Royalty and Statistics Guidelines - Coal

This is intended to be a guideline only. To determine calculation of coal royalty, this document must be taken in
consideration with the Minister’s Determination dated 31 December 2008, Mining Regulations 2003 and Mining
Act 1992.
CONTENTS
Introduction...................................................................................................................... 3
Royalties.......................................................................................................................... 4
Coal Royalty................................................................................................................. 4
Coal Reject Royalty...................................................................................................... 4
Royalties and the GST ................................................................................................. 4
Completion and Lodgement of Coal Royalty Returns...................................................... 5
Calculating the Quantity and Value of Mineral Recovered .............................................. 6
Monthly Coal Royalty Return ........................................................................................... 7
Notes to Monthly Coal Returns...................................................................................... 12
Export Sales............................................................................................................... 12
Domestic Sales .......................................................................................................... 12
Colliery Sales ............................................................................................................. 12
Exchange Sales ......................................................................................................... 12
Other Disposals ......................................................................................................... 12
Total Disposals .......................................................................................................... 12
Invoiced Purchases.................................................................................................... 13
Exchange Purchases ................................................................................................. 13
Net Disposals............................................................................................................. 13
Closing and Opening Stock........................................................................................ 13
Value of Mineral for Royalty ....................................................................................... 13
Allowable Deductions................................................................................................. 14
Annual Coal Royalty Return .......................................................................................... 16
Matters Arising from Inspections and I&I Determinations .............................................. 22
Auditing ......................................................................................................................... 24
Records ......................................................................................................................... 24
Keeping Accurate Records ........................................................................................ 24
Privacy and Confidentiality ............................................................................................ 24
Payment ........................................................................................................................ 25
Penalties........................................................................................................................ 25
Disputes......................................................................................................................... 26
Royalty Refunds ............................................................................................................ 26
Appendix 1: Assessable Income and Allowable Deductions ......................................... 27
Appendix 2 Types of Records........................................................................................ 28
Appendix 3 Royalty Contacts......................................................................................... 30
Introduction
Industry & Investment NSW (I&I) issues titles for the right to mine and dispose of
minerals and petroleum. When titleholders obtain a title they undertake to abide by the
conditions of the authority, including the payment of royalties and prompt lodgement of
royalty returns on their titles. These guidelines explain the royalty requirements and
sets out titleholders’ obligations in this regard. It also highlights the penalties that can be
incurred.
Royalty is the payment to the State for the right to extract and use the State’s mineral
resources. The collection of mining statistics is incorporated with the royalty return. The
information required consists of employment at the end of each period; capital
expenditure, value of minerals sold, used, purchased and stockpiled.
Royalty rates are set to encourage present and future exploration and development of
mineral resources. At the same time, the NSW Government aims to ensure that the
State receives a fair and equitable return for the use of non-renewable resources.
The collection of mining royalties is based on ‘self-assessment’. Therefore responsibility
for calculating the amount to be paid and prompt lodgement of royalty returns and
payment rests with the titleholder.
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Royalties
Coal Royalty
Royalties are levied on all coal recovered in New South Wales. Royalty on coal is
charged on an ad valorem basis. Four types of coal royalties apply:
o Open Cut Royalty at the rate of 8.2% of net disposal value
o Underground Royalty at a rate of 7.2% of net disposal value
o Deep Underground Royalty at the rate of 6.2% of net disposal value. Deep
underground Royalty is applied to mines below 400m from the earth’s surface.
o Coal Reject Royalty
Royalty is payable monthly (in arrears) on coal disposed of or sold within the given
period.
Section 283 (5) of the Mining Act 1992 states the value of minerals recovered is to be
calculated (whether by weight or volume) in the matter determined by the Minister. At
present, the Minister’s Determination commenced on 1 January 2009. (Please follow
this link for the determination –
http://www.dpi.nsw.gov.au/__data/assets/pdf_file/0004/65866/Ad-valorem-coalroyalties.pdf
Coal Reject Royalty
Royalty is payable on coal in coal reject if the coal reject is used or disposed of for the
purpose of producing energy. Coal reject is defined as the by-product of the mining or
processing of coal that has energy value of less than 16 gigajoules per dry tonne or
contains more than 35% ash by dry weight. The rate of royalty on the coal in coal reject
is no more than half the rate applicable to coal.
Royalties and the GST
Royalties paid in accordance with the Mining Act 1992 are an exempt tax, fee and
charge as per section 81-5 of the A New Tax System (Goods and Services Tax) Act
1999. GST is not payable on royalties paid under the Act.
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Completion and Lodgement of Coal Royalty Returns
Coal Royalty returns are to be lodged on a monthly and annual basis.
Monthly returns and payment are due by the 21st day of the following month, e.g. the
monthly return for June is due by the 21 July.
The lodgement date for annual coal returns and payment of any adjusted returns, for the
preceding financial year is 31 July.
Titleholders are responsible for ensuring that:

information relating to their titles is accurate and up-to-date;

coal recovered by each operation is calculated in accordance with Regulation 44
of the Mining Act 1992 and correctly attributed to each coal lease worked;

they apply the appropriate royalty and accurately calculate the royalty payable for
coal recovered;

completed and signed royalty returns in respect of all titles held are lodged with
the Department, together with the royalty payment on or before the specified due
date;

details and maps are kept of areas of extraction and a breakdown of mineral
recovered from different land portions; and

a level of assurance that values for sales, foreign exchange gains and losses,
purchased coal and levies are equal to the value within the company’s own
general ledger.
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Calculating the Quantity and Value of Mineral Recovered
The return will provide a separate form for each type of coal available to be mined by the
leaseholder and the applicable royalty rate. (See page 4 for the current rates).
The royalty will be calculated on the minerals recovered during the period.
The value of minerals sold will be the first arm’s-length sale that receives market value
(typically the invoiced). Where no invoice is rendered the value should reflect spot
prices at the time of disposal. The closing stock should be valued at the net realisable
value, while opening stock will reflect the value reported during the previous period.
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Monthly Coal Royalty Return
The net disposal value of coal recovered will be determined by subtracting total
deductions from the value of net disposals. Please also refer to Appendix 1 for details of
assessable income and allowable deductions.
Royalty is calculated by multiplying the Value of Mineral for Royalty value by the rate
prescribed for the type of coal operation.
An example of the calculations required for a monthly coal return is as follows.
A download version of the template is now available in excel format.
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Notes to Monthly Coal Returns
All quantities are to be reported in whole tonnes. All values are to in $AUD.
Export Sales
Export coal means coal consumed or to be consumed outside Australia. These sales
values are at free on board (f.o.b.) price rate (i.e. excluding ocean freight and
insurance).
Foreign exchange gains and losses arising between the time the shipment (BOL) and
the date of payment are assessable as revenue. Please see the Minister’s determination
for a detailed description.
Domestic Sales
Domestic coal refers to coal consumed or to be consumed within Australia, e.g. power
stations. The total value of domestic sale invoices, including any allowances for royalty
payments are to be included as assessable revenue.
Colliery Sales
This refers to invoiced sales between collieries regardless if they are related. Sales must
be of valued at a rate that an authorised officer is satisfied that the price charged is an
amount that would be expected to have been obtained if the coal had been sold to an
arm’s length buyer.
Exchange Sales
Exchange sales (loans) refer to coal swapped at ports to fulfil contracts or coal ships.
These records are reported by the various port authorities and do not require a $AUD.
This is because it is expected that coal loaned will be returned in the near future.
Other Disposals
This includes disposals such as household coal and coal disposed for own use. Coal
used for construction of port facilities such as stockpile pad, is considered to be other
disposals of coal. Coal categorised in this category must be valued at an arm’s length
pricing methodology in respect of the quality of the coal being disposed.
Total Disposals
This refers to the cumulative total of the above sales and disposals.
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Invoiced Purchases
This refers to invoiced purchases between collieries. Purchase value allowable as a
deduction must be the invoice cost. If the coal is purchased from a related colliery the
coal must be valued at a rate that an authorised officer is satisfied that the price charged
is an amount that would be expected to have been obtained if the coal had been
purchased at an arm’s length buyer.
Exchange Purchases
Exchange purchases (borrows) refer to coal swapped at ports to fulfil contracts or coal
ships. These records are reported by the various port authorities and do not require a
$AUD. This is because it is expected that coal borrowed will be returned in the near
future.
Net Disposals
The Net Disposals quantity and value is the total disposals less total purchased coal.
The net disposal quantity will be used to calculate beneficiation expenses.
Closing and Opening Stock
Reportable stock totals at the beginning and end of the reportable period. Stock should
include ROM stockpiles, washed stock, stock in transit and stock at port.
Value of Mineral for Royalty
Refers to the quantity and value (including stockpiles) recovered from the lease during
the specified period.
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Allowable Deductions
As per the Minister’s Determination dated 1 January 2009, allowable deductions include
the following;
Beneficiation
A leaseholder can claim allowable deductions for beneficiation (based on net disposals
for the period) under three categories and at the following rates:
o Coal subjected to a full cycle of washing - $3.50 per tonne.
o Coal subjected to a simple washing process such as wet jigging - $2.00 per
tonne.
o Coal which is crushed and screened, but not subjected to a washing process $0.50 per tonne.
Levies
Four types of levies are allowable for deduction. The allowable deduction totals should
be equal to the expense in the general ledger for the year. Levies allowable for
deduction are as follows:
o Coal Research Levy – based on the monthly net disposal of coal as imposed by
Australian Coal Association Research program (ACARP).
o Mine Subsidence Levy – Colliery proprietors are required to pa an annual levy
into the Mine Subsidence Compensation Fund under the Mine Subsidence
Compensation Act
o Mines Rescue Levy – A levy payable by coal mine owners under the Coal
Industry Act for the funding of mines rescue services.
o Commonwealth Levy for Long Service Leave – A monthly levy is imposed on all
employers in the coal industry to fund long service leave entitlements to all
person employed in the coal mining industry.
Insurance
This includes Export Credit Insurance and Ocean Freight and Insurance for CIF sales.
Insurance is provided by AUSTRADE covering payment to the producer for an export
sale. The amount of that insurance cost paid or incurred by the leaseholder during
through royalty period is allowable.
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Other
This includes Bad Debts and Bank Commissions incurred on letters of credit. Where an
amount owing is irrecoverable by the leaseholder, the amount of the bad debt may be
claimed, to the extent the bad debt is not covered by insurance.
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Annual Coal Royalty Return
Annual Coal Returns are required to by lodged and signed by the leaseholder on or
before the 31 July each year.
The Annual Coal Return constitutes the total of coal disposed of in the previous 12
month period (i.e. July to June), including total allowable deductions and stock totals.
An example of the Annual Coal return follows.
A template is issued to collieries which aids the leaseholder to complete the various
tables.
A download version of this template is now available in excel format.
A brief summary of the annual return is below. Much of the annual return template is
formulated and provides notes on requirements.
The covering sheet must include the titles where coal was won during the year, county
and parish details, type of coal won (e.g. open cut, underground or deep underground),
quantity and value of coal won and royalty payable.
Annual returns must include reconciliations of coal won from the lease during the period.
This is required to be completed in Tables 2 and 3 of the annual return.
All colliery sales and exchange sales (loans) are to be reconciled in Table 4.
All colliery purchases and exchange purchases (borrows) are to be accounted for in
Table 5.
If there are any queries regarding the completion of the annual return, or other royalty
matters please contact the Royalty Branch. Contact details appear in Appendix 3 at the
end of the guidelines.
Please Note: Interest Penalties may be considered if there has been found to be a large
variation (x%) made with the annual return reconciliation, and then after an audit this is
found to be incorrect.
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Matters Arising from Inspections and I&I Determinations
If coal is used at port for foot pads stockpiles and not considered a sale as no
revenue is received, is this still assessable for royalty?
As coal is removed from the colliery it is considered to be a disposal under the Mining
Act and a value must be assigned for royalty purposes. The value should reflect the
quality of the coal and at an arm’s-length pricing methodology, e.g. if coal contains high
ash content the value should reflect this.
High ash coal used for such an event does not meet the coal reject criteria as it is not
used in energy production.
Beneficiation expenses appropriate to the coal disposed is allowable for deduction.
Coal of this nature should be categorised under the heading of Other Sales/Disposals.
Can purchased coal be claimed for beneficiation purposes?
Beneficiation on a disposal can only be claimed once. Beneficiation on Purchased Coal
that passes 'through the gate' may be claimed for the additional processing, for example:
In regard to purchases that go straight to port or the client, no additional beneficiation
would be expected.
Can the Coal 21 Levy be claimed as an allowable deduction?
The Minister’s Determination is clear in the levies allowable for deduction. These include
the Australian Coal Association Research program (ACARP), Mine Subsidence Levy,
Mines Rescue Levy and Commonwealth Levy for Long Service Leave.
Levies that are not allowable include Coal 21, Mine Safety Levy and Royalty.
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Does beneficiation apply only to coal won from the leaseholder’s titles?
Beneficiation is allowable on the net disposal total of coal tonnes. This will include the
net effect of coal sales and coal loans, less coal purchased and coal borrowed.
This net disposal total can then be multiplied by the beneficiation rate appropriate.
If a colliery has different types of beneficiation, how is that calculated?
The Minister’s determination allows for 3 types of beneficiation on ROM coal. If a colliery
has production records that indicate coal that has undergone a full wash, a jigging or a
crushed only process, then stock on hand and disposals can reflect these various
products.
If a colliery produces products that are distinguishable by the beneficiation process but
not recorded separately in stockpiles, the type of coal predominately produced will be
considered the major product from that colliery, and therefore any stockpiles will contain
this type of coal.
For example, if a colliery predominately sells coal that has undergone the full wash
cycle, coal that is crushed only will be considered to be fully disposed of in the period.
All stocks (other than ROM stocks) will therefore be considered as being part of the full
wash cycle and the $3.50 rate for beneficiation applies on net disposals. The net total of
crushed only coal will attract the $0.50 rate for beneficiation and all stock produced will
be considered fully disposed in the period.
If a colliery mines coal classified across 2 royalty rates, what rate is appropriate to
calculate net disposals?
Some collieries may need to apply 2 or sometimes 3 royalty rates across their
operations. Both regimes will need to be calculated separately.
I&I has determined that if a colliery predominately mines under the underground regime
(i.e. 7.2%) then it is considered an underground colliery. In that case coal that is won
from seams below 400m and which will attract a royalty rate of 6.2%, is determined to
be fully disposed of in the period and all stockpiles will be considered underground coal.
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Auditing
The Department will audit all annual returns. This will be undertaken within two years of
submission. The Department requests that all royalty records be retained until after an
audit has been completed.
Records
Keeping Accurate Records
Titleholders are required to maintain proper and accurate account books relating to
minerals recovered. Any officer of the Department must be permitted access to account
books, documents and other records relating to the production, treatment and disposal
of minerals by the titleholder. If necessary, the Minister will direct the titleholder to make
such records available for an officer of the Department to inspect. Examples of the
types of records a titleholder should keep are set out in Appendix 2.
Privacy and Confidentiality
The information, including personal information, collected by the Department for the
purposes of royalty is collected under the requirements of the Mining Act 1992. The
information is necessary in order to administer the mining laws of the State.
The information collected is treated as confidential and specific disclosure provisions are
set in Section 365 of the Mining Act 1992, which states:
Information obtained about a titleholder’s operations may not be disclosed unless the
disclosure is made:
a) with the consent of the person from whom the information was obtained; or
b) in connection with the administration or execution of the Act; or
c) for the purposes of any legal proceedings arising out of the Act or of any report of
any such proceedings; or
d) for the purpose of any investigation or inquiry conducted by a Warden under the Act;
or
e) with the concurrence of the Minister.
f)
Under the Freedom of Information Act 1989
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Payment
Payments of royalty due should accompany a Royalty return.
The preferred method of payment is a direct deposit to the Department’s Remitting
Account
Account Name
Account No
Bank
BSB
I&I Royalty Remittance Account
203404
Westpac Banking Corporation
032 – 001
You are also required to inform the Department of the payment by email to
mineral.royalty@industry.nsw.gov.au or fax to 02 4931 6796 on the same day the
payment is made.
If the payment is to be made by cheque, it should be in the name of the Industry &
Investment NSW and mailed to PO Box 344 Hunter Regional Mail Centre, NSW 2310.
The effective date of payment is taken as the date of lodgement with the Department’s
cashier or direct deposit into the Department’s remitting account.
Penalties
Unpaid royalties incur an interest charge which is added to the outstanding amount and
must be paid. The interest rate is 1.5 times the Westpac Unsecured Personal Overdraft
rate or any other rate which the Minister may from time to time determine.
Interest charges apply in all cases except where exceptional circumstances can be
demonstrated by the titleholder to the satisfaction of the Minister. Postal delays and
misdirected courier deliveries do not constitute exceptional circumstances.
If the titleholder does not pay the outstanding amount, the Department will commence
action to recover the amount outstanding and cancellation of the title may follow.
The Mining Act 1992 provides for fines for offences relating to returns, the provision of
information and access to records.
If you furnish false or misleading information or fail to lodge a Royalty Return on time the
Regulations specify a maximum penalty of $11,000. In addition, a person in charge of
premises, where a royalty officer believes records are kept, fails to provide reasonable
facilities and assistance may face a penalty of up to $11,000.
These penalties may be imposed by a court of competent jurisdiction.
In addition, where there is a variation of greater than 2% in the annual reconciliation of
the monthly returns, then interest charges will apply.
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Disputes
If you dispute an assessment you may lodge an objection.
If you believe that an incorrect assessment has been issued, action to recover any
outstanding debt will be suspended pending investigation of the matter. However, if it is
found that the initial assessment is correct, you will be charged continuing interest on
the unpaid debt.
If you consider that assessment for royalty liability is based on an invalid application of
policy or an inappropriate method of calculation, the objection will not be investigated
until full payment has been made. The Minister will determine the claim and you will be
notified of the outcome as soon as practicable. Any resultant refund will be made within
14 days.
Titleholders should note that during a period of indebtedness to the Department all
matters before it (e.g. lease renewals, transfers, applications for titles etc) will be viewed
in light of any outstanding liability.
Royalty Refunds
Generally, royalty refunds occur for two reasons
i.
Overpayment of royalty amounts
ii.
Refunds to private owners of minerals
Overpaid Royalties
Overpayments are generally identified during audit inspections of royalty returns.
Refunds are made as soon as possible after approval to vary the assessment granted.
Refunds to Private Owners of Minerals
Private owners of minerals are entitled to seven eights (7/8th) of the royalty collected in
respect of a particular parcel of land in which they own the minerals. Extensive
investigations are undertaken to determine ownership of all minerals mined in New
South Wales each year. We also carry out verification of the amounts of privately owned
minerals recovered. We endeavour to have full refunds to private owners by 30
November each year. The exception will be mines targeted to be audited during that
year, where 90% of the refund will made, then upon inspection, either additional refund
or adjustment to future refunds will be made.
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Appendix 1: Assessable Income and Allowable Deductions
Income
Includes the revenue realised from the mineral recovered and disposed from the title.
This assumes an arm’s length transaction, where the Minister is satisfied that it
produces a market value. Speculative activity is not assessable and should be ignored.
Sales
The $AUD invoice value at disposal.
Foreign exchange gains or losses
The variation in the $AUD value at settlement.
Income from Insurance claims
Assessable where it is determined that this income
is due to claims on saleable coal. E.g. 2007
Newcastle flood claims
Foreign exchange trading
Not assessable.
Hedging losses or gains
Not assessable.
Interest
Not assessable.
Income from housing rental
Not assessable.
GST
Not assessable.
Deductions
Allowable deductions are confined to beneficiation and four levies.
Beneficiation
See allowable deduction for per tonne rates
Levies
See allowable deductions for allowable levies
Foreign exchange trading
Not assessable
Hedging losses or gains
Not assessable
Royalty on Coal
Not allowable
Transport expenses
Not allowable
Costs of transport to stockpiles
Not allowable
GST
Not assessable
Port charges, wharfage
Not allowable
Demurrage/Despatch
Not allowable
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Appendix 2 Types of Records
Whilst there are basic record-keeping requirements that apply to all titleholders, the
extent of records kept depend upon the relative size and nature of mining operations.
These may also be dictated by other business reasons.
Examples of the types of records that should be kept are summarised below.
General record
category
Information required
Recommended supporting
records
Disposals
(includes all
minerals removed
from the lease
whether for sale,
further processing
or personal use)
 Quantity of each mineral
sold or disposed (including
minerals consumed by the
leaseholder and/or related
parties).
 Tax invoice showing transaction
date, mineral description,
quantity (e.g. tonnes), value
and customer details.
Purchases
 Quantity of each mineral
acquired (from external
sources).
 Value of minerals disposed
in Australian dollars (i.e.
total consideration received
less GST).
 Invoice register showing details
of sales.
 Tax invoice showing transaction
date, mineral name, quantity,
value and supplier details.
 Value of minerals acquired
(i.e. total consideration paid
less GST).
Stockpiles
 Annual stockpile survey
 Quantity of minerals
undertaken by an independent
recovered or purchased that
surveyor.
have not been sold,
disposed or consumed by
 Working papers showing
leaseholder (includes raw
calculation of closing stock from
and processed minerals
production, sales and purchase
stockpiled inside and outside
records since last survey date.
the mine site).
 Value of stockpiled minerals
based on most recent
arm’s-length sale.
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Production
 Quantity of minerals
recovered from each lease
held.
 Daily records (with monthly and
annual summaries) showing the
quantity of mineral recovered.
 Plans showing the extent of
mining activity within each
lease.
 Daily records (with monthly and
annual summaries) showing the
input and output of any
processes undertaken to
improve the quality of the
mineral stockpile.
 Surveyed maps and/or
sketches showing the location
within each lease boundary
where mining activity has
occurred each year.
Allowable
Deductions
 Actual costs paid or incurred
during the period.
 For guidance on the extent
that deductions may be
allowable, please refer to
Appendix 1.
 Tax invoices/receipts.
 General Ledger totals
 Other evidence of payments
such as bank statements,
cheque butts, credit card
statements.

If you need any assistance in deciding what records are required for your operation
please contact the royalty unit on (02) 4931 6436.
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Appendix 3 Royalty Contacts
If you require assistance or further information on any aspect of the royalty scheme or
you obligations as a titleholder, please contact the appropriate Royalty Branch officers
listed below.
Royalty Contacts
Manager Royalty and Statistics
Adrian Delany
Ph (02) 4931 6437
Email adrian.delany@industry.nsw.gov.au
Royalty Compliance Officer
Matthew Gagan
Ph (02) 4931 6435
Email matthew.gagan@industry.nsw.gov.au
Royalty Investigations
Michael Halmy
Ph (02) 4931 6432
Email michael.halmy@industry.nsw.gov.au
Royalty Systems and Investigation
Peter Harvey
Ph (02) 4931 6434
Email peter.harvey@industry.nsw.gov.au
Royalty Clerk Audit
Elaine Gray
Ph (02) 4931 6436
Email elaine.gray@industry.nsw.gov.au
Branch Fax Number
(02) 4931 6796
Branch Email
mineral.royalty@industry.nsw.gov.au
Address
Mailing Address
PO Box 344, Hunter Region Mail Centre NSW 2310
Building Address
516 High Street Maitland NSW 2320
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