Miners lose out on royalties refunds

Federal government plans to impose restrictions on refunds

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

In a bid to shore up revenues from the controversial Minerals Resource Rent Tax (MRRT), the federal government is planning to impose new restrictions on the refunds they can claim against state royalties.

The way the MRRT works currently, is that iron ore and coal miners can claim state royalties as a deduction before calculating MRRT. Obviously, the more the states increase royalties, the less revenue the federal government receives.

Related: Treasurer admits boom is over

According to the Australian Financial Review (AFR), the proposed change would mean that if the states increase royalties, only a set amount would be refundable to miners such as BHP Billiton (ASX: BHP), Rio Tinto Limited (ASX: RIO) and Xstrata. The big three are expected to contribute almost 90% of revenues due under the MRRT. Only iron ore and coal are currently included in the MRRT.

The AFR has suggested that The Greens want royalty credits to be capped at July 2011 levels, when the MRRT legislation was introduced to parliament. The Greens estimate that around $2.2 billion in revenue has been lost because of rises in state royalty levels. The world’s best treasurer, Wayne Swan is due to meet with state counterparts early next month, in a bid to arrange a deal over increases in state royalties. If that is unsuccessful, the treasurer may consider further action against the states, including withholding grants, or legislation for royalties credits.

In September, the Queensland state government increased state royalties on coal from 10% to 12.5% for coal valued under $100 a tonne, while coal worth more than $150 a tonne would face a 15% tax. That forced several coal miners, including Yancoal Australia Limited (ASX: YAL) and New Hope Corporation (ASX: NHC) operating in the state, to shelve new projects, cut back on expanding existing projects, and shed jobs to cut costs.

The Foolish bottom line

The MRRT appears to be a case of shutting the gate after the horse has bolted. Commodity prices, especially iron ore and coal, have dropped substantially from their highs, and none of the miners have paid  any taxes under the MRRT in the current financial year so far. Whether they will in future remains to be seen.

Oil, copper, and gold continue to be in high-demand — and their popularity doesn’t look to be slowing. We’ve uncovered three companies poised to benefit from the rising prices of these commodities. Get our brand-new report — “3 High-Risk/High-Reward Resources Stocks” — FREE!

More reading

Motley Fool writer/analyst Mike King owns shares in BHP Billiton. The Motley Fool’s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

asx share price competitions represented by businessmen arm wrestling
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

person reading news on mobile phone
⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »