The Association of Mining and Exploration Companies (AMEC) says the federal government’s recent capital gains tax (CGT) expansion is “another blow” to the exploration industry.
CEO Warren Pearce says the exclusion of junior mineral explorers in the CGT expansion is “beyond disappointing”.
“Yet another indication that the federal government has little to no understanding of the realities of attracting investment into mineral exploration,” Pearce says.
“It’s the same problem over and over again.”
As reported by Mining.com.au last week, the Australian Government broadened the proposed Innovative Business CGT Concession by extending company eligibility to 15 years.
This expansion reduced the minimum investment period from five to three years and removed the proposed lifetime cap.
The reforms will take effect from 1 July 2027, replacing the existing 50% discount for individuals, trusts, and partnerships with cost-base indexation, alongside a 30% minimum tax on capital gains.
“The states and territories are working their backsides off to find, grow, and develop new projects, but are constantly undermined by the federal government’s lack of support,” Pearce adds.
“It’s counterproductive when the federal government is working against the efforts of jurisdictions trying to generate investment and jobs.
“The CGT changes show the government is out of touch with markets and how the real world finances mineral exploration and discovery.”
AMEC has called for mineral exploration to receive further CGT treatment, similar to CGT laws provided to the technology start-up sector, as junior explorers begin with little capital, have no operating revenue, and rely on investor engagement.
In junior exploration, investors have to accept substantial risk over many years for the possibility of a discovery.
“The federal government’s major vision piece, A Future Made in Australia, imagines a return to value-adding and making things here in Australia. Surely it’s obvious that you can’t have a successful downstream industry without an upstream industry to feed it,” Pearce explains.
The Future Made in Australia program is a $22.7 billion initiative established by the federal government to maximise the country’s economic benefits from the net zero transition while securing Australia’s industrial capacity.
“The federal government has already murdered the Junior Mineral Exploration Initiative (JMEI), and the impact on mineral exploration is already being felt,” Pearce adds.
“The scheme which was designed to encourage investment in greenfield exploration (unexplored areas), now gone, has seen greenfield exploration quickly freefall, now making up only one-fifth of the overall spend.
“Why does that matter? Because greenfield exploration is where the nation-changing discoveries will be made. It’s where the project that will stock the pipeline for the future comes from. Though perhaps not anymore.”
The Australian Government has opened another round of consultation for the CGT legislation. AMEC says further consultation will be “meaningless” if it doesn’t result in genuine change.
Write to Maddison Elliott at Mining.com.au
Main Image: AMEC
