Ernst & Young said the decision to remove immediate mining exploration deductions (which will instead be depreciated over a 15-year or life-of-mine period) would lower after-tax returns in a period when exploration was becoming more complex and costly.

“The knock-on impact of this will be for purchasers to lower the prices they pay for exploration projects, reducing the return on the exploration investment that explorers receive when selling outright,” Ernst & Young Oceania mining and metals leader Scott Grimley said.

“This will result in risk capital for exploration moving to other countries with more favourable regimes for exploration.”

Grimley said the budget failed to provide a means for increasing collections for the Minerals Resource Rent Tax – for which projections had to be lowered.

“Exploration is the most effective way of doing this [increasing rent collections],” he said.

“It does not make sense to discourage investment in our resources which is our major endowment when the government should be trying to maximise the rent.”

The Association of Mining and Exploration Companies called the budget announcement a “serious concern” to the industry, in particular attacking the expansion of the exploration write-off period and reference to deduction exceptions for exploration projects deemed unsuccessful.

“To consider a 15-year period is unrealistic and needs to be changed to reflect the inherent risks associated with exploration,” AMEC chief executive officer Simon Bennison said.

“The introduction of the concept of ‘unsuccessful exploration’ potentially creates uncertainty as to what this entails.

“Exploration may lead to the discovery of resources, however, due to a range of factors including commodity prices and difficulty raising finance, a company may not be able to develop a mine.

“When this occurs, the level of write-off of the acquisition costs will not be commensurate with the commercial outcome.”

Queensland Resources Council CEO Michael Roche said the change in exploration policy added to a mounting tax toll on a pillar of the economy.

“Any way you look at it, it is a disincentive to exploration and more broadly it raises more questions over Australia’s attractiveness as a global investment destination with taxation regimes subject to rapid-fire change,” he said.

“Exploration is a financially high-risk industry but it is also the R&D department of the resources sector.

“We are living off the proceeds of last century’s easy minerals and energy discoveries and while much of the country is relatively underexplored, shifting the tax goalposts reduces the chances of finding our next generation of resource projects.”

Meanwhile, Queensland Acting Premier and State Development Minister Jeff Seeney said the budget included more unnecessary green tape on the resources sector.

“This expanded assessment, compliance and enforcement roles at the federal level will yet again duplicate the assessment and approvals process carried out for all these projects by the Queensland government,” he said.

“They will add costs and lengthen timeframes for projects which have the potential to inject billions of dollars into the Queensland and Australian economies.”

The South Australian Chamber of Mines and Energy said more changes in Australia’s taxation system would impact negatively on the country’s increasingly uncompetitive investment environment.

“But the bigger impact is the cumulative effect of a seemingly never-ending collection of investment deterrents over recent years,” SACOME CEO Jason Kuchel said, referring chiefly to the MRRT, petroleum resource rent tax, carbon tax and the issues surrounding their inception.

“Investor funds are scarce and competition for mining and energy projects is fierce – Australia is not alone in its wealth of minerals and oil and gas resources.

“There is absolutely no doubt that this continual tinkering with the tax system severely damages investor confidence.

“It is in every Australian’s interest for the government to stop changing the rules and provide a stable fiscal environment.

“Investment is by far the biggest challenge facing the resources sector and this government has once again succeeded in providing investors with another reason not to invest here.”