Angela Wood, Annemarie Wilmore, Daniel Osvath & George Hempenstall review a recent decision which considers whether three heads of expenditure incurred in relation to mining activities were deductible for the purposes of calculating mineral royalty liability.
The recent decision of the Northern Territory Supreme Court in Groote Eylandt Mining Company Pty Ltd v Secretary for Mineral Royalties (NT)  NTSC 58 considers whether three heads of expenditure incurred in relation to mining activities were deductible for the purposes of calculating mineral royalty liability under section 10 of the Mineral Royalty Act 1982 (NT) (“MRA”). To be deductible, the expenditure must be an “operating cost” as defined in the MRA.
The Court considered three heads of expenditure.
The first two heads of expenditure concerned payments required by the Mining Management Act 2001 (NT) as statutory preconditions for receiving authorisation from the Northern Territory government to carry out mining activities:
The third head of expenditure considered was intra-group costs incurred in respect of access to and use of software for human resources, accounting, supply maintenance and other purposes. These costs were also found to be “operating costs”, however were non-deductible by virtue of a specific “fees for management” exclusion within the MRA. The appellant was unable to discharge its onus of establishing that the charges were not fees for management services given that the software was integral to the control and decision making processes of both the appellant and the broader corporate group (rather than only the appellant).
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