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Missed Tax Savings by The Mining Sector…

Certainly, Australia’s colonial and federal history, its geographical isolation, huge landmass and small population have profoundly influenced the country’s industries, technologies and research institutions. This resource-rich history lead to what is more commonly known as the ‘mining boom’. In light of this, Australian industrial research and development (R&D) in the second half of the nineteenth and early twentieth centuries was largely focused on the agriculture and mining industries.

Whilst industry in Australia is historically a ‘user’ rather than a ‘creator’ of technology, the mining sector has in fact contributed greatly to the creation of new technology through R&D. However, are companies in this field missing out on the R&D tax incentive?

With the mining sector set to slow down in the 2016, Australia is now endeavouring to improving resources, technology and innovation. In fact, due to the downturn many companies in the mining sector are innovating and would most likely discover that they are already undertaking activities that would qualify for the R&D Tax Incentive.

The R&D Tax Incentive is a government incentive to stimulate innovation and streamline cash flow for businesses undertaking eligible research activities. With Australia set on an innovation agenda led by the Turnbull government, the importance of R&D has become increasingly discussed in public discourse. In effect, more than $18 billion of R&D expenditure was registered for 2013-2014 nationally according to the Australian Taxation Office. Nonetheless, the incentive is actually rather undersubscribed and is claimed by only 13, 600 companies per annum. This is particularly surprising as  approximately 2 million entities could be eligible for the incentive. Moreover, in Western Australia – otherwise known in mining as the idiom ‘invest in the west’ – only 13 per cent of companies claimed the incentive.

Previously, successful R&D in areas such as radar exploration and minerals analysis has given birth to firms that now export niche technologies. As a result, the resources sector is one of the leading stimulants for R&D in the Australian economy. The mining sector spends nearly $3 billion on R&D annually, or nearly $1 in $6 of all business R&D spending in Australia. In fact, mining and minerals currently comprises of approximately 8 per cent of the Australian economy, and 40 per cent of exports.  Remarkably, 60 per cent of the world’s mines use mining software that was actually developed in Australia. Moreover, in total, the mining equipment, technology and services sector generates sales of $12 billion annually, and $2.5 billion worth of exports. These statistics highlight the fact that the mining industries does invest heavily in R&D, which consequently could benefit from tax savings.

If you’ve conducted innovative activities through research and development in your firm. Contact Swanson Reed’s team of specialist R&D tax advisors to find out if you qualify  for the R&D Tax Incentive.