Show download pdf controls
  • Mining and quarrying and mineral transport

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    From 1 July 2001, deductions for the decline in value of depreciating assets used in mining and quarrying and in minerals transport are worked out using the general rules, see Working out decline in value. However, the decline in value of a depreciating asset you first use for exploration or prospecting for minerals (including petroleum) or quarry materials obtainable by activities carried on for the purpose of producing assessable income can be its cost. This means you can deduct the cost of the asset in the year in which you start to use it for such activities to the extent the asset is used for a taxable purpose.

    An immediate deduction is available for payments of petroleum resource rent tax and for capital expenditure which does not form part of the cost of a depreciating asset and is incurred on:

    • exploration or prospecting for minerals (including petroleum) or quarry materials obtainable by activities carried on for the purpose of producing assessable income, or
    • rehabilitation of your mining or quarrying sites

    If the expenditure arises from a non-arm's length transaction and is more than the market value of what it was for, the amount of the expenditure is instead taken to be that market value.

    Any recoupment of the expenditure is included in assessable income.

    Expenditure incurred after 30 June 2001 which does not form part of the cost of a depreciating asset and is not otherwise deductible may be deductible as a project amount through a project pool. This applies to mining capital expenditure directly connected with carrying on mining operations and transport capital expenditure directly connected with carrying on the associated business.

    Mining capital expenditure is capital expenditure incurred on:

    • carrying out eligible mining or quarrying operations
    • site preparation
    • necessary buildings or improvements
    • provision of water, light or power to the site of those operations
    • building used directly for operating or maintaining treatment plant
    • buildings and improvements for storing minerals or quarry materials for treatment
    • housing and welfare, except for quarrying operations.

    Transport capital expenditure includes capital expenditure on:

    • a railway, road, pipeline, port or other facility used principally for mining or quarrying transport
    • obtaining a right to construct or install such a facility• compensation for damage for constructing or installing such a facility
    • earthworks, bridges, tunnels or cuttings
    • contributions you make in carrying on business to someone else’s expenditure on the above items.

    For information on how to work out deductions for such expenditure using a project pool, see Project pools.

    Special transitional rules ensure that amounts of undeducted expenditure as at the end of 30 June 2001 incurred under the former special provisions for the mining and quarrying and mineral transport industries remain deductible over the former statutory write-off periods-for example, over the lesser of 10 years and the life of the mine.

    Similarly, that former statutory write-off continues to apply to expenditure incurred after 30 June 2001 if:

    • it would have qualified for deduction under those former special provisions
    • it is a cost of a depreciating asset that you started to hold under a contract entered into before 1 July 2001 or otherwise started to hold or commenced to construct before that day.

    Finally, exploration or prospecting expenditure incurred after 30 June 2001 that is a cost of a depreciating asset that you started to hold under a contract entered into before 1 July 2001 or otherwise started to hold or commenced to construct before that day is deductible at the time incurred.

    Last modified: 11 Dec 2019QC 27399