource Tax Consultation Panel. The Panel will undertake targeted consultation with industry and other stakeholders.

Article continues below…

Australian Petroleum Production and Exploration Association (APPEA) Chief Executive Officer Belinda Robinson said that the oil and gas industry is concerned about the impact the proposed changes could have, in particular on projects within the emerging coal seam gas (CSG) sector in Queensland.

Ms Robinson said “A particular concern is the impact of the new tax on projects at critical stages of planning. These include Queensland’s LNG projects to be developed from CSG and investments in domestic gas projects for the supply of energy to our capital cities.”

As part of the reform the Government will introduce a resource exploration rebate (RER) from July 2011 to promote resource exploration.

Under the RER, companies can receive a refundable tax offset for their exploration expenditure.

Mr Ferguson said “The RER will significantly benefit small, pre-profit exploration companies. Small exploration companies currently do not get a tax benefit from their deductible exploration expenses until they become profitable. Compared to larger, more diversified companies, these smaller companies face a competitive disadvantage because losses they generate from exploration often cannot be used to offset other taxable income.”

Ms Robinson said “The industry has welcomed the Australian Government’s decision to introduce a resource exploration rebate, reduce the corporate tax rate and retain the existing Petroleum Resource Rent Tax regime for existing offshore oil and gas projects.”

Ms Robinson said APPEA has long supported the removal of the “tax-induced distortion disadvantaging the exploration efforts of Australia’s small and medium sized oil and gas explorers.

“This reform will help to stem the flood of exploration funds shifting overseas and will assist in maintaining the strength of the Australian junior exploration sector – so critical for the long-term viability and sustainability of Australia’s oil and gas sector."

The Government’s tax reform also includes an increase to 12 per cent Superannuation Guarantee (SG), from the current 9 per cent. The SG will commence with a 0.25 increase in 2013–14 and 2014–2015 and be followed by 0.5 increments until the SG reaches 12 per cent by 2019–20.

As a result 8.4 million Australians will receive an increase in their retirement incomes.