The Albanese government’s proposed changes to capital gains tax (CGT), announced in the recent federal budget, have drawn sharp criticism, particularly from the mineral exploration sector. The reforms, which would remove a 50 per cent discount currently applied to taxes payable when an investor sells an asset at a profit, are warned to significantly harm the industry. Industry figures suggest this adjustment will make pre-revenue assets with growth potential less appealing, potentially diverting investment towards more established businesses offering reliable dividend streams.
The Association of Mining and Exploration Companies (AMEC), representing about a third of all ASX-listed companies, stated these changes could “cut the throat” of mineral exploration. AMEC chief Warren Pearce called it a “disaster waiting to happen,” asserting that reduced investment would hinder new discoveries and mine development, impacting a “Future Made in Australia.” Pearce noted this follows the cessation of the Junior Minerals Exploration Incentive (JMEI) last year. James Gurry, managing director of gold explorer Aureka, an entity involved in the search and assessment of potential gold deposits, reported investor unease, highlighting the reliance of firms like his on risk capital for long-term returns.
Exchange-traded fund (ETF) provider BetaShares anticipates a shift towards index-tracking ETFs, as Cameron Gleeson, senior investment strategist, explained that their lower annual stock turnover (around 8 per cent compared to 40 per cent for actively managed funds) means fewer capital gains tax implications and less “tax drag.” However, the Australian Shareholder Association (ASA) cautioned that while ETFs offer diversification, they don’t solve the broader concerns. ASA chief executive Rachel Waterhouse emphasised the core issue is whether the tax system distorts long-term investment decisions or erodes confidence in investing outside superannuation, raising concerns about unintended consequences for portfolio rebalancing or retirement planning.
