Explorers warn the Federal Government’s capital gains tax shake-up could choke investment in the next generation of mining projects by making high-risk exploration less attractive.
The Budget proposal would replace the current 50 per cent CGT discount with an inflation-indexed system across all assets, while introducing a 30 per cent floor on capital gains.
While much of the debate has focused on property, the changes would also apply to shares, start-up investments and business sales.
The Association of Mining and Exploration Companies said this could dampen capital flowing into the mining sector, which often relies on high-risk high reward investments.
“Encouraging investment in exploration is challenging enough without removing what little support exists for these investors already,” AMEC chief executive Warren Pearce said.
AMEC represents over 500 companies in the sector, most of which are smaller, more speculative operations.
Mr Pearce said these companies operated in a space where investors are taking a significant risk, without expectation of a dividend — unlike blue-chip ASX stocks.
“The reason they take that risk is for higher reward,” he said. “Without the current setting for capital gains tax, that reward and therefore incentive, diminishes substantially overnight.”
The warning echoes concerns from the technology sector, which has also argued the CGT discount is a vital lever for attracting founders, employees and investors into high-risk ventures.
Tech Council of Australia chief executive Kate Cornick said there was “work to do” to ensure Australia’s start-up community did not become “collateral damage” from the proposed changes.
Mr Pearce said mineral exploration was no different to technology start-ups.
“Mineral exploration is the original start-up in this country,” he said. “And it still plays a crucial role in making the discoveries that lead to new mines, creates jobs and fuels our economy.”
AMEC is still pushing for clarity on whether exemptions will be considered.
“Having met with government since the Budget release, we understand no decision has been made regarding exemptions for removal of the 50 per cent discount for capital gains tax,” Mr Pearce said.
“With a consultation period to follow, our industry will need to make its case. Rest assured that’s exactly what we plan to do.”
The national Minerals Council of Australia was more complimentary, saying the Budget had “backed in” the sector, pointing to $105.9 million for faster approvals under the Environment Protection and Biodiversity Conservation Act using AI, $47.6m for bilateral agreements with States and Territories, and a permanent two-year loss carry-back for businesses with turnover of up to $1 billion.
Chief executive Tania Constable said the government had also supported mining through the Australian Fuel Security and Resilience package, which would strengthen diesel supplies for minerals extraction and processing.
“This approach shows the government understands mining’s immense contribution to Australia’s economy, jobs and regional communities,” she said.