Australia’s peak industry body for mineral exploration and mining, the Association of Mining & Exploration Companies (AMEC), says changes announced in last week’s Federal budget to the resources industry tax system are of great concern to the mining and exploration sectors. As expected, the budget contained measures to tighten the rules on exploration deductions for miners, aimed at netting $1.1 billion to the government over four years.
Companies that buy a previously-explored tenement will be hit hardest by the changes because the purchase price of the mining right will be excluded from being claimed. The budget papers said the move was designed to avoid penalizing junior mining companies conducting greenfields exploration.
‘‘This measure will improve the sustainability of this important concession, which recognizes that resources exploration is a vital and economically risky activity that has spillover benefits to the economy,’’ the budget papers said.
AMEC chief executive officer Simon Bennison says it’s not the time to implement further changes. “The exploration and mining sector is facing difficulties raising capital as investment continues to flow to projects in other resource-rich jurisdictions.
“We have seen a number of high profile expansion plans and proposed new projects recently put on hold throughout Australia, with the result that contracts have been cancelled and associated staff laid off. It is critical that the mining or exploration sectors are not targeted as part of the budget solution.
“Now is not the time to introduce policy change that further discourages investment flowing to Australia and continues to make the industry internationally uncompetitive. There is no doubt that governments are tempted to increase revenue through additional and new taxes, royalties, levies, duties, fees and charges, cost recovery or by removing existing expenditure deduction allowances.
“The conclusions drawn by the Government`s own Business Tax Working Group, in November 2012 confirmed these concerns, with the result that potential business tax reform was shelved. This included proposed changes to interest deductibility and thin capitalization rules, depreciation, and exploration and prospecting deductibility. The status quo should remain.
“Driving investment offshore will inevitably lead to a smaller mining industry in Australia and jeopardize jobs and the significant revenue streams currently enjoyed by state and federal governments. The government should focus on growing the mining industry through the exploration sector. The emphasis should be for new discoveries to create employment and revenue for the future,” says Simon Bennison.
There was some relief with fears diesel fuel rebates would be targeted again proving unfounded and the 32 cent rebate remaining unchanged.
The government has also funded a new ‘councillor’ position based in Beijing aimed at fostering relations between the resources and energy industry and Chinese authorities.