THE Queensland Resources Council (QRC) has called on the Palaszczuk Government to delay the implementation of any gas royalty increase to January 1, 2020 to allow industry and Government to work through confusion in the draft legislation. 

“As it currently stands, the 25% increase in gas royalties on domestic and export gas will damage industry viability and increase costs to the electricity and domestic processing and manufacturing sectors,” QRC chief executive Ian Macfarlane said.

“Increasing the cost of gas to Queensland businesses puts their viability and jobs at risk. Of particular concern is the retrospective introduction of the royalty increase to 1 January, 2019 which will be passed through as an additional charge to gas consumer companies which have already produced and sold their electricity and goods. 

“The gas industry understands its role in delivering returns for all Queenslanders, but the shock tax increase announced in this week’s budget will undo all the benefits Queensland has secured by being the only East Coast state to develop its own gas.

“We’re calling on the Premier and the Treasurer to hold off on any royalty increase until January 1 2020, instead of rushing it through the Parliament and adding to the existing confusion on domestic gas royalty impacts. 

“Currently, the legislation for the gas royalty increase risks pricing Australian LNG exports out of the international market and perversely making domestic gas more expensive for industry users here in Australia," Mr Macfarlane said.

"At the very least there should be an exemption for gas sold on the domestic market. We’re calling on the Treasurer to make that commitment as soon as possible.

“Queensland is the only East Coast state producing new gas resources to supply the domestic market. Given production in the Bass Strait is declining, that means Queensland gas will be more important than ever. 

“At the height of the East Coast gas supply squeeze, the ACCC said transport costs from Queensland to southern markets were already adding at least an extra $2 a gigajoule to the price for domestic users.

"Even though the price of gas has since come down from those peaks at which domestic users were being offered contracts at about $20 a gigajoule, nothing can reduce transport costs.

“Adding on the extra 25 percent royalty tax will mean more expensive gas for export and more expensive gas for domestic users.

“The QRC looks forward to meeting with Premier Palaszczuk and the Treasurer as soon as possible to address these significant concerns with the legislation.”

www.qrc.org.au

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"IT IS pleasing to see that sanity has finally prevailed in the decision-making process on the Adani mine,” Australian Industry Group Queensland head Shane Rodgers said today.

“Ultimately there is nothing particularly special about the Adani proposal. It is an application to establish a mine in a state with a long history of mining and a heavy reliance on mining royalties to balance its books and support living standards. Adani deserved to be treated like any other company in these circumstances," he said.

"Aside from the merits of the project itself, this issue was being watched carefully by business and investors in Australia and overseas as a case study on the transparency and consistency of decision-making in Queensland. Investors in the state need to be certain that their investment is welcome here and there is a level playing field for everyone.

“Over time the energy mix will change, as will mining economics. In the meantime we need to make rational, timely decisions that support the investment climate in the state.

"We cannot let the extremes of philosophical discussion derail a sensible approach to transitioning industry in a way that supports the livelihoods of families and addresses important environment and climate change issues,” Mr Rodgers said. 

About Ai Group

The Australian Industry Group (Ai Group) is a peak employer organisation in Australia which represents the interests of thousands of businesses in an expanding range of industry sectors including: manufacturing; engineering; construction; food & beverage processing; transport & logistics; information technology; telecommunications; labour hire; and defence. Ai Group's influence crosses all areas of workplace development and sustainability.

aigroup.com.au

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NEW RULES requiring companies to prove they have a clean tax record when tendering for major government contracts is a welcome improvement, but more needs to be done to assist and protect small businesses subcontracted to these projects, the Australian Small Business and Family Enterprise Ombudsman Kate Carnell said.

From July 1, businesses tendering for Commonwealth contracts over $4 million will need to provide a statement from the ATO proving they have a satisfactory tax record.

“This is an important step to ensure businesses tendering for government projects are up-to-date with tax payments,” Ms Carnell said.

“It provides small businesses, particularly subcontractors who work further down the supply chain, with some security, but certainly more can be done in the procurement space.

“Small businesses rely on contracts being awarded to businesses that operate in a fair and sustainable manner.

 “The government should also require that tenderers use contracts with subcontractors that comply with unfair contract terms legislation and that all subcontractors are paid on time.

“If businesses do not comply, they should be banned from future tendering for a period of time.

“I will continue to argue the case for a level playing field and the need to give small business a fair go in the procurement process.”

www.asbfeo.gov.au

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QUEENSLAND now has the highest tax rates in Australia for resources projects, undermining the state's hard-won reputation as a global commodity leader and risking the 315,000 jobs in the sector, Queensland Resources Council (QRC) chief executive Ian Macfarlane said today.

"The surprise 25 percent hike on gas royalty rates in the state budget, coupled with Queensland’s sliding scale for coal royalties, means the Palaszczuk Government oversees the highest rate tax grab on the resources sector in Australia,” Mr Macfarlane said.

“Hiking up gas royalty rates to a flat 12.5 percent will make Queensland the highest taxing state on the East Coast. It will even put the state out of kilter with gas-rich Western Australia, which has a tax range that starts at 10 percent and only increases to 12.5 per cent for secondary licences. Plus we now have the threat of a royalty review process hanging over Queensland’s second most valuable export industry.

“At current market prices, Queensland already has the highest rates of coal royalty taxes of any state in Australia, well above the other significant coal-producing state of NSW.  A tonne of high-quality Queensland coal pays 43 percent more in royalties than in NSW.  What signal does that send to investors?

“Queenslanders deserve a fair share from the development of our state’s resources.  At the end of the day those resources belong to all Queenslanders. But on existing tax rates resources projects already pay enormous dividends to the Palaszczuk Government.

“This financial year the Queensland Government is reaping $5.2 billion in resources royalty taxes. That includes $450 million in petroleum royalties. In the space of one year petroleum royalties have more than doubled from $187 million in 2017-18.

“Next financial year the resources sector will pay $5.45 billion to the Palaszczuk Government in royalty taxes.  The onus is on the Government to make sure that enormous tax revenue is spent fairly and wisely across the state – not resort to bigger tax grabs to fill budget black holes.

“By putting up royalty taxes with no warning and no consultation, Treasurer Jackie Trad is selling out the people of regional Queensland – because they are the ones who would be hardest hit by a loss of investment in resources.

“The Treasurer’s comments today that because royalty rates for gas have been frozen for 10 years means now is the time for industry to give back more shows a misunderstanding of the way resources projects work to the long-term benefit of all Queenslanders.

“Multi-billion dollar investments are made in resources projects over decades relying on clear rules for investment in order to create regional jobs and support for regional communities for the long haul.

“A tax hike out of the blue with no consultation just doesn’t pass muster.

“The Government cannot expect to be taken seriously as a state that welcomes international resources investment when it has shown it’s prepared to change the rules overnight with no warning and no consultation.”

BACKGROUND DETAILS

According to the QRC, figures from the ACCC show there has been a significant reduction in netback prices for LNG exporters, or the price an exporter can expect to receive for their gas. Since October 2018 the gas price has more than halved. In October 2018 the price was A$13.21 per gigajoule, while in June 2019 the price was $6.38 a gigajoule. Any extra tax impost will make Australian gas more expensive on the global market and therefore less competitive, Mr Macfarlane said.

Coal weekly spot prices last week were: Thermal coal US$71.50 (or A$102.14 with the dollar at 70 cents); coking coal US$198.63 (or A$283.76).

www.qrc.org.au

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