The Western Australian mining industry has put increased pressure on the Prime Minister and his Cabinet to introduce Flow Through Shares Scheme as the PM tours Australia’s largest mining state.
The Association for Mining and Exploration Companies (AMEC) CEO Simon Bennison said that while the Prime Minister is in the country’s most mining-dependant state, he should announce a July 1 start date.
“While Rudd and his Cabinet are campaigning around Western Australia, I hope they have a long, hard think about how to best to support the Australian economy, now and into the future,” Bennison said.
“Flow Through Shares will allow exploration companies to pass on unused tax credits for use by their investors — thus increasing the attractiveness of the shares and creating greater financial security for exploration and junior mining companies.
“This, in turn will allow these companies to undertake more work and secure vulnerable jobs, particularly those in the regions.
“In 2007, the then Opposition said they recognised the long-term importance of encouraging investment in the sector and promised to introduce Flow Through Shares if successful in the forthcoming election.
“Since the election, the Government has reiterated their support for the plan on a number of occasions, but have not made any move other than to entangle FTS in the time consuming and heavily bureaucratic Henry Tax Review.”
Bennison is well supported in his push to introduce the Scheme, with The AusIMM President-Elect Greg Chalmers saying a Flow Through Share Scheme is essential to the mining industry in January this year.
“The rationale for a flow-through share scheme is to rectify a current anomaly in taxation law that adversely affects junior explorers,” Chalmers said.
“Currently, the Income Tax Assessment Act (ITAA) provides for a tax deduction for exploration expenditure, presumably on the basis of it being a high-risk activity with recognised benefits to the common economic good. However, junior exploration companies (which make up more than 70% of companies engaged in mineral exploration within Australia) generally do not generate sufficient taxable income to be able tot claim the deduction.
“A flow-through share scheme would smooth out this anomaly by allowing companies which cannot use the deduction themselves to pass it through to shareholders, who are then able to use it to offset their own tax liabilities.”