Senate Economics Legislation Committee, , 7:16:52 to 7:23:54
Discussion on Capital Gains Tax changes affecting junior mineral explorers and the impact of trust reforms on small business income splitting.
Topics: Manufacturing, Workplace relations, Government spending
Speakers: Senator Tyron Whitten, Speaker 41, Katrina Di Marco, Speaker 40, Senator Lisa Darmanin
We're not live. I thought oh, we are now. Okay, so I have to start again. All right. Apologies. Take to the committee welcomes officers from Department of Treasury Revenue Small Business and Law Group. Senator Whitman, over to you.
So the CG two changes came as quite a shock to a lot of investors. One of the groups we've heard from who is particularly hard hit with this is junior mineral explorers. Was any consultation undertaken with this sector?
Oh, I might defer to my colleagues to understand if any specific consultations have been taken, undertaken with them post announcement. But we're certainly aware of the concerns that have been raised.
So they fall out of the scope of that particular concession.
And to attract investment, you're when you're an investor, your only upside potential is capital gains. So why would you invest in one of those businesses again?
Senator, the capital gains changes are about providing more neutral treatment across all different asset classes. As a whole is about providing more mutual treatment so decisions are made on economic considerations, not tax considerations.
Yeah, they're going to struggle to attract new investment, aren't they?
Senator, I don't think that's something that I can answer, but my colleague perhaps in corporate and international tax division can.
Yeah, so Susan Voltitude, Acting First Assistant Secretary, Corporate and International Tax Division. So Senator.
Sorry, just can I ask broadcasting or whoever it is that get the microphones up a bit? It's a bit quiet for everyone. Thank you.
Sorry, I'll say again yes, Susan Voltitude, Acting First Assistant Secretary, Corporate and International Tax Division. So Senator, in some of our discussions with the representatives of the sector, we've uh they've spoken to us about the the types of investors that invest in this sector. Um so I just thought I mentioned that yes, there are quite a lot of individual investors who, if they're investing directly, would be impacted by the CGT changes. Um the sector does also attract some investment from institutional investors. So if those are corporate investors, for instance, they're not impacted by the CGT changes. And if there's superannuation funds, and that includes individuals who may choose to invest through a self-managed super fund, they're also not impacted by the changes. Um the other thing that I mentioned is um that in this sector, as you can imagine, the um commodity prices are quite an important driver of investment, and so in fact, um tax, yes, it's one factor that might impact on investment in the sector, but in historically commodity prices have been a major driver of investment. And right now, with um buoyant, for instance, copper and gold prices, those are um still in recent quarters have still been attracting quite a significant amount of investment to the sector. So you know, as a whole, there are still a lot of factors there that remain attractive for investment, and and as my colleague has said, the whether or not you're affected by the CGT changes does depend on your circumstances, and not all investors will be affected.
Yeah, I get that. There's I would suggest that um a lot of people that invest in junior explorers uh you know pretty well gambling. Um they're not likely to be an institutional investor or somebody that's not affected, it's more likely to be somebody that will be impacted. So given that you know, over 60% of mineral discoveries made in recent decades. Um, given that we have a decline in manufacturing sector, we're increasingly relying on our mineral exports. If we don't have investment in our exploration, we're in danger of declining mineral sector. So was this sector specifically considered when making these tax changes? Or do you concede that it will have a material impact on the level of investment?
Senator. I might just echo a couple of sentiments of the colleagues, the colleagues have made already. The purpose of the changes was to provide a more neutral tax treatment of capital gains. It it was not to um set out to reward particular kinds of investment or you know, investment where you've sort of spoken about things that could be taken as gambling or speculation or luck or those sorts of things. It is designed to say designed to provide a much more neutral treatment such that capital flows to its most productive use. I I hear your representations from stakeholders that may that may affect sort of particular characteristics of certain sectors.
I'd suggest they are pretty productive use.
Well, yeah, and Senator, if they are very productive, then despite the changes, it still provides a return on that capital investment, should it be successful? It doesn't deny that there would be a return from that capital investment. It changes the base of it such that it's more neutral, so investors choose to go to what they believe is most productive. And if that is something that, you know, is um oh, sorry, I don't want to, I don't want to, I don't want to be too tried, but to borrow your words gambling, then that is still available under the current regime. Yeah, that's um under the legislative regime, rather.