Mining industry looks to minimise tax

TAX minimising investment schemes, usually linked with horticultural-type projects, have emerged in the mining industry.

Such schemes have proved controversial of late because many investors have been hit with big retrospective tax bills from projects that did not have product rulings from the Australian Tax Office.

Product rulings guarantee the ATO will allow tax deductions providing the project sticks to what it promises in its prospectus.

Some advisers and industry sources say these schemes could help bring risk capital back into an industry investors have been neglecting.

Queensland-based Charters Towers Gold Mines is the first miner to get an ATO product ruling.

Charters seeks to raise $25 million towards exploration and the possible mining of the Brilliant Gold Reef Project through an investment scheme managed by Australian Rural Group, which manages other tax effective investment projects.

WA-based Metex was the first miner to take the managed investment scheme path. It wanted to raise funds for an exploration play north of Telfer. However, the ATO refused to give the project a product ruling, a decision that is now under appeal.

Association of Mining and Exploration Companies chief executive George Savell said the exploration industry was crying out for risk capital.

“We’ve had a great deal of difficulty convincing the Federal Government that the only way to arrest the downturn in

mining investment would be to introduce some tax incent-

ives to attract risk capital back into the industry,” Mr Savell said.

“The Government has now let the Brilliant Gold project through. It looks as though we may have broken through on this one.”

The WA Chamber of Minerals and Energy is taking a wait-and-see approach to the Charters Towers’ project.

Chamber executive officer economic affairs Charles Crouch said it would watch with interest to see how successful the company was in raising the money.

“It is becoming increasingly difficult to get funding for exploration. You used to be able to go to the market and get equity funding but market sentiment is against that at the moment,” Mr Crouch said.

“Mr Crouch said there were no guarantees the tax effective investment approach would apply to other mining companies.

Many analysts and advisors warn against tax minimising investments. They believe investors should only become involved with projects if they can see real returns before considering any tax benefits.

Australian Securities and Invest-ments Commission regional commiss-ioner Michael Gething recommends investors seek advice from independent licensed advisers, make sure they understand the risks in such ventures and that the venture meets their investing objectives.

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