The Federal Government must stop increasing investor uncertainty by messing with Australia’s taxation system, says the South Australian Chamber of Mines and Energy (SACOME). Changes to taxation announced in the Federal Budget are set to impact negatively on Australia’s increasingly uncompetitive investment environment.
Continuing a disturbing trend established by the Government in recent years, attacking the deductibility of exploration expenses and rules surrounding thin capitalization sends the wrong message to investors. SACOME’s chief executive Jason Kuchel says that in the current environment, already extremely difficult for junior explorers, these changes make it even more challenging to obtain project investment.
“But the bigger impact is the cumulative effect of a seemingly never ending collection of investment deterrents over recent years,” says Jason Kuchel, referring chiefly to the Minerals Resources Rent Tax, Petroleum Resources Rent Tax, carbon tax and the issues surrounding their inception.
“Investor funds are scarce and competition for mining and energy projects is fierce - Australia is not alone in its wealth of minerals and oil & gas resources,” he says. “There is absolutely no doubt that this continual tinkering with the tax system severely damages investor confidence.”
The changes around exploration expenses mean many will lose their immediate deductibility and must be claimed instead over a minimum of 15 years, making the acquisition of exploration projects less attractive.
Changes to the long-established rules around thin capitalization mean companies will now have to dramatically increase the equity they put into new Australian investment projects. Investigations for the Business Tax Working Group last year showed that Australia’s thin capitalization rules are not overly generous, with the group expressly rejecting any changes to the current rules.
SACOME is extremely disappointed that whilst clearly relying heavily on the mining pipeline to fund spending programs, the Government is driving up taxes on resource investments at a time when global market conditions have placed them as higher risk.
“Attracting investment into our country will grow the economy and grow jobs,” Jason Kuchel says, “It is in every Australian’s interest for the government to stop changing the rules and provide a stable fiscal environment.”
“Investment is by far the biggest challenge facing the resources sector and this government has once again succeeded in providing investors with another reason not to invest here.”