Foreign investors will be further scared off Australian mining and energy — pushing up power prices and crippling the nascent critical minerals industry — after last week’s Budget confirmed a change to the definition of what they’re selling when they cash out of projects.
Both sectors have been thrown into disarray by retrospective change, which increases the tax rate from nothing to 30 per cent and could cover all sales for the past 20 years.
They’re warning it creates immense sovereign risk and makes Australia’s tax rates uncompetitive in an environment where it’s already difficult to attract much-needed capital.
Chamber of Minerals and Energy WA boss Aaron Morey says the best thing the Government could do would be to dump the policy change.
Foreign investors have poured some $87 billion into mining projects over the past five years, and this was only expected to expand as the Government seeks like-minded partners to get the critical minerals sector running.
“For our sector, it won’t expand, it won’t grow, it won’t even maintain itself without significant foreign capital in the coming years,” Mr Morey warned.
The change creates a new definition of “real property” for tax purposes that now covers things built on the land — like resources processing plants and wind and solar farms — along with mining leases.
Capital gains captured by this new definition will now have to pay 30 per cent tax, instead of nothing.
The proposed changes are separate to the broader CGT package announced in the Budget, and will be backdated to 12 December 2006.
Treasurer Jim Chalmers previously said the absence of a clear definition of real property, and state and territory laws plus court decisions that narrowed the existing understanding, had created uncertainty that needed to be dealt with to “protect revenue”.
Mr Morey said it was already “increasingly challenging to attract foreign investment into the country” given issues with slow approvals, industrial relations, and relatively high taxes.
“A change of this nature, which materially increases the tax burden on foreign investors in our sector, but also opens up potential for sovereign risk when you have a retrospective taxation policy applied of this nature, that is obviously just a significant headwind to attracting that investment,” he said.
Minerals Council of Australia chief executive Tania Constable said the changes put in doubt the CGT treatment of every transaction by a foreign company over the past 20 years.
She labelled it a blow to Australia’s reputation.
“Foreign mining companies invest in Australia because it is seen as a safe, stable and largely predictable jurisdiction, and foreign investment is crucial to mining developments which bring highly-paid, highly skilled jobs, the largest tax contribution of any sector and massive royalty flows to fund hospitals, police, schools and roads,” she said.
Dr Chalmers is likely to face questions from resources figures over the plan when he speaks at a CME event in Perth on Thursday.
The ATO has sought to reassure companies that it won’t start slugging them with tax bills for decades-old sales, saying it would continue its practice of not reopening sales more than four years old.
For the renewables sector, the change is seen as slamming a door closed when the government claims it wants to roll out the red carpet.
Last week’s Budget offered a “transitional” arrangement for renewable projects that would only impose a 15 per cent tax on capital gains over the next four years, instead of 30 per cent, but this is seen as too little and too short when investors usually hold onto projects for 10-15 years.
“The Federal Budget has moved the goal posts on good faith investors who are building most of Australia’s new energy projects,” said Richie Merzian, chief executive of the Clean Energy Investor Group, whose members hold a $41 billion portfolio of projects across Australia.
“By introducing a retrospective tax on clean energy assets with a short discount period, the budget is increasing the cost of investing in clean energy, deterring future investment and ultimately increasing the cost of electricity for Australian households.”
Foreign investors will be further scared off Australian mining and energy — pushing up power prices and crippling the nascent critical minerals industry — after last week’s Budget confirmed a change to the definition of what they’re selling when they cash out of projects.
Both sectors have been thrown into disarray by retrospective change, which increases the tax rate from nothing to 30 per cent and could cover all sales for the past 20 years.
They’re warning it creates immense sovereign risk and makes Australia’s tax rates uncompetitive in an environment where it’s already difficult to attract much-needed capital.
Chamber of Minerals and Energy WA boss Aaron Morey says the best thing the Government could do would be to dump the policy change.
Foreign investors have poured some $87 billion into mining projects over the past five years, and this was only expected to expand as the Government seeks like-minded partners to get the critical minerals sector running.
“For our sector, it won’t expand, it won’t grow, it won’t even maintain itself without significant foreign capital in the coming years,” Mr Morey warned.
The change creates a new definition of “real property” for tax purposes that now covers things built on the land — like resources processing plants and wind and solar farms — along with mining leases.
Capital gains captured by this new definition will now have to pay 30 per cent tax, instead of nothing.
The proposed changes are separate to the broader CGT package announced in the Budget, and will be backdated to 12 December 2006.
Treasurer Jim Chalmers previously said the absence of a clear definition of real property, and state and territory laws plus court decisions that narrowed the existing understanding, had created uncertainty that needed to be dealt with to “protect revenue”.
Mr Morey said it was already “increasingly challenging to attract foreign investment into the country” given issues with slow approvals, industrial relations, and relatively high taxes.
“A change of this nature, which materially increases the tax burden on foreign investors in our sector, but also opens up potential for sovereign risk when you have a retrospective taxation policy applied of this nature, that is obviously just a significant headwind to attracting that investment,” he said.
Minerals Council of Australia chief executive Tania Constable said the changes put in doubt the CGT treatment of every transaction by a foreign company over the past 20 years.
She labelled it a blow to Australia’s reputation.
“Foreign mining companies invest in Australia because it is seen as a safe, stable and largely predictable jurisdiction, and foreign investment is crucial to mining developments which bring highly-paid, highly skilled jobs, the largest tax contribution of any sector and massive royalty flows to fund hospitals, police, schools and roads,” she said.
Dr Chalmers is likely to face questions from resources figures over the plan when he speaks at a CME event in Perth on Thursday.
The ATO has sought to reassure companies that it won’t start slugging them with tax bills for decades-old sales, saying it would continue its practice of not reopening sales more than four years old.
For the renewables sector, the change is seen as slamming a door closed when the government claims it wants to roll out the red carpet.
Last week’s Budget offered a “transitional” arrangement for renewable projects that would only impose a 15 per cent tax on capital gains over the next four years, instead of 30 per cent, but this is seen as too little and too short when investors usually hold onto projects for 10-15 years.
“The Federal Budget has moved the goal posts on good faith investors who are building most of Australia’s new energy projects,” said Richie Merzian, chief executive of the Clean Energy Investor Group, whose members hold a $41 billion portfolio of projects across Australia.
“By introducing a retrospective tax on clean energy assets with a short discount period, the budget is increasing the cost of investing in clean energy, deterring future investment and ultimately increasing the cost of electricity for Australian households.”