Significant customs duty savings for expanding mines

Miners have the potential to save millions of dollars on their expansion plans through the Enhanced Project By-law Scheme (EPBS), which allows companies to access customs duty concessions on eligible equipment not manufactured in Australia.

BDO Brisbane’s Natural Resources Lead Partner David Wilson said the scheme, administered by AusIndustry, could save miners up to two per cent on project capital expenditure budgets.

“While two per cent sounds like a trivial amount, when it is applied to expansion plans worth hundreds-of-millions or even billions of dollars, the savings become quite material,” Mr Wilson said.

“Recently, one of our clients saved $6 million in customs duty, which equated to 1.5 per cent of the overall project budget of $400 million,” he said.

Mr Wilson said that some miners are unnecessarily paying five per cent customs duty calculated on the value of imported equipment, without even realising.

“As it is generally contractors managing all the engineering, procurement and construction of a mining project, there isn’t usually much incentive for them to actively look to save money throughout the planning stages,” Mr Wilson explains.

“As with most project costs, the five per cent customs duty on imported equipment is simply added into the final bill and paid by the miner without question.

“Basically, some mining companies are bearing these unnecessary customs duty costs without even realising,” he said.

Exemptions from the customs duty are applicable to companies with projects worth more than $10 million through the EPBS. Companies must provide AusIndustry with sufficient evidence that it has followed a suitable process to ensure Australian industry is used wherever possible.

“While AusIndustry prefers companies to buy equipment from an Australian manufacturer, sometimes it is simply not possible,” Mr Wilson said.

“If mining companies can prove to AusIndustry that they will involve Australian industry wherever possible throughout the project, then there is a good chance they will be given an exemption from customs duty,” he said.

Mr Wilson said new mine constructors, in particular, have the best opportunity to save money with customs duty exemptions.

“The production deadlines of a lot of new miners are so ambitious they could inadvertently be overlooking these smaller details and consequently miss out on millions-of-dollars worth of savings,” Mr Wilson said.