To the great surprise of all within the industry, the Queensland government has announced significant changes to the royalty regime for coal. The changes end what has otherwise been a stable period of royalty policy nationally. The royalty changes proposed are well out of step with other jurisdictions and display a deep lack of appreciation of the sector and the investment challenges which the coal industry faces. The net effect of the royalty changes is likely to be negative for both the State and industry.
The Current Regime
Under the Mineral Resources Regulation 2013 (Qld) a royalty is payable on coal sold, disposed of or used in a return period. Royalties are calculated by multiplying the applicable royalty rate by the value of coal. The royalty rate for a return period is determined by reference to the average price per tonne of the coal sold, disposed of or used in that period. Until 30 June 2022, coal royalty rates are as follows:
| Price per tonne | Royalty Rate |
| Up to and including $100 | 7 per cent of value |
| Over $100 and up to and including $150 | First $100 – 7 per cent of value
Balance – 12.5 per cent of value |
| More than $150 | First $100 – 7 per cent of value
Next $50 – 12.5 per cent of value Balance – 15 per cent of value |
The New Regime
The changes to royalty rates are to apply from 1 July 2022. The changes provide for new tiers of royalty rate above $150 per tonne. No changes were be made to applicable rates for prices below $150 per tonne. The changes are designed to transfer a much greater share of higher prices to the State. From 1 July 2022 the new royalty rates will be as follows:
| Price per tonne | Royalty Rate |
| Up to and including $100 | 7 per cent |
| Over $100 and up to and including $150 | 12.5 per cent |
| Above $150 | 15 per cent |
| Above $175 | 20 per cent |
| Above $225 | 30 per cent |
| $300 and above | 40 per cent |
The tiers of royalty rates only apply to the portion of the royalty above the relevant price. For example, if coal prices are $302 per tonne, the 40 per cent tier will only apply to the $2 portion.
Comparisons with Rates of Other States
Queensland Rates Compared to the New South Wales Rates
New South Wales (NSW) has a far more direct royalty rates regime in place. Under the Mining Regulation 2016 (NSW), the applicable rate varies depending on the method used to extract the coal. For open cut mining the rate is 8.2 per cent, underground mining is 7.2 per cent, and deep underground mining is 6.2 per cent.
Queensland Rates Compared to the Western Australian Iron Ore Royalty Rates
In Western Australia, iron ore royalty rates are prescribed under either the Mining Regulations 1981, or the various State Agreement Acts. There are two systems used to collect iron ore royalties. The collection system applicable to iron ore is the value-based rate of royalty, rather than the price per tonne of the relevant commodity. The royalty value is essentially the invoice value of the mineral, less any allowable deductions. This system considers the fluctuations in price, and the material grades. Under this regime the relevant rates are as follows:
- For bulk iron ore – 7.5 per cent of the royalty value
- For concentrate material – 5 per cent of the royalty value
- For metal – 2.5 per cent of the royalty value
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