Addressing profit shifting through the artificial loading of debt in Australia

The 2013-14 Budget introduced measures which will further erode the international competitiveness of Australia’s business taxation system, add yet another layer of complexity and introduce further uncertainty. The package of changes to the thin capitalisation and debt deduction rules, announced without prior consultation, will have a number of unintended consequences which in turn will impair investment and economic growth.

Targeting the Immediate Deduction for Mining Rights and Information First Used for Exploration

Immediate deductibility for exploration expenditure is a long-standing feature of the income tax system to encourage mineral exploration, in recognition of the spill-over benefits to the economy. The Government’s Budget announcement to deny immediate deductibility for the cost of exploration tenements and information to address a specific integrity concern is poorly targeted and will impact on genuine exploration activity. By decreasing incentives to explore, this measure has the potential to harm Australia’s future pipeline of mining projects.


The region is set to benefit from the continuation and expansion of the mineral sands mining sector which is already highly active in Loddon Mallee North. Mineral sands mining activity in the region is substantial, including three deposits near Ouyen which are currently being mined. In addition to these, there are a number of advanced projects underway which should see the region’s identified mineral sands endowment increased and lead to regional production increases in coming years. It has been estimated that the Victorian part of the Murray Basin, much of which is in Loddon Mallee North, contains more than 60 million tonnes of coarse-grained mineral sand deposits and more than 200 million tonnes of fine-grained deposits with the potential to support several long-life mining operations.


The Hume region is prospective for a range of minerals including (but not limited to): brown coal, gold, base metals, and molybdenum. The development of these resources has the potential to boost the region’s economy significantly through the creation of high-skill, high-wage jobs in a high-value add sector.

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