New Australian resource tax raises accounting issues, prompts AASB to issue agenda decisions
14 Dec 2011
The Australian Accounting Standards Board (AASB) has issued tentative agenda decisions dealing with accounting for proposed new resources taxes. These may potentially have wider implications due to the generic nature of some of the matters discussed and the widespread involvement of global resources companies in the Australian resources industry, many of whom report under IFRSs or US GAAP.
The tentative agenda decisions deal with the following accounting issues arising from a proposed 'Mineral Resource Rent Tax' (MRRT) and extension of 'Petroleum Resource Rent Tax' (PRRT) that are currently being considered by the Australian Parliament:
- Whether MRRT is an income tax. The agenda decision stops short of concluding MRRT is an income tax, but notes existing guidance is sufficient to address the issue, referencing the possible direct or analogous application of AASB Interpretation 1003 Australian Petroleum Resource Rent Tax (a domestic Interpretation)
- Accounting for an uplift in allowances on the commencement of a new tax. Entities becoming subject to the MRRT/PRRT for the first time are given the option of adopting an 'starting base allowance' which increases future deductions available based on the market value of the operation, rather than the actual cost of establishing the operation. The agenda decision states such increases in deductions available are to be treated "as a deductible temporary difference giving rise to a deferred tax asset"
- Substantive enactment. The Bills required to enact the tax have been passed by the Lower House of the Australian Parliament, but will not be considered by the Australian Senate until 2012. The tentative agenda decision concludes existing guidance (including a further Australian domestic Interpretation) "is sufficient to address the issue of when substantive enactment has occurred".
The tentative agenda decisions arose from the AASB's discussions at its December 2011 meeting, where the AASB also debated the question of accounting for payments to Australian State Governments for royalties that can be credited against MRRT/PRRT payable. There is currently debate about whether such royalties should be considered production costs or a form of 'prepaid' MRRT/PRRT and the AASB has indicated it will raise this additional issue with the IFRS Interpretations Committee.
Comments on the AASB's tentative agenda decisions close on 17 January 2012. Click for:
- AASB's tentative agenda decisions (link to AASB website)
- AASB Action Alert (link to AASB website) from the AASB's December meeting with more details of the discussion
- Deloitte (Australia) submission to AASB on accounting for MRRT/PRRT, providing some additional background to the issues arising.
