Henry Report

[HiEquity]

I base this on the petroleum/oil industry already being taxed at this level for the same thing and I don't see them going broke or shutting shop.

This just highlights the level of the debate around the place on the taxation regime for mining companies. I've even heard Fed govt ministers make this point and it is disingenuous at the least and dishonest at the worst.

Offshore oil and gas projects (like Gorgon et al) operate outside the jurisdiction of the States and therefore don't pay State royalties at all. Woodside for example pays peppercorn rates to the Shire of Roebourne for its monstrosity sitting on the Burrup and that's it - everything else goes to Canberra.

To compare the Federal taxation of an industry that doesn't pay State royalties to one that does is a complete bum steer. I wouldn't mind if the payment of royalties were backed off when these projects hardly make any money but no - they decide in their wisdom to only limit your upside while leaving you on your own with the downside. And on top of that to have no grandfathering provisions makes this a perfect example of sovereign risk that will flow through to other industries.

Now every Australian company knows it's OK to make a bit of money but if perchance you start making what we the govt think is "too much" then we'll cut you off at the knees. A great message for the investment community!

 

[Player]

Harvesting those poppies who are too tall

.........Now every Australian company knows it's OK to make a bit of money but if perchance you start making what we the govt think is "too much" then we'll cut you off at the knees. A great message for the investment community!

And here are some tools to assist the pruning of those tall poppies:

 

[The Donners]

Depends on the commodity. For something like iron ore where you're selling at say $140/t and have cash costs sub $40/t, you still make lots of money regardless. But there're some lower margin projects and these will be squeezed.

It's my understanding that the tax will be on profits.

 

[Gools]

I could well be wrong but what I have read it will be a take on margin, not the profit. It was something like if your ROI is greater than x% then you will be taxed the 40% on that excess.

Gools

 

[The Donners]

I could well be wrong but what I have read it will be a take on margin, not the profit. It was something like if your ROI is greater than x% then you will be taxed the 40% on that excess.

Gools

It just wouldn't happen.

http://www.bdo.com.au/media-centre/...ing_resource_rent_tax_doesnt_break_the_miners

The imposition of a Federal RRT on the mining sector to replace the existing State-based royalty scheme has been widely reported as one of the recommendations of the Henry Taxation Review, with most reports indicating that it is almost identical to the Petroleum Resources Rent Tax with a 40 per cent tax on profits on a project basis, after all exploration and development costs have been recouped.

http://www.bdo.com.au/media-centre/...ing_resource_rent_tax_doesnt_break_the_miners

 

[Deltaberry]

It's my understanding that the tax will be on profits.

Just thinking on an IRR / payback period basis. So low margin, let's say 10 year pay back. Losing nearly half your money to tax blows out payback to 20 years nearly so IRR dies off and capex spend is not justifies no lower margin projects. These projects can put on hold, industrial cos suffer?

 

[Sunfish]

There seems to be a lot of misunderstanding of this tax but I'm reluctant to go into detail myself because there is still quite a bit we don't know.

Firstly, it is a tax on profits. The Feds grab 40% of the sales of each individual mine after state royalties, expenses and other "allowable" costs which I am unsure of but development costs are definitely allowed to be met before the tax is paid.

After that RRT is paid the mining company pays the normal company tax on what is left.

According to Mish Shedlock this is the highest royalties paid anywhere. I am real proud that Rudd has outdone Chavez and Mogabe.

 

[oracle]

This is just not right. The mining companies take all the risks, they find the buyers, they negotiate the price in the best interests of shareholders who have invested their own money in the company. They implement the efficiencies to get the best possible return for shareholders and now that all the hard work is done the Government say hey, I know we negotiated with you in the beginning that you will pay us 30% company tax, you will pay Royalties etc, etc...you seem to still manage bumper profits. Look at us, we were given $20b surplus when we came in power now we are in deficit of $50b. Forget making anything on top of the $20B we blew away $70B. We know how to spend money.

To me it is similar to Dazz asking his commerical tenants, hey your business seems to be thriving. You know what this is my property you are running your business in. I don't care the effort you went through to generate that extra ordinary profits. I now not only want my rent but even a cut of your profits.
I personally see no difference to doing this and what the Government is trying to do.

Cheers,
Oracle.

 

[melbmeg]

Now every Australian company knows it's OK to make a bit of money but if perchance you start making what we the govt think is "too much" then we'll cut you off at the knees.

Well, if it's only the ones making massive profits from national resources, fair enough!

Geez, I thought I'd get on here to find everyone jubilent that their CGT discount and NG had been left untouched, but instead you're all whining about your shares!

 

[redwing]

Taxes Exposes Small Miners to Takeovers

David Flanagan, managing director of iron ore company Atlas Iron, was among mining executives who met Prime Minister Kevin Rudd in Perth yesterday to express their vehement opposition to the new tax.

Mr Flanagan warned the 40 per cent super tax would make it impossible for Atlas Iron to expand and make his company a target for a takeover by one of the major miners or an offshore company.

 

[Sunfish]

Well, if it's only the ones making massive profits from national resources, fair enough!

Geez, I thought I'd get on here to find everyone jubilent that their CGT discount and NG had been left untouched, but instead you're all whining about your shares!

Actually I'm upset that we have a corrupt government. Are you another Commie who wants every one else's business taxed to oblivion?

The banks make more than our miners so if the principle is expanded, how much of "other peoples money" will be available for property speculators?

 

[gg1965]

To me it is similar to Dazz asking his commerical tenants, hey your business seems to be thriving. You know what this is my property you are running your business in. I don't care the effort you went through to generate that extra ordinary profits. I now not only want my rent but even a cut of your profits.
I personally see no difference to doing this and what the Government is trying to do.

Cheers,
Oracle.

Isn't that what the shopping malls - ie Westfield do? Don't they charge rent as well as take a share of the profits of their tenants?


g

 

[Sunfish]

Isn't that what the shopping malls - ie Westfield do? Don't they charge rent as well as take a share of the profits of their tenants?

Absolutely!

 

[HiEquity]

Isn't that what the shopping malls - ie Westfield do? Don't they charge rent as well as take a share of the profits of their tenants?

Among plenty of others... of course this is all agreed up front when the lease is signed, often before the property is built. A bit different to just changing the rules after the investment has been made!

 

[MTR]

Let's get real 40% tax aint gonna happen.....seriously think about it, mining companies have the power and why would Govt shoot themselves in the foot.

 

[steveadl]

Isn't that what the shopping malls - ie Westfield do? Don't they charge rent as well as take a share of the profits of their tenants?


g

Absolutely!

Yes but it's negligible, ie. less than 1% - the rent is where they get their revenue. The % is more just so they can monitor their tenants sales, individual malls performances vs portfolio, whether certain tenancies are struggling in their current position and a better tenant could be put in etc. But as HiEquity pointed out, as a retailer you know this going into a Westfield (which is why many don't), it's not sprung on them 8yrs into the lease.

I also disagree with those suggesting that a super tax should be put on the banks. This sort of new tax for the miners shouldn't be put on any business just because they're successful and you believe you can get away with it. You can't just say, 'oh well it's not fair for the miners, but I hate the banks so I don't mind letting them pay it.'

 

[steveadl]

Let's get real 40% tax aint gonna happen.....seriously think about it, mining companies have the power and why would Govt shoot themselves in the foot.

I'm starting to believe that the more I read, even if it is introduced but in a watered down form. There's just too much risk on Australia's side - the big boys can choose/threaten to scrap any planned expansions or new mines full stop in Australia in favour of their tenements overseas. Yeah little miners can still give it a crack, but that's not where the $$$'s from this tax are coming from. I seriously doubt the country will be better off long term if this tax is introduced but as a result RIO and BHP pack their exploration/development dollars and leave.

 

[lizzie]

rio's already scrapped a large west aust contract ... the games begin.

what i don't understand is why they don't scrap the royalty system and just tax them like any other company - 30% on net profits.

 

[MTR]

I feel sick, apparently RIO is scrapping $50B projects in WA.

Does this mean property prices in Karratha/Pt Hedland will go south?

Thanks Rudd, great job now you want to "kill the golden goose".

I suppose his gotta find a way to fund the stimulus debarcle.

 

[Gentle_Chief]

I feel sick, apparently RIO is scrapping $50B projects in WA.

Does this mean property prices in Karratha/Pt Hedland will go south?

Thanks Rudd, great job now you want to "kill the golden goose".

I suppose his gotta find a way to fund the stimulus debarcle.

MTR, where is this information from and what projects are under scrutiny?