The controversial mining tax will impose an additional 30 per cent tax on the exorbitant profits of Australia’s top mining companies and is expected to raise $12 billion in revenue for the Government over its first three years.

The new tax means that Australian mining companies will be taxed over and above the standard company tax rate on their profits.

What does this mean for you as an investor?

Well, the proposed tax does not pass on any additional franking credits to investors.

Before the dividend imputation system, the tax office would tax both the companies and the investor, even though this money has already been taxed, so it was a form of double taxing. The Australian Dividend Imputation System that was introduced in 1987 fixed this by providing a franking credit to investors to put a stop to the double taxation of company dividends.  

Are we returning back to the days of double taxation?

The answer is yes! The new mining tax has no franking element, meaning that shareholders will effectively pay double tax on the extraordinary profits of some of our top miners. This provides a clear disadvantage to shareholders of large Australian mining companies such as BHP and RIO.

However whilst the Chinese juggernaut continues to power along, quality Australian mining companies should continue to generate attractive returns to investors.