Federal Budget update: what this means for the mining industry

With the Australian government looking to boost the economy, it has made a number of announcements that will impact the mining industry in the years to come. Here’s what you need to know.

Investment in the mining industry

Despite a challenging environment, the outlook for the mining industry remains relatively positive, with investment expected to grow modestly over the next few years.

Non-mining investment is expected to be the main driver of growth in business investment over the coming years, increasing by 4% in 2022-23, 2.5% in 2023-24 and 2% in 2024-25.

Ongoing upgrades to machinery and equipment and continued expenditure on construction projects will drive growth throughout these years.

Mining investment is forecast to be flat in 2022-23 before growing modestly over the rest of the forecast period, by 2% in 2023-24 and 1.5% in 2024-25.

The outlook primarily reflects expenditure to maintain existing resource production capacity along with a modest number of new LNG and metal ore projects.

However, there remains a downside risk that firms may delay or cancel projects in response to elevated input costs and ongoing domestic and global headwinds.

Hydrogen investment

One of the key announcements of the budget was a $2b investment in Hydrogen Headstart, a new program to support hydrogen production.

This positions Australia to become a world-leading hydrogen producer and will have a significant impact on the mining industry.

Hydrogen is expected to be an important fuel for the mining industry, with potential applications including powering haul trucks and providing electricity to remote mining operations.

The investment in Hydrogen Headstart will help to drive innovation in this area and position Australia as a leader in hydrogen production.

Corporate taxes

The Federal Budget also included changes to corporate taxes that will impact the mining industry.

The Federal Government has extended the instant asset write-off scheme, allowing businesses to immediately deduct the full cost of eligible depreciable assets that are installed ready for use until 30 June 2023.

This will allow mining companies to invest in new equipment and technology and receive an immediate tax deduction, reducing the cost of investment.

The extension of the instant asset write-off scheme is a significant development for the mining industry as it encourages investment and promotes economic growth.

By allowing businesses to immediately deduct the full cost of eligible assets, mining companies can reduce their tax burden and invest in new equipment and technology that will improve their operations.

This change to corporate taxes is expected to have a positive impact on the mining industry, as it will make it easier for companies to invest in new projects and expand their operations.

By reducing the cost of investment, mining companies can improve their profitability and create new job opportunities in the sector.

Moreover, the extension of the instant asset write-off scheme also helps to support the Australian manufacturing sector, as mining companies will be able to invest in locally-made equipment and technology.

This will help to boost local businesses and create a more sustainable supply chain for the mining industry.

Multinational taxes

Multinational taxes have been a long-standing issue for the Australian government, as multinational corporations often shift their profits offshore to avoid taxes in the country.

This has led to a significant loss of revenue for the Australian government, impacting the country’s ability to fund important public services.

To tackle this issue, the Federal Budget has introduced measures aimed at preventing multinational companies from avoiding taxes in Australia.

One of the measures includes the introduction of a new tax on certain digital platforms that have a significant presence in Australia but pay little tax.

This will ensure that these companies pay their fair share of taxes in the country, helping to boost revenue for the government.

In addition, the Federal Budget has also increased funding for the Australian Taxation Office (ATO) to investigate and prosecute multinational tax avoidance.

The ATO will be provided with an additional $1.9b over the next four years to combat tax avoidance by multinational corporations.

The increased funding for the ATO is expected to improve its ability to identify and investigate multinational tax avoidance, as well as enhance its capacity to take legal action against those companies found to be avoiding taxes.

This is expected to help the government recover lost revenue and ensure that all companies, including multinational corporations, pay their fair share of taxes in Australia.

Individual income taxes

The Federal Budget also includes changes to individual income taxes that will impact workers in the mining industry.

The Federal Government has announced an increase in the low and middle-income tax offset, which will provide tax relief for low and middle-income earners.

This will help to support workers in the mining industry who may have been impacted by the economic downturn.

The Federal Budget update has a range of implications for the mining industry, including investment in the sector, the promotion of hydrogen production, changes to corporate taxes, multinational taxes, and individual income taxes.

These changes are designed to stimulate economic growth and support the industry in the years to come.

The mining industry is a key driver of the Australian economy, and the government’s support for the sector is an important part of Australia’s economic recovery.

Conclusion

The Federal Budget 2022-23 brings a mixed bag of news for the mining industry in Australia.

While investment in non-mining sectors is expected to be the main driver of growth over the coming years, mining investment is forecast to be flat in 2022-23 before growing modestly over the rest of the forecast period.

The Federal Budget also includes significant investment in renewable energy, particularly hydrogen, which has the potential to revolutionise the mining industry by powering haul trucks and providing electricity to remote mining operations.

On the tax front, the Federal Government has taken measures to prevent multinational tax avoidance and has extended the instant asset write-off scheme, providing mining companies with an immediate tax deduction for investing in new equipment and technology.

Overall, the Federal Budget reflects the government’s commitment to support the mining industry while also investing in renewable energy and preventing tax avoidance by multinational corporations.

The industry will need to adapt and innovate to take advantage of the opportunities presented by these developments.