Australian government eliminates mining tax

Australian government eliminates mining taxAustralia’s Federal Treasurer, Joe Hockey, unveiled the country’s toughest budget in almost two decades last night, slashing welfare entitlements and increasing taxes for high earners, but also abolishing the country’s debated mine tax.

In his speech, published by ABC News, the authority said mining had done much of the “heavy lifting over the decade,” and that it was turn to “fire up” the rest of the economy.

“An amazing 80 per cent of all investment in the recent mining and resources boom has come from new foreign investment in Australia,” he was quoted as saying.

The eliminated Minerals Resource Rent Tax would have raised $3.4 billion over four years.

Australian government eliminates mining tax

Australia’s Federal Treasurer Joe Hockey. (Image courtesy of The Council of Social Service of New South Wales).

The budget provides $100 million over four years for minerals exploration, by giving small explorers not making any taxable income access to a refundable tax offset for their Australian shareholders.

It also seems to deliver on other key election commitments, such as ending the carbon tax and sparing mining an increase in the diesel fuel levy. Currently, mining companies and farmers get a rebate on excise (of about 38 cents a litre) for diesel used off-road.

The resource sector will also benefit from grants under the Coalition’s Emissions Reduction Fund (part of Direct Action), which will offer $2.55 billion over ten years for measures to reduce pollution.

But for many in the industry, the government’s announcement was not as positive as it seems.

In a statement Tuesday, Brendan Pearson, CEO of The Minerals Council of Australia, said the budget spreads the fiscal burden and the mining sector will continue to do a lot of the heavy lifting.

“We’ve got $3.7 billion in new tax charges which will primarily hit the mining sector. They relate to changes to exploration deductibility, costs of mining rights, new research and development requirements and a revision of the thin capitalization ratio,” he said.

The Queensland Resources Council has called the Budget a “mixed bag” of positive and negative measures for the mining industry.

He said that while the organization welcomes the exploration development incentive of tax break for investors, he was surprised to see cuts in funding to the Great Barrier Reef Marine Park Authority and the Australian Institute of Marine Science, especially at times when “when there is international focus on Australia’s management of the Great Barrier Reef Marine Park” and mining plans in the area.