It's not all bad news for the resources sector with the federal government proposing to implement a resource exploration rebate that will take the place of the promised flow through share scheme for explorers.
It's not all bad news for the resources sector with the federal government proposing to implement a resource exploration rebate that will take the place of the promised flow through share scheme for explorers.
While much of the focus is on the 40 per cent resource super profit tax which has caused a storm amongst many miners and lobby groups, the Rudd government plans to reinvest part of that tax money into the sector.
The resource super tax profit is proposed to be introduced on July 1 2012 and is expected to raise $3 billion in its first year of operation.
By 2013-14, the federal government estimates about $9 billion will be raised from the super profit tax.
Much of the tax will go back to the resources sector through the resource exploration rebate, which gives companies a refundable tax offset for the cost of exploring for minerals and geothermal energy sources.
The government plans to give explorers a rebate of 30 per cent without having to offset against profit.
The rebate will cost about $1.1 billion in the two years from 2012-13.
BDO corporate tax director Russell Garvey said the rebate represents an improvement to the proposed flow through share scheme.
The scheme is when individual investors receive tax relief for their investment in companies that have specific exploration budgets.
The scheme has long been promoted by the resources sector as an offset to the low level of exploration spending in Australia.
Association of Exploration and Mining Companies chief executive Simon Bennison said that at first glance, the rebate is an excellent outcome.
"As much as we'd also love to have seen a flow through shares program, a 30 per cent rebate for the exploration activities for companies is certainly going to be well received," he told WA Business News.
"We obviously need to go through the detail and see how the rebate applies.
"But at first glance the rebate looks like a very good proposition for the exploration sector.
Mr Bennison said the rebate is a lot broader than what had been anticipated, meaning the rebate would apply to both greenfields and brownfields exploration.
He added that even though the government had devised an incentive for explorers, it could not be compared to the flow through share scheme.
"We're still disappointed that those companies looking for the ability to go out there and find equity finance in a particularly difficult market where the banks are very reluctant to provide debt finance, they're still going to be left short in regards to the tax incentives that are being provided in this so called reform packages," Mr Bennison said.
"But we're just going to have to work on that [flow through share scheme] for the future."
