Federal Budget impacts to the Energy and Resources sector
This year’s budget contains a number of negatives for the resources sector. NAB’s Group Chief Economist, Alan Oster, looks at where the government has targeted it’s efforts including impacts to exploration and many mining and energy programs.
This year’s budget contains a number of negatives for the resources sector. In particular, the mining industry is one targeted by the government’s drive to bolster the corporate tax base and reduce loopholes. Deductions for exploration are to be tightened with immediate deduction of mining rights and information now to be depreciated over 15 years, or their effective lives (whichever is shorter). The Budget estimates a $1.1 billion gain in revenue over the next four years. The introduction of a cash bidding system for certain offshore petroleum exploration is expected to raise government revenue by $160 million after four years.
Many mining and energy programs have also been scaled back in an attempt to cut costs, with the clean coal sector one of the clear losers – almost $900 million in related program cuts (carbon capture and storage, emission initiatives, job assistance programs etc).
However, fears that fuel rebates – of which miners are a major beneficiary – would be wound back didn’t come to fruition. Also, the government pledged to amend the Petroleum Resource Rent Tax (PRRT) legislation that will grant petroleum producers additional certainty regarding deductions for legitimate expenditure. The change is expected to reduce government revenue by $120 million over the estimate period.
- The budget defers $370 million of funding from the Australian Renewable Energy Agency (ARENA) over three years, beyond the forward estimates. As a result, the program will be extended to 2021/22.
- Renewable – $225.4 million will be deferred and $32.3 million redirected from the biodiversity fund. $58 million in funding for the Clean Technology Program moved to 2017/18.
- $500 million in funding will be withdrawn from the Carbon Capture and Storage Flagships Program over three years.
- $29 million in funding will also be withdrawn from the Coal Mining Abatement Technology Support package over two years from 2015/16.
- Exploration deductions have been targeted. From July 1, 2014, the government is removing depreciation concessions available to large resource companies that purchase junior miners and then claim their exploration costs and mining rights for immediate depreciation. This measure will raise $1.1 billion over four years.
Our team of leading economists, tax and superannuation experts will continue to unpack the Federal Budget 2013 to help you understand what it means. Visit all the latest articles, fact sheets and video commentary – 2013 Federal Budget – Business Research and Insights.