Dean Smith (WA, Liberal Party) Share this | Hansard source

As I was saying, Labor's mining tax failed to go close to raising the levels of revenue the former government anticipated—although of course that did not stop Labor from locking in billions of dollars in spending on the basis of that unrealised revenue, including cynical pre-election promises made to regional communities across my home state of Western Australia. Labor made promises to regional communities that they would receive significant new infrastructure projects, all the while knowing that there was no money there to fund them. The cynicism was sickening.

Abolishing the mining tax will save the budget around $50 billion over the next decade. The exploration development incentive contained in this bill is a recognition that mining is a capital-intensive undertaking. It is high risk, and if the sector is to continue growing and creating jobs we need to provide some support to smaller mining companies, particularly when they are commencing their operations. There is some history to this issue, of course. The Henry tax review, no less, recommended that if earlier access to tax benefits from exploration expenses is provided then it should take the form of a refundable tax offset at the company level for exploration expenses incurred by Australian small listed exploration companies, with the offset set at the company income tax rate. Smaller miners have long called for a recognition in taxation arrangements of the long lead times between investment, exploration and production. Small exploration companies often must wait many years before tax losses from exploration expenses can be utilised. Many will never generate sufficient income to utilise their losses.

This government is committed to doing something to assist in a responsible, economically effective manner. The tax offsets provided though the incentive set out in this bill are capped at $100 million over three years. Schedule 6 of the bill provides refundable tax offsets to shareholders of small mineral exploration companies undertaking greenfields exploration activities. The discovery of new resources is, self-evidently, vital for the future of the mining and resources sector, certainly in my home state of Western Australia but across the whole country no less, as existing resources are depleted.

Exploration is high-risk, but it can also be of very high reward in terms of job creation and in terms of revenue flowing to government through royalties. The exploration development incentive is a recognition of this important fact. It is an investment in the future of Australia's mining sector. The plain fact is that smaller mining companies have been experiencing difficulties in raising the sort of capital they need to continue exploration activities. And of course exploration underpins development. You cannot have minerals and resource development unless you have minerals and resource exploration. Greenfields exploration has fallen as a proportion of total exploration from 40 per cent to 33 per cent over the last decade. The exploration development incentive is a show of good faith by this government in the mining and resources sector. We understand that our continued economic prosperity is dependent on the ability of smaller companies to make new mineral discoveries.

I cannot stress how important this commitment will be to my home state of Western Australia, and I am pleased that it has been welcomed by the Association of Mining and Exploration Companies, who have noted:

The EDI will encourage much-needed investment in greenfields exploration which is at historic lows. It will also create jobs for exploration support services such as drilling contractors and geoscientists.

Along with the repeal of the carbon tax and the mining tax, the establishment of the exploration development incentive is another demonstration of the government's commitment to a sustainable, profitable and job-creating mining and resources sector that will continue to contribute to the nation's economic health for decades to come.