On Friday 13 January 2012, the Queensland Treasurer, Mr Andrew Fraser, announced some important changes that will impact on the resources industry in Queensland as part of his Mid Year Fiscal and Economic Review.

These changes will have a significant impact on any miner or prospective miner considering resources project in Queensland.

Changes to transfer duty

The Queensland Duties Act 2001, as currently drafted, excludes the following from the definition of both statutory licences and land for duty purposes:

  • exploration or prospecting permits under the Minerals Act 1989 
  • authorities to prospect for petroleum under the Petroleum Act 1923 or the Petroleum and Gas (Production and Safety) Act 2004; and 
  • exploration permits under Petroleum (Submerged Lands) Act 1982

With effect from 10.30am on 13 January 2012 (the “start time”), the above exploration permits and authorities to prospect will be included in the definition of statutory licences and land. This means that they will become dutiable property for duty purposes. In addition, the following statutory licences which were previously exempt from duty will also become dutiable property:

  • Geothermal exploration permits under the Geothermal Exploration Act 2004
  • Greenhouse Gas (GHG) exploration permits under the Greenhouse Gas Storage Act 2009

These changes are expected to raise an additional $30m in State revenue per annum.

Impact If enacted with effect from the start time, the legislation will likely have the following effects:

Transfers of interests in exploration permits or authorities to prospect will be subject to Queensland transfer duty at rates of up to 5.25%. This means that joint ventures and farm-ins over existing tenements will be subject to duty

Entities with exploration permits or authorities to prospect in Queensland are now more likely to be considered landholders in Queensland for the purposes of Landholder Duty. A landholder is an entity which holds land in Queensland with an unencumbered value of $2,000,000 or more.

As a result, transactions involving a relevant acquisition in companies which hold directly or indirectly, exploration or prospecting permits are now more likely to be subject to duty in Queensland. A relevant acquisition includes one involving 50% or more of an unlisted Landholder, or 90% or more of a listed Landholder, or a transaction where existing interests in a Landholder are increased beyond these levels.

The creation or termination of a trust over exploration permits or authorities to prospect may now be subject to duty in Queensland Any agreements entered into before the start time, where the transfer or acquisition occurs after the start time, will not be liable for duty.

Changes to the bidding process for exploration permits

The Treasurer has announced that new exploration and prospecting permits to be issued in highly prospective areas of Queensland will be the subject of a cash bidding system. This auction process is expected to raise the State an additional $95m of revenue per annum once the system is fully operational.

This announcement corresponds to Recommendation 49 of the Henry Tax Review which recommended that State governments consider using a cash bidding system to allocate exploration permits. It further recommended that smaller exploration areas, where the cost of running an auction would likely exceed any revenue raised, be granted on a first-come first-served basis.

Which areas the Treasury considers “highly prospective” have not been announced, however it is reasonable to assume that areas of the Bowen, Surat and Galilee basins would fall under such a definition.

Change to monthly royalty returns

Finally, we leave you with a reminder from last year’s Mid Year Fiscal and Economic Review, that from 1 January 2012, royalty returns and payments are now due to the Queensland Office of State Revenue on a monthly basis.