Australia: Australian Miners Call For Exploration Tax Relief
20 August 2013
Posted by: Author: Mary Swire
Author: Mary Swire
Flagging exploration in the Australian mining sector could receive a boost were the next government to introduce a new tax credit, industry representatives have claimed.
The South Australian Chamber of Mines and Energy (SACOME) has said that a mineral exploration tax credit (METC) would enable Australian junior mineral exploration companies with no taxable income to voluntarily pass current losses on to Australian resident shareholders in the form of a tax credit. Shareholders would thereby have an incentive to commit capital to the exploration sector.
In 2008, Alice McCleary, a SACOME councillor, developed an METC model she argued would be suitable for Australia. Based on the existing franking system, the model could help minimize administrative and tax compliance costs, and drive down risks for investors. Only junior explorers would be eligible.
In the context of an increasingly bitter general election campaign, in which the Coalition has pledged to axe the mining tax, SACOME is again pressing for the adoption of its proposed scheme. It stresses that the cost would be offset by the additional economic activity and tax revenue generated. At least 534 jobs could be created across the exploration and associated mining services sectors, and Australia's gross domestic product (GDP) could benefit to the tune of AUD231m (USD212m). Were exploration to result in viable projects, SACOME believes that the flow-on effects could support over 4,000 jobs and up to AUD2.2bn in additional GDP.
According to SACOME's Chief Executive Jason Kuchel, "An METC policy will reinvigorate Australia's mining sector, which has recorded a drop in share of worldwide exploration over recent years – from around 21 percent of world exploration spend in 1996 to just 12 in 2011."
Kuchel warned that the decrease, "combined with softening commodity prices and the constrained capital markets we are experiencing right now, is providing an extremely challenging environment for our junior resources companies trying to develop their deposits into economical projects."