ASSET PAIN PREDICTED

By on July 3, 2003

The ATO’s review of the effective life of quarry assets continues, but feedback and recent meetings suggest the issue is not going favourably for smaller independent extractive industry operators.

A revised effective life schedule has been released by the ATO  just prior to going to press and while recommended lives have been pushed downwards for some assets the CMPA believe the impact of the proposed changes could seriously damage operators viability.

The battle to have CMPA representation and input into the review has been a drawn out affair but a series of meetings and site visits have occurred in recent weeks as the ATO moves toward a July introduction.

On 28 February 2003, the Extractive Industry Association-Queensland (EIA-Q) with input from the CMPA and on behalf of the extractive industry nationally, lodged a second submission prepared by PricewaterhouseCoopers (PWC) containing more detailed and comprehensive data in support of the lower effective lives as recommended by the industry in mid December 2002.

At the request of the ATO’s Effective Life, Centre of Expertise, a meeting was then held on 24 March 2003 between extractive industry representatives, manufacturers and PWC.

The meeting heard that the ATO would provide a written response to the industry’s submissions.

While a small sub-committee comprising representatives from both industry and the ATO would meet with a view to progressing this matter, ATO officials made it clear that in absence of further more compelling evidence that it would put in place the new effective lives as from 1 July 2003.

A copy of the minutes of this meeting is available to members. On 27 March 2003 the ATO provided a detailed written response to the industry’s submissions.  This is also available to members.

Industry representatives Denis Wagner, chair of the EIA (Queensland) Industry Profile sub-committee, Jeff Sims and Ken Gluch together with Julian Myers of PWC met with the ATO representatives on 31 March 2003 and argued strongly for the industry’s case based on data already provided to the ATO and additional information from CMPA members and manufacturers as a result of the meeting held on 24 March 2003.

The meeting agreed that the areas of major concern related to assets including crushers, conveyors, material handling assets and screens.

In the light of the arguments put forward by the industry representatives the ATO indicated it would re-visit the proposed effective lives of these particular assets.  This re-examination was to particularly look at the need to provide a separate category for mobile crushers with an appropriate effective life.

Also to be re-examined is the need to provide different effective lives for different types of conveyors (gravity and screw take-up); and also the need to divide material handling assets into two categories with different effective lives.

The industry representatives agreed to provide additional data in relation to the categorisation of material handling assets.

As part of its re-examination ATO representatives then visited Wagner’s quarrying operations at Toowoomba. An offer was made by the industry representatives to assist with visits to other sites if this was deemed necessary by the ATO.

Regarding dredges, the ATO has indicated it would be prepared to re-examine

the proposed effective life if additional data could be furnished by the industry to support its recommendation.

Following the visit to Wagner’s, and after assessing the deputations and information provided by the EIAQ and the CMPA, the ATO has since revised its initial recommendations on effective lives of extractive industry equipment.

In correspondence received from the ATO on 8 April the recommended effective life for crushers has been reduced from 30 to 20 years; while screening assets have similarly been reduced from 15 to 12 years.

While the CMPA acknowledges the improvement in these proposed schedules it maintains that they will have a significant impact on smaller independent extractive industry operators.

The ATO claims that operators who feel the recommended lives of some assets may be inappropriate have the ability to present their own effective lives under division 40 of the Income Tax Assessment Act 1997.

The CMPA is concerned however, that this would add further cost as engineering reports would probably be required to substantiate depreciation claims outside the ATO schedule.

The accompanying table details the existing asset life schedules as well as the original and revised ATO recommendations. In the next issue of CMPA news an extrapolation of the impact of the proposed schedules will be provided to demonstrate the impact on business viability.

Comparison of CMPA, current and the latest ATO proposed Effective Lives.  Notice the decrease in the ATO’s most recent proposal.  These figures in most cases are still well above the CMPA proposal’s. 

You must be logged in to post a comment Login

Sponsored Ads