Tuesday, 30 November 2010

Hot rock tax doubts hurt low-carb plays

West Australian
Tuesday 23/11/2010 Page: 40

WA's fledgling geothermal industry is missing out on investment because of uncertainty about whether explorers are entitled to the same tax deductions that other mining and energy companies receive, an industry lobby group has claimed. Australian Geothermal Energy Association chief executive Susan Jeanes said investors were being disadvantaged for backing geothermal exploration instead of iron ore, oil or gas.

Under the existing tax regime, a company that spends money on exploration is entitled to a tax deduction for the amount it spends, either offset against a source of revenue or carried forward as a tax loss. But Ms Jeanes said it was unclear whether the relatively new field of geothermal exploration was covered. She has written to the Federal Government's mining tax policy transition group in the hope that new incentives being considered under the tax could resolve the problem.

"(The Income Tax Assessment Act) does not specifically recognise exploration for geothermal resources potentially resulting in a divergent and discriminatory taxation treatment relative to exploration for other resources", she said in the submission. "AGEA believes that this is inconsistent with the Australian Government's policies to encourage a rapid transition to a low carbon intensity energy supply". Geothermal energy better known as "hot rocks" uses water heated by the slow decay of naturally radioactive elements thousands of metres underground.

While it is better known in South Australia than in WA, the Barnett Government has taken some steps to back the emerging industry, including introducing a maiden geothermal acreage program. Federal Resources Minister Martin Ferguson was unavailable for comment last night.

The Federal Government's now scrapped resource super profits tax had provided an exploration rebate that specifically included geothermal projects. However, the Federal Government has yet to reveal what if any exploration incentives will be included under the watered down mineral resources rent tax.