Mining tax windfall six times more than expected, report claims

Mining companies will be slugged six times as much - meaning the Queensland Government will reap six times as much - as expected in forecast royalties under the new regime, analysis reveals.

Mining companies will be slugged six times as much - meaning the Queensland Government will reap six times as much - as expected in forecast royalties under the new regime, analysis reveals.

Wood Mackenzie, a global consultancy company which does work with the resources industry, has done analysis of the new royalty regime which came into effect on July 1 and was expected to raise $1.2 billion over four years.

Its analysis claims it could raise $5.9 billion more than the old tax would have in its first year alone.

This is expected to be about $1 billion more in the second year, before normalising in the 2024 and 2025 financial years.

Coal at the Port of Brisbane. Picture: AAP image, John Gass

“Queensland coal producers – already paying the highest royalty rates globally – will be significantly worse off,” according to the analysis obtained by The Courier-Mail.

“A key concern for Queensland producers will be project development as financing becomes more difficult with traditional lenders and banks no longer willing to offer debt services.

“The new royalty hike will eat into cash flows when prices are high, which will reduce the value of existing operations and projects.”

The new royalty regime adds three tiers to the existing tiered structure, with the top rate being raised from a 15 per cent tax to a 40 per cent hit.

Companies now pay 20 per cent on the dollar when prices exceed $175 per tonne, 30 per cent on the dollar when prices climb beyond $225 per tonne and 40 per cent when they exceed $300.

Royalties are levied against revenue, not profit, which means company costs and future investments are not taken into consideration.

A spokesman for Treasurer Cameron Dick said the forecast returns were based on coal price modelling by Queensland Treasury.

Queensland Treasurer Cameron Dick. Picture: NCA NewsWire/Tertius Pickard

“If prices go higher, any additional royalties generated would only be a fraction of the additional profits that coal companies would enjoy,” he said.

“The Queensland resources industry is booming.”

Premier Annastacia Palaszczuk has previously defended the move, saying it was “only just” discussions about a royalties tax occur amid record coal prices.

The Budget papers argued the “exceptional surge in coal prices” last year and now meant the state’s current royalty structure did not “provide a fair return to Queenslanders” during boom periods.

Meanwhile, Minerals Council of Australia released a report showing the mining industry paid a record $43.2 billion in company tax and royalties paid in financial year 2020-21, up 16 per cent on the previous year.

MCA CEO Tania Constable said the amount of company tax and royalty was expected to increase again next financial year.

“The Australian mining industry always pays its fair share of tax while providing royalties to state governments to pay for improved roads, hospitals and other infrastructure and services,” she said.

Originally published as Mining tax windfall six times more than expected, report claims