The Coalition’s Australian federal election victory is likely to bring changes for the Australian mining industry. The key potential changes relate to carbon, the mining tax, environmental approvals and exploration initiatives.
Carbon Price and Mining Tax repeal
It looks likely the Australian Labor Party (the former government) and the Greens will block moves to repeal the carbon price and mining tax while they still have control of the Senate until 1 July 2014. This may lead to another election, but that looks unlikely. From 1 July 2014, when the new Senators just elected take their seats, the Coalition will likely have the necessary numbers to pass the repeal legislation, with the support of various minor parties. The repeals are expected to occur sometime in the second half of 2014.
The Coalition has not proposed any form of replacement for the mining tax.
The Coalition has proposed an alternative carbon system, that it calls ‘Direct Action’. Only limited details are available. In short it involves an Emissions Reduction Fund, with $3.2b over the first 4 years, to purchase abatement at a tender auction to reduce emissions over time, and potentially a system of baselines and penalties for industry. Much remains to be consulted on. The likelihood of Direct Action passing the Senate looks lower than the repeal, as several minor parties may oppose it. The result is that the future of carbon regulation is uncertain and hence management of carbon costs remains an important issue and care continues to be needed when working with situations potentially involving material carbon costs, such as electricity, gas and coal transactions.
Streamlining of environmental approvals and establishment of a one-stop-shop
The Coalition made an election commitment to streamline environmental approvals, targeting the impact of ‘green tape’. The Coalition will seek to achieve this through establishment of a ‘one-stop-shop’ for environmental approvals, including those under the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act).
Given State jurisdiction in respect to the environment, establishing a one-stop-shop cannot be achieved by the Commonwealth unilaterally and will require the cooperation of the States. COAG has previously considered the development of bilateral agreements delegating EPBC Act approval functions to the States, but abandoned progress earlier this year following concerns the delegation would result in a watering down of environmental standards. It can be expected that moves to create a one-stop-shop will be met with strong opposition from the Greens and environmental groups.
While further details on the framework and timeline for streamlining environmental approvals haven’t been released, new Minister for the Environment, Mr Greg Hunt, has reiterated the Coalition’s commitment and the need for a simple process for rapid decisions.
Exploration Development Incentive (EDI)
The Coalition has also proposed to introduce an EDI ‘flow through scheme’ into the income tax system, to encourage new minerals exploration activity. In broad terms, it will be designed to permit Australian resident shareholders to claim a tax credit, ie deduction, in respect of certain green fields mining exploration expenditure incurred by companies in Australia.
The credit, which will reflect a proportionate share of the eligible expenditure, could be used by shareholders to reduce their other taxable income. A ‘no taxable income test’ will apply in respect of the company, in order to qualify for the EDI. The intention is to ensure that the program is only available for junior minerals explorers.
The EDI is proposed to commence from 1 July 2014, following consultation with industry peak bodies regarding implementation details. The Coalition has also indicated that the EDI will be reviewed every 12 months, with the cost of the scheme to be capped at $100 million over the forward estimates budgetary period (4 years).
At this stage, the positions of other political parties and independents on the EDI is unknown.