Tax credits for mineral miners

(Clause 88)

Summary of proposed amendments

A new subpart LU is proposed to allow mineral miners a refundable credit in circumstances when there is a tax loss due to a loss on disposal of land or because rehabilitation expenditure has been incurred. The value of this credit is limited to the income tax liability attributable to the relevant permit area.

Application date

The amendments will apply from the beginning of the 2014–15 income year.

Key features

It is likely that the natural life cycle of a mine will conclude with mining ceasing, the land being restored and then sold. This scenario may result in a mineral miner incurring rehabilitation expenditure or a loss from a land sale after the income-earning activities have ceased. This would see a miner having deductions and losses, but with no prospect of future income to offset those losses against.

To recognise this, proposed section LU 1 sets out when a tax credit is available to a mineral miner. The person must have either:

• incurred an amount of rehabilitation expenditure; or
• disposed of land for a loss

and, after taking those amounts into account, have a tax loss for the year.

The credit is the tax rate multiplied by the “expenditure or loss” (section LU 1(2)). The amount of “expenditure or loss” will be capped at the lesser of:

• the total of the relevant losses; and
• the person’s loss for the year (section LU 1(3)).

The total amount of the credit will also be limited to the historical income tax liability the miner has in relation to the permit area. This is to prevent credits that may exceed the tax paid from the mine in question (section LU 1(4)).

Proposed section LU 1(5) also clarifies that any loss giving rise to a credit does not form part of a tax loss component or net mining loss of the miner. This is to prevent a miner claiming a credit under subpart LU but also using the same loss to offset any future income.

Proposed section LU 1(6) sets out that the credit generated is refundable.