Article by Brad Thompson, courtesy of The Australian.
16.10.2025
The resources industry has come out swinging over a Productivity Commission proposal for a 5 per cent cashflow tax as the federal government seeks a way to plug a budget black hole.
The Chamber of Mineral and Energy WA, whose members include BHP, Rio Tinto, Fortescue, Glencore, Newmont, Woodside Energy and Chevron, is ready to go to war over any move to adopt the tax proposal first floated at the end of July.
CME director of policy and advocacy Anita Logiudice blasted the proposal on behalf of the lobby group’s membership over fears it might be considered in the wake of Labor’s super tax reset and efforts to boost productivity.
Economists say the move to scrap the unrealised gains tax in response to a major backlash could create a revenue gap of up to $20bn and keep a budget surplus out of reach for more than a decade.
Ms Logiudice said a cashflow tax would be disastrous for a resources industry that needed to build up balance sheets for major projects.
“Australian businesses already operate under some of the highest corporate taxes in the world, with resources companies paying an effective tax rate in excess of 40 per cent when considering additional burdens such as royalties and payroll tax,” she said.
“In addition to further weakening Australia’s international competitiveness, there is a very real risk this experimental new tax would have the exact opposite effect of its stated goal of boosting productivity.
“Taxing cashflows disincentivises businesses from accumulating the money they need to fund big new projects, such as mines or factories, decarbonisation initiatives, or major productivity enhancing technology.”
Mark McGowan, who led the Labor government in resources-rich WA for six years, and business leaders are among those urging federal Treasurer Jim Chalmers to rein in government spending to cover any budget shortfall from the retreat on super tax and unrealised gains.
Speaking in Perth on Wednesday, BHP president for Australia Geraldine Slattery renewed her criticism of the 30 per cent corporate tax rate paid by most companies in Australia, saying it was a barrier to investment and needed to be closer to 20 per cent.
The Productivity Commission has argued that a net cashflow tax would allow businesses to immediately deduct capital expenditure in the year in which it was incurred, and encourage investment. The commission case for the tax is that all companies would be subjected to a net cashflow tax of 5 per cent and almost all would then pay a lower statutory company tax rate of 20 per cent – and that most would pay less tax than they do under the current system.
However, the commission concedes companies with turnover of more than $1bn a year could pay more. The higher tax bill could be mitigated by investing back into the economy in the same year.
Ms Logiudice said that wasn’t a model fit for the resources industry, and would damage major investments and exploration.
“Building a balance sheet capable of funding these kinds of game-changing investments doesn’t happen overnight. It takes multiple years and, in the resources sector, is highly contingent on commodity cycles,” she said.
“Discouraging businesses from building cash reserves also places them at much higher risk of being forced to shutter operations during a downturn – another common occurrence in the resources sector.”
Gold miners are among those currently reporting record cashflows and building cash reserves on the back of soaring prices for the precious metal. Genesis Minerals on Thursday announced a cash build of $165.8m in the three months to the end of September. Managing director Raleigh Finlayson said the outstanding cashflow put Genesis in a strong position for growth.
Gold and copper miner Evolution reported record net mine cashflow of $366m on Wednesday and said it had ended September 30 with a cash balance of $780m as it continued to deleverage and pay down debt.
In a submission to the Productivity Commission, the CME spelled out a series of concerns about what it described as an “experimental change that hasn’t been tried anywhere else in the world”. The lobby group said a cashflow tax could discourage investment and have other damaging unintended consequences for miners and oil and gas producers.
“Most businesses undertake large investments in cycles rather than annually, reflecting multi-year asset lives and, in the case of the resources sector, commodity price cycles,” it told the Productivity Commission.
“As building cash buffers in intervening years to finance this investment will now be taxed, firms are less likely to be able to invest without seeking external finance and paying interest costs. Lower cash buffers would also increase liquidity and insolvency risks during economic shocks, particularly as lower cash buffers may make it more difficult to access finance during these periods.”
The CME said a net cashflow tax would not be frankable, which would also hit small business.
It claimed exploration would be particularly vulnerable because capital raisings to fund the multi-year search for new mineral deposit and gas reserves would now be taxed despite not earning any operating revenue.
