The New South Wales government plans to boost the budget by $2.7 billion by increasing coal royalties, which the mining sector says is a “significant additional tax burden” during already challenging times.
Key points:
- NSW coal royalties will increase by 2.6 per cent next financial year
- The state government says it has “struck the right balance” between maintaining a healthy industry and servicing the public interest
- The coal industry says it is already dealing with high costs and low coal prices, but is relieved NSW did not follow Queensland’s royalties model
NSW Treasurer Daniel Mookhey said the increases were about “modernising” the state’s scheme.
“This is a fair outcome for the people of NSW,” he said when announcing the changes.
“The old system is out of date — the market has moved on.”
Royalties are the revenue taxes paid back to governments in exchange for the right to extract coal and other resources.
From July 2024 royalty rates will increase by 2.6 per cent for open cut, underground and deep underground mines, taking those rates to 10.8 per cent, 9.8 per cent and 8.8 per cent respectively.
The government projects the increase will return more than $2.7b to state coffers within four years of being implemented.
Finance and Natural Resources Minister Courtney Houssos said the new rates would take effect next financial year, when the coal cap and reservation measures end.
“The Minns government is committed to ensuring the ongoing stability of the mining sector while rebuilding essential services for the people of NSW,” she said.
“Having embarked on extensive consultations with mining companies, industry groups and our trading partners, we have struck the right balance.
“We understand the importance of the coal mining industry to our electricity network … but also to our broader state’s economy, whether that’s the royalties that are funding our schools and hospitals, or it’s those local coal mining jobs right across regional NSW.”
Industry relieved, but burden will be felt
NSW Minerals Council chief executive Stephen Galilee said the industry appreciated the consultation but would face challenges when the changes took effect.
“It will be a significant additional impost on the NSW coal sector at a time when coal prices have been falling and our operating costs have been rising,” he said.
“Based on our own modelling, we believe the increase in rates … is an effective 30 per cent increase in proportional terms.
“That’s a significant additional tax burden for any industry or any business to have to cover and it will be significant challenge for our industry as well.”
But Mr Galilee was glad the state did not follow Queensland’s sliding scale royalty scheme, despite a report earlier this year claiming it could have doubled NSW’s revenue for FY22.
“We are relieved that the NSW government has decided not to recklessly impose a Queensland-style windfall progressive royalty system in NSW, because that would have wreaked havoc on the sector,” he said.
“It would have caused mines to close early, it would have cost lots of coal mining jobs and it would have potentially threatened energy security.”
Mr Galilee also welcomed the end of the coal cap and reservation measures.
“We recognise that the industry has a role to play in relation to royalty taxes and repair of the NSW budget,” he said.
“We expect that the $2.7b in additional revenue that the government is expecting is probably a minimum.”
Posted , updated
