Royalty Assessment

Which minerals attract royalty?

Under the Mineral Royalty Act, royalties are payable on all minerals, excluding uranium, petroleum and extractive minerals of a specified kind that are recovered under an extractive permit or extractive mineral lease issued by the Department of Mines and Energy. However, extractive minerals recovered under a mineral lease or mineral claim prior to conversion to a new mining title under the Mineral Titles Act 2010 (NT) are subject to royalties.

What is a royalty?

Under the Mineral Royalty Act, royalties are payments made to the Northern Territory Government, as the owner of the minerals, in consideration of a right granted to extract and remove those minerals. The royalty payable is calculated from profit derived from the minerals taken or produced. Royalties are not taxes. 

See the Mineral Royalty Overview (pdf, 147kb) | Mineral Royalty Overview (docx, 758kb) for more information.

How is royalty calculated in the Northern Territory?

Royalty is based on the net value of production of mineral commodities. Net value is calculated according to the formula:

Net Value = Gross Realization - (Operating Costs + Capital Recognition Deduction + Eligible Exploration Expenditure + Additional Deduction)

The current royalty rate is 20 per cent of calculated net value.

What happens if calculated net value is negative or if the production unit has made a loss?

Negative Net Value may be carried forward to a future royalty year with the approval of the Secretary. When Negative Net Value is carried forward, it can reduce your net value in later royalty years.

See MRA Guideline RG-MRA-003 (pdf, 106kb) | MRA Guideline RG-MRA-003 (docx, 105kb) for more information.

What is Gross Realization? (How are minerals valued?)

Gross realization is comprised of a range of elements, including the gross value of any saleable mineral commodities sold or removed without sale from the production unit in a royalty year. This may also include any amounts received by way of insurance, indemnity or guarantee on loss of the minerals and any net gains on the sale of production unit assets. Gross realization may be reduced by any approved negative net value brought forward.

See MRA Guideline RG-MRA-004 (pdf, 185kb) | MRA Guideline RG-MRA-004 (docx, 779kb) for more information.

What are Eligible Operating Costs?

Expenditure in relation to a production unit that is reasonable in amount and directly attributable to either the production of saleable mineral commodities, maintenance for the purposes of production or the sale or marketing of mineral commodities. To be 'reasonable in amount' an amount expended must represent the fair and realistic value of the activities carried out. To be 'directly attributable' there must be a close and material connection with the requisite activity.

Expenditure that is only remotely or tenuously connected with production, maintenance for the purposes of production, or sale and marketing is not deductible as Eligible Operating Costs (EOC). EOC includes various items closely connected with those activities such as employee remuneration and accounting and auditing fees.

See MRA Guideline RG-MRA-005 (pdf, 172kb) | MRA Guideline RG-MRA-005 (docx, 764kb) for more information.

What is Capital Recognition Deduction? (Can I claim for depreciation expenses?)

Capital Recognition Deduction is a deduction that recognises expenses such as depreciation and interest costs related to specified assets used on the production unit for operational purposes. Expenditure on relevant assets is known as Eligible Capital Assets Expenditure (ECAE).

ECAE is an amount expended which was absolutely necessary for the operation of the production unit. This generally includes plant and equipment and production unit set-up costs.

See MRA Guideline RG-MRA-006 (pdf, 129kb) | MRA Guideline RG-MRA-006 (docx, 121kb) for more information.

What is Eligible Exploration Expenditure?

Expenditure incurred in respect of exploration to determine the existence, location, extent or quality of a mineral occurrence on a mining tenement which forms part of the production unit.

Eligible Exploration Expenditure (EEE) has a deduction cap and cannot reduce net value to a negative amount or increase a negative net value. EEE amounts not used as deduction may be carried forward to future royalty years.

See MRA Guideline RG-MRA-008 (pdf, x116kb) | MRA Guideline RG-MRA-008 (docx, 739kb) for more information.

Lodgement and Payment

Who is liable to pay royalties?

The tenement holder/s of mining tenement/s forming a production unit, including the responsible person appointed for that production unit, are liable to pay royalties.

What is a production unit?

A production unit consists of one or more mining tenements and facilities essential to the mineral production in the Northern Territory. Two or more mining tenements may form a single production unit where tenements are being operated as a functionally integrated operation. This means that the tenements must be interdependent for the production of a saleable mineral commodity.

See MRA Guideline RG-MRA-002 (pdf, 107kb) | MRA Guideline RG-MRA-002 (docx, 114kb) for more information.

What is a responsible person?

The responsible person is an individual who acts on behalf of the tenement holder/s to accept service of documents, furnish statements and make royalty payments. A responsible person must be appointed by the tenement holder/s at or before the production unit comes into active operation. Responsible persons can be appointed by notifying the Secretary in writing, using the Section 11 Notification of Information Form (pdf, 258kb).

See the Mineral Royalty Overview (pdf, 147kb) | Mineral Royalty Overview (docx, 758kb) for more information.

Where can I download the forms for royalty returns and who can I contact if I have any problems with lodging my return?

The relevant forms can be found at Mineral Royalty Forms and Returns.

You can contact the Territory Revenue Office on 1300 305 353 for immediate assistance, or send an email to ntrevenue@nt.gov.au

When are royalty payments and returns due?

Payments for royalty must be made each six months, not later than 30 days after the end of each six month period in the royalty year. These payments should be accompanied by a provisional royalty return. A provisional return should still be lodged even if a negative net value is calculated and no royalty is payable.

An annual return and any residual payment for the royalty year are to be lodged within 3 months of the end of the royalty year.

The royalty year can be chosen by the royalty payer; most adopt either the financial (1 July to 30 June) or calendar (1 January to 31 December) year. For example, those using the financial year as their royalty year must make payment by 30 July and 30 January and must lodge an annual return and make residual payment by 30 September.

What are my payment options?

Payment options can be found at Territory Revenue Office: Payment Options.

Will the royalty return be audited by the Territory Revenue Office and what happens in an audit?

All royalty returns are reviewed by an authorised person appointed by the Secretary. In some cases an audit may be conducted to verify information disclosed in the royalty return. The audit may be carried out on the royalty payer’s premises or the royalty payer may be requested to provide further information to substantiate the royalty return.

To facilitate the audit process, royalty payers must ensure that all records requested by an authorised officer are submitted or available for examination in a timely manner. An assessment is issued once the audit is completed, incorporating any necessary adjustments arising from the audit.

See Understanding Your Royalty Audit for more information.

What can I do if I don't agree with an assessment?

You are able to object to an assessment by writing to the TRO within 60 days of the assessment being issued. This objection is determined by a TRO business unit that is organisationally separate to the business unit which issued the royalty assessment.

If dissatisfied with the objection decision, you are able to lodge an appeal within 60 days of the objection decision, to either:

  1. the Taxation and Royalty Appeals Tribunal under Division 4 of Part 11 of the Taxation Administration Act (NT) (TAA) by lodging a notice of appeal with the Registrar of the Local Court; or
  2. lodge an appeal to the Supreme Court under Division 4 of Part 11 of the TAA by filing a notice of appeal in the Registry of the Supreme Court.

Royalty payers will be advised in the covering letter to an assessment of the next available stage of review including processes, prescribed time limits and subsequent appeal options. See the Guideline CC-GEN-003 Objections and Appeals (pdf, 128kb) | Guideline CC-GEN-003 Objections and Appeals (docx, 140kb) for more information.

What if I am unsure about how certain changes in the operations of the mining tenement will affect my royalty obligation?

A person may apply in writing to the Secretary for an Advance Opinion about their liability for royalty, for a proposal to set up a production unit, change a process, or adopt or change an accounting basis, system or contractual arrangement. An Advance Opinion sets out the Secretary’s interpretation of the operation of the provisions of the Mineral Royalty Act to the particular proposal and is given in advance of the proposal being implemented. If you are issued an Advance Opinion, you apply that decision when completing the royalty return.

An Advance Opinion will only be given for seriously contemplated proposals but not for those that are hypothetical. An Advance Opinion will also not be issued to aid royalty planning or to provide options to minimise royalty amounts payable.

Penalties and Interest

What happens if I don't submit a royalty return?

The general expectation is that the royalty payer will organise their affairs to ensure they lodge their royalty return by the due date. It is important that the royalty payer and/or the responsible person satisfy this significant legal and social responsibility. In the event that the royalty payer or the responsible person fails to comply with this obligation the royalty payer and/or the responsible person may be liable for prosecution under section 46 of the Mineral Royalty Act 

If a royalty return is not submitted the Secretary may issue a default assessment, which may include penalty royalty and interest.

See the Mineral Royalty Overview (pdf, 147kb) | Mineral Royalty Overview (docx, 758kb) for more information.

What happens if royalty payments are overdue?

Royalties not paid by the due date incur an interest charge. The rate of interest is based on the monthly average yield of 90-day bank accepted bills published by the Reserve Bank of Australia, plus 7 per cent.

Interest charges apply in all cases and the Secretary is unable to remit interest charges even in exceptional circumstances.

Royalty that remains unpaid for 6 months or more from being due may also lead to a cancellation of the mining tenement. 
 

What happens if my royalty payments are substantially less than what is assessed at the end of the year?

The Mineral Royalty Act imposes a penalty where the combined six-monthly provisional payments are less than 80 per cent of the assessment of royalty payable.

Royalty payers will be liable to pay additional royalty of an amount equal to the difference between 80 per cent of the royalty assessed and the provisional payments.

The additional royalty may be remitted in full or in part provided the Territory Revenue Office is satisfied that the underpayment did not result from an intentional, deliberate, reckless or negligent act or behaviour.

Information Confidentiality

Where can I get information about mineral royalties collected by the Territory?

We are unable to release royalty information for specific companies or minerals due to a range of laws which establish and govern the collection, storage, usage and disclosure of, and access to, personal and royalty payer information. This includes secrecy provisions of the Mineral Royalty Act.

However, de-identified information (which does not, directly or indirectly, divulge information identifying the affairs of particular royalty payers) are disclosed in the Treasurer's Annual Financial Report.
 

Will information I provide be kept confidential?

Any information provided by you or collected by the Territory Revenue Office for the purpose of carrying out statutory obligation/s under the Mineral Royalty Act will be appropriately protected at all times in accordance with section 50 of the Mineral Royalty Act. Any information provided will not be released to any person except where required or authorised by law.

Client Feedback

Please contact the Territory Revenue Office on 1300 305 353 or send an email to royaltiesandassurance.dtf@nt.gov.au if you require further information or if you would like to comment on the recently restructured royalty information.