The submission deals with accounting for the proposed Mineral Resource Rent Tax (MRRT) and extension of Petroleum Resource Rent Tax (PRRT) that are currently being considered by the Australian Parliament.
Under the MRRT and PRRT, the Australian Government would seek to access a proportion of the 'economic rent' inherent in coal, iron ore and oil and gas operations. In response to diversity in practice that emerged on Australia's transition to IFRSs in accounting for the existing smaller scoped form of PRRT, the AASB issued Interpretation 1003 Australian Petroleum Resource Rent Tax, which requires PRRT to be accounted for as an income tax.
The submission argues the Interpretation "effectively represents the elimination of accounting policy options under Australian Accounting Standards that are available to entities that report under International Financial Reporting Standards (IFRS) as promulgated by the IASB".
The submission notes the following on the efficacy of domestic Interpretations:
"... we believe that Interpretation 1003 (along with other Australian 'domestic' Interpretations) should be reassessed by the AASB for possible withdrawal. Such a withdrawal would deal with issues such as inconsistencies with the AASB's own objectives in relation to full convergence with IFRS and permit Australian entities to consider global practice in this area when setting their accounting policies. It would also serve to address misconceptions Australia is 'not fully compliant' with IFRSs, and set a leading example for other jurisdictions in Asia-Oceania and more broadly."
The submission also notes a number of significant accounting issues that arise in accounting for PRRT or MRRT as an income tax, arising from the unique features encompassed in a resource rent regime, such as the ability of affected entities to elect to use a measure of 'market value' in their tax calculations, the indexation ('augmentation') of unused allowances, and the proposed rebateability of royalties paid to Australian States.