Something that caught my eye in the 17th May announcement re...

Something that caught my eye in the 17th May announcement re rebate, is the timing of announcement of production and the approval of the ATO rebate. Perhaps it's coincidence, perhaps not.

On the 13th May LMG announced the demo plant was in production of MgO. On the 16th May they received notification from the tax office that the 2023 rebate was approved. I am guessing that in order for the rebate to be approved, the demo plant had ro be commissioned and producing product - ie being used for its intended purpose? I not also that the rebate is claculated at 48.5% of claimable expenditure.

This would explain a number of things;
1) The shift from producing Mg ingots to MgO composite powder. Having realised last year that they were not going to get the rebate until the plant was in production(requirement by the tax office) and waiting for Mg ingot prduction was going to take too long, they decided to switch to MgO product so they could get the rebate approved for that part of the plant that was built.

2) As at 30 June 2023, the capital cost expended on the Demonstration Plant eligible for a research and development rebate was $22.8M and applying the 48.5% rebate calculates to ~$11M rebate. Research and development activities outside its demonstration plant activities then would have been about $1.5M to take it to the total received of $12.5M.

3) LMG estimates that its research and development tax rebate for the year ended 30 June 2024 will be in the order of $16M. That includes rebate from LMG’s research and development activities outside its demonstration plant activities which is in the order of $1.2M and leasing of its equipment in November 2023 is expected to contribute some $2M to its tax rebate. Therefore the rebate for demo plant expenditure would be about ($16M-$1.2M-$2M) about $13.8M. This then calculates to a fiscal expenditure on the demo plant of $13.8/0.485 = $28.5M elegible for rebate claim.

4) The 17th May announcement also states that, by the end of the financial year ending 30 June 2024, capital cost expended on the Demonstration Plant eligible for a research and development rebate is estimated to be closer to $50M. LMG’s research and development activities outside its demonstration plant activities will earn a rebate in the order of $1.2M.

So, total expenditure on the Demo plant to 30th June 2024 that is claimable for the rebate would be:

• $22.8M in 2023
• $28.5M in 2024

gives a total of $51.3M.

We have spent $51.3M to date that's claimable for rebate. We don't know how much has been spent on the Demo plant that is not claimable for the rebate. but I assume it would be relatively small - probabaly no more than $2-$3m over the two fiscal years. That then gives us a total expenditure of about $55M.

That will increase further in 2025 fiscal year as they expand the plant to produce ingots, LMG anticipates the research and development rebate for the 2025 financial year should be in the order of $5M so based on the 48.5% rebate the 2025 expenditure claimable would be ($5M/0.485)about $10M.

So on those latter projections the total cost of the Demo plant would be about $55M + $10M = $65M.

If there is someone with a background in accountancy and knows tax law they my like to critique my calaculations.