Australian Mineral Rent Resource Tax

Emerson’s Dan Nower, a member of the Machinery Health Management team, looks at the impact of changing tax rates on Australian miners.

At first look, the 30% tax that the Australian government is about to impose looks bad. In fact, my first thought was, “What is the Aussie Government doing? They are going to bring the Australian economy to a screeching halt! After all, it was the mining industry that minimized the effects of the global recession in Australia, right?” A more in depth look revealed another point of view and some concern, depending upon if you were in the Australian mining industry or not. Here are a few of the views.

View of Australian Coal Association:

The mining tax is only going to make Australian companies less competitive against foreign-owned opposition and ultimately it will threaten many Australian jobs.

A viewpoint from outside the mining industry:

  • A tax break for Australia’s 2.7 million small businesses to begin this year, which allows businesses with a turnover under $2 million to instantly write off a purchase of a new asset up to $6500.
  • A 1% cut to the company tax rate for all businesses, with small businesses getting a one-year head-start with the cut applied from July 1
  • Investment in roads, bridges and other infrastructure, particularly in mining regions

So, it looks as though the Aussie Government is trying to spread the wealth. Whenever that happens, the side that the wealth is taken from is the one that is complaining. On the other hand, mining businesses will have less revenue to reinvest in themselves, potentially costing mining jobs. It is almost as though the Aussie Government instituted this tax so that they can determine where the investment goes and that is for all businesses, especially small businesses.

Posted Monday, May 7th, 2012 under Metals, Mining, Minerals.

5 comments

  1. It will be interesting to see if this works. I’ve done business over there for 10 years and strongly considered relocating my business and family to Brisbane four years ago. My experience is that the small business community in Australia is extremely small, risk averse and heavily disadvantaged. There is little upside to starting a business there and lots of downside. In fact, they joke amongst themselves that if you want to run a successful business in Australia, you need to move to the US or Europe, start it up and then move back after you’re rich and successful. Maybe they’re trying to change that but it seems a very dangerous game to be playing.

    There’s one other aspect of this that Dan didn’t mention. In talking to business owners over there, one of their biggest challenges is maintaining talent. The turnover is extremely high because the mining industry is pulling all of their trained employees out of businesses and driving up salaries. If they take a haircut financially, it could actually improve the labor situation for the small businesses. However, wages will necessarily go down as a result.

    At some point, Australia is no longer going to be able to dig money out of the ground. It may not be a bad thing to spread that pain out over time instead of waiting for the well to go dry.

    • #PAuto Jon, Thanks for your perspectives! I tend to agree that targeting taxes and differential rates can create imbalances and unintended consequences.

    • Dan Nower says:

      Jon: As I deal primarily with mining market (big business) in Australia it is good to hear the from those that have direct experience from those that deal with the benefactores of this tax. It is a bold roll of the perverbial dice by the Australian government.

      I also see the ‘maintaining talent’ issue, especially in Western Australia. This issue is driving large automation projects so that large mines can operate with less personnel. This is a ‘Catch 22’, because less revenue will slow these projects. Maybe that is one thing that the Aussie government got right, the tax is on profits, not revenue. But as Jim points out, who knows what unintended consequences will result.

  2. #PAuto Great perspectives from @JonDiPietro on Australian tax structure and impact on small business on this mining tax post.

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