High Court rejects mining tax challenge
Even though the minerals resource rent tax has raised negligible revenue, its imposition rankles miners, who argue that they already pay royalties to state governments, along with income tax to the federal government.
A liability to pay the so-called super-profits tax is triggered when a miner generates an annual profit of $75 million, or more, after taking various deductions into account.
Fortescue Metals argued that the tax was invalid for several reasons, including that it cut across states' rights in the execution of their functions.
The challenge was dismissed unanimously by the full High Court. "The treatment of state mining royalties by the MRRT Act ... did not discriminate between states and that the acts did not give preference to one state over another," the court ruled.
The action sought to argue that some portions of the legislation "were not valid laws of the Commonwealth".
Before the court, lawyers representing the federal government rejected the claims of Fortescue lawyers that the mining tax had inhibited the states from developing their resources.
Mr Forrest's lawyers contended that the federal government had punished the states for reducing royalties for individual mining companies by imposing the tax, which is levied across the board.
Fortescue said it was "disappointed" by the High Court ruling, pointing out that the "very low" level of revenue collected by the tax vindicated its opposition to it.
Fortescue managing director Neville Power said: "Fortescue challenged the MRRT because it was an unreasonable intrusion into an area of state responsibility and that it was also an unfair, discriminatory and complex tax. We're disappointed by today's decision."
The tax was "ill-conceived", Fortescue said, and "an unfair and administratively burdensome and inefficient tax".
Fortescue alone has incurred up to $5 million of costs to comply with the demands of the tax, with the mining sector paying a high level of tax already since, along with company tax, it also pays mineral royalties to state governments.
"Fortescue expects to pay $1.5 billion in company tax and royalties this financial year, rising to $2 billion in the years ahead," Mr Power said.
Opposition Leader Tony Abbott has promised to repeal the tax should his Coalition win the federal election. Mr Abbott has said the revenue shortfall was an example of the government's failure to manage the economy.
Treasurer Chris Bowen welcomed the High Court decision. He said he had no plans to change the tax if Labor was returned to government.
The structure of the MRRT offsets any reduction in state taxes, so if Western Australia cuts levies in a bid to spur development the federal tax rises and eliminates the difference. That inhibits states from offering tax breaks to companies agreeing to finance development in remote regions, WA argued in a filing to the High Court late last year.
Frequently Asked Questions about this Article…
The full High Court unanimously dismissed Fortescue Metals’ challenge, finding that the MRRT’s treatment of state mining royalties did not discriminate between states and that the legislation was valid as laws of the Commonwealth.
The MRRT, often called a super‑profits tax in the article, is levied on miners when annual profit after deductions reaches $75 million or more, targeting what the government considers excess returns from mineral projects.
Fortescue argued the tax cut across states’ rights, was an unreasonable intrusion into state responsibility, and was unfair, discriminatory, complex and administratively burdensome. It also claimed the federal law effectively punished states that reduced royalties for individual companies.
Fortescue said it was disappointed, called the tax ‘ill‑conceived’ and inefficient, and noted it had already incurred up to $5 million in compliance costs. The company also highlighted it expects to pay about $1.5 billion in company tax and royalties this financial year, rising to $2 billion in future years.
The article says the MRRT has raised negligible revenue. For everyday investors, that’s relevant because miners argue the tax still imposes compliance costs and additional tax burden even if it hasn’t generated significant federal receipts.
Opposition Leader Tony Abbott promised to repeal the tax if his Coalition wins government, while Treasurer Chris Bowen welcomed the High Court decision and said he had no plans to change the tax if Labor is returned to government.
Yes. The MRRT structure offsets reductions in state levies—so if a state like Western Australia cuts royalties to spur development, the federal MRRT can rise and eliminate the difference. That dynamic can inhibit states from offering tax breaks to companies.
The ruling means the MRRT remains in place for now, keeping an added layer of tax and compliance for large miners. Investors should note the ongoing political debate (including promises of repeal), the potential for continued compliance costs, and the way federal and state taxes interact when assessing mining company profitability.
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