Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)Chapter 4 Sale of mining rights
Overview
4.1 Part 4 of Schedule 1 of the Bill will remove the exemption from tax under paragraph 23(pa) of the Income Tax Assessment Act 1936 (the Act). The exemption will not be available in respect of income derived from the sale, transfer or assignment, under contracts entered into after 31 December 1996, of rights to mine for gold or for any prescribed metal or mineral.
Summary of the amendments
4.2 The purpose of the amendment is to remove the exemption from tax on the income derived by bona fide prospectors when they sell, transfer or assign their rights to mine for gold or for any prescribed metal or mineral.
4.3 The amendment will apply to income derived under contracts entered into after 31 December 1996.
Background to the legislation
4.4 Paragraph 23(pa) exempts income derived from the sale, transfer or assignment of rights to mine for gold or for any prescribed metal or prescribed mineral. The exemption only applies to sales by 'bona fide' prospectors, as defined in the law.
4.5 The prescribed metals and prescribed minerals are listed in Regulation 4 of the Income Tax Regulations . They are:
| Ores of | |
|---|---|
| Asbestos | Antimony |
| Bauxite | Arsenic |
| Chromite | Beryllium |
| Emery | Bismuth |
| Fluorspar | Cobalt |
| Graphite | Columbium |
| Ilmenite | Copper |
| Kyanite | Lithium |
| Magnesite | Mercury |
| Manganese oxides | Molybdenum |
| Mica | Nickel |
| Monazite | Osmiridium |
| Pyrite | Platinum |
| Quartz Crystal (piezo-electric quality) | Selenium |
| Radio-active Ores | Strontium |
| Rutile | Tantalum |
| Sillimanite | Tellurium |
| Vermiculite | Tin |
| Zircon | Tungsten |
| Vanadium |
4.6 This exemption was enacted as an incentive for 'bona fide' prospectors to search for prescribed metals and minerals, which they do not necessarily have the means to mine themselves, with the knowledge that the income from transferring the rights to mine would not be reduced by taxation.
4.7 The list reflects past concerns that known resources of certain metals and minerals were inadequate for Australia's present and prospective domestic consumption. These concerns are no longer justified in the light of Australia's current reserves and the global trading environment.
Explanation of the amendments
4.8 The exemption from income tax provided by paragraph 23(pa) is withdrawn for income derived under contracts entered into after 31 December 1996. [Item 13]
4.9 Paragraph 23(pa) is not repealed. References to the paragraph in other parts of the Act will have a continuing operation, such as provisions calculating the amount of undeducted exploration and prospecting expenditure or unrecouped capital expenditure.