The $13.7B production tax credit won't kick in until 2027 at the earliest.
My guess is that in 2 years time, when the economy is in dire straits, this policy is superfluous and likely to be dumped because 1) there are more immediate priorities that could generate better economic multiplier 2) the Govt of the day would either have shelved it or unable to win support to pass as well as from the public. Miners hail tax credits but Coalition to block ‘billions for billionaires’ Brad ThompsonReporter
May 14, 2024 – 10.36pm
Australia’s critical minerals’ industry has hailed $13.7 billion in budget tax credits at the same time as the Coalition has vowed to block the policy claiming it will deliver “billions in handouts to billionaires”.
The credits, flagged by The Australian Financial Review on the eve of the budget and aimed at boosting downstream processing of critical minerals, won’t kick in until 2027 as the government fine-tunes the policy and legislates changes to the tax system.
But shadow treasurer Angus Taylor said the Coalition would not support “billions of dollars of handouts to billionaires” in production tax credits.
“We strongly support having those sectors being strong. But the way to get there is to focus on the fundamentals, not to throw money at them with subsidies. We don’t support the $13.7 billion of production tax credits,” Mr Taylor said.
The wider critical minerals industry hailed the tax credits – modelled on assistance available in the United States and Europe – as a big step toward Australia becoming a superpower in the global energy transition.
Wesfarmers chief executive Rob Scott described the support as “smart, targeted use of the tax system to solve big problems, leverage our competitive advantages and enhance Australia’s prosperity”.
Association of Mining and Exploration Companies chief executive Warren Pearce, who led lobbying for the tax credits, said Mr Taylor’s comment were disappointing and ignored the fact that nations around the world had massive incentives on the table to attract investment in downstream processing of critical minerals away from Australia.
Mr Pearce said claims about handouts to billionaires were unfair and inaccurate.
Wesfarmers is building Australia’s third lithium hydroxide refinery and is set to become one of the big winners from tax credits expected to total $17.6 billion over 14 years and apply to any of the 31 minerals the government considers “critical”.
The tax credits will apply to lithium hydroxide production, but not to miners who stop at producing spodumene concentrate onshore.
Budget winners: from left, Andrew Forrest, Gina Rinehart, Chris Ellison and Mike Henry.
The policy is aimed at encouraging the likes of Pilbara Minerals, Chris Ellison’s Mineral Resources and the Gina Rinehart-backed Liontown Resources to move production further downstream in Australia.
MinRes, which in the past has considered building a lithium hydroxide plant onshore, welcomed the government’s move.
“This policy will help Australia move further down the battery supply chain to add more value to our critical minerals and create the jobs of the future,” a MinRes spokesman said.
New York-listed Albemarle’s lithium hydroxide plant at Kemerton in Western Australia is expected to qualify, as is a similar plant owned by China’s Tianqi and IGO Limited at Kwinana south of Perth.
Iluka Resources, through its mineral sands products classified as critical minerals and its rare earth refinery under construction in WA, will be another big winner.
Arafura Rare Earths boss Darryl Cuzzubbo said encouraging downstream processing would keep the vast majority of value-add, jobs and skills in Australia.
“The government’s support is ensuring Australia’s critical mineral sector remains cost competitive with overseas jurisdictions where there has been similar policy reform,” he said.
Arafura’s biggest shareholder is Mrs Rinehart’s Hancock Prospecting.
Nickel producer Wyloo, owned by Andrew and Nicola Forrest, said the tax credits would put Australia on track to become a leader in the electric vehicle industry.
Wyloo boss Luca Giacovazzi said the budget measures acknowledged the significance of the critical minerals sector in Australia becoming a much bigger player.
“Australia has an opportunity to build on the advantages of our significant mineral resources and move further along the supply chain to become a key player in the global electric vehicle battery industry,” he said.
“Measures like the tax incentive will support Australia’s global competitiveness, shore up local supply chains and build a generational opportunity for our mining industry to expand as part of the energy transition.”
Wyloo will put its WA nickel mines into care and maintenance at the end of the month amid an industry collapse that has seen 2000 job losses announced since December.
The private company will not qualify for tax credits unless it eventually reopens the mines and pushes ahead with plans to build a nickel plant that would produce a precursor material for battery cathodes. BHP talks on nickel to continue
The Albanese government will hold post-budget talks with BHP about the future of its struggling nickel business after confirming the mining giant will qualify for the 10 per cent production tax credit unveiled in the budget.
BHP is still weighing up the future of its nickel mines, smelter and refinery in WA.
The company has been warning since February that tax credits may not be enough to save the business as it struggles to survive the impact of Chinese-backed Indonesian producers flooding the global market with supply.
The government has told BHP it wants to talk about what more it can do to save about 3000 jobs in WA with the tax credits three years away, but also warned there is a limit to the support it can offer.
BHP declined to comment on Tuesday.
The tax credits represent a big win for Resources Minister Madeleine King and for the Perth-headquartered Association of Mining and Exploration Companies which led lobbying on behalf of key industry players.
Ms King hosted nickel and lithium crisis meetings in Perth in January where she talked up the tax credits and then had to stare down Labor colleagues uneasy about the perception of bailing out the likes of BHP and billionaire Dr Forrest in nickel.
Mr Pearce said Australia was already much more than a “dig and ship country” in mining.
“This (tax credits) is a proven mechanism that will reward those willing to take a risk in establishing new and costly industries, that if successful, will deliver a significant return on investment for Australia,” he said.
“To be clear, this incentive is a zero-risk approach for Australia to take. If companies don’t produce a value-added product, they don’t receive a tax credit. It’s as simple as that.”
