Queensland Royalties Regime payers urged to move quickly to comply with new rulings

Amanda Firth |

20 October 2015

Queensland mining companies have until 29 January 2016 to ensure compliance with four new royalty rulings or face being dealt hefty penalties.

BDO tax partner and state tax specialist Leisa Rafter said the Queensland Office of State Revenue’s announcement closed an important Royalties Regime information gap left open since the regime’s handing over from the Department of Natural Resources and Mines.

“This is a case of better late than never, and represents a positive and necessary change made by the OSR to further strengthen the Royalties Regime,” Ms Rafter said.

“The new rulings seek to improve the limited compliance guidance provided in the historical Ministerial Determinations and follow a public consultation period which closed on 28 August 2015.

“The new rulings are also designed to provide some clarity on how the law, which has undergone a lot of revision over the past decade, will be applied.”

Companies will have an amnesty period until 29 January next year in order to review their historical mineral royalty obligations and make any voluntary disclosures or face the financial consequences.

At the end of the amnesty, companies could be subject to significant penalties of up to 75 per cent if they’re found to be not compliant.

Significant for prescribed and specified minerals, the MRA002 ruling provides for the calculation of the value of minerals, and states royalty will be payable in the return period the mineral is sold regardless of whether consideration for the minerals has been received.

The MRA001 ruling also provides clarity around allowable coal deductions relating to inter-mine transactions and port operating costs, while the MRA003 ruling provides guidance in relation to various minerals not covered previously.

A draft ruling in relation to petroleum royalties (PGA001.1) has not been finalised and will be issued separately.

“Given the amnesty period for these rulings is three months, royalty payers will need to review its circumstances and prepare and lodge any voluntary disclosures as a matter of priority,” Ms Rafter said.

Ms Rafter said companies impacted by the new ruling should be asking themselves the following questions now to ensure they are not adversely impacted once the amnesty period expires.

  1. What royalty payments have been made?
  2. Are these payments consistent with the new rulings?
  3. If not, have you determined the underpayment and considered making a voluntary disclosure to the OSR?
  4. Do you have processes in place to ensure compliance and correct and on time payment going forward?
  5. Do you sell or dispose of any minerals to related entities?
  6. If so, have you applied for a gross value royalty decision with the OSR?