Processing and Treatment of Minerals
19.27. Subject to any election that may be made under section 122H, section 122A (1) (b) provides that expenditure incurred on plant for use primarily and principally in the treatment of minerals obtained by prescribed mining operations is allowable capital expenditure. ‘Treatment’ is defined in section 122 (1) as consisting of a number of specified processes excluding sintering, calcining, and the production of or processes carried on in connection with the production of alumina or pellets or other agglomerated forms of iron. With this description of treatment, the definition of ‘processed materials’ in section 123 (1) of Division 10AAA may be compared. It has been submitted to the Committee that new methods of treatment or processing have been developed since the definition of ‘treatment’ was amended in 1968 and that both the Commissioner and taxpayers have experienced problems in determining whether these new methods constitute ‘treatment’ within the terms of its definition. The expenditure on treatment plant and on the buildings to house and service it in the vicinity of mines is often considerable and will not be recoverable on the exhaustion of the mine. Unless a number of minerals are afforded treatment at or close to the mine site, large sums are incurred for loading and freight charges in the carriage of materials over long distances from the mine to the point where treatment and processing must eventually be carried out. The Act should not discriminate between methods of treatment, and the extension of the definition of ‘treatment’ to include processing at or adjacent to the mine might remove many of these costly inefficiencies.
19.28. The treatment and processing plant utilised by mining enterprises would normally be depreciable in accordance
with sections 54 to 62. The utility of extending the definition of ‘treatment’ under section 122 must be viewed in the
light of the fact that the accelerated depreciation provision of section 122E is now no longer available in respect of
expenditure upon such plant. Hence the practical alternatives available to a mining enterprise, if the definition of
‘treatment’ were extended to cover all processing at or adjacent to the mine site, would be (i) amortisation of the
expenditure over the life of the mine under section 122D, or (ii) depreciation of the plant under the depreciation
provisions of sections 54 to 62. Since there would appear to be only marginal returns from extending the definition of
‘treatment’ under section 122
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to cover all forms of processing at or adjacent to the mine site and since
such an extension might precipitate demands by other industries for similar concessions, the Committee makes no
recommendation on this question. Substantially all the allowances which would flow from the extension of the
definition of ‘treatment’ will be available under depreciation provisions, if the Committee's recommendations in
relation to building depreciation in Chapter 8 are adopted. Where buildings to house and service the plant are
demolished or scrapped on the termination of mining operations a balancing allowance will be available to the taxpayer
in respect of any unrecouped expenditure. The costs of preparing a site for the erection of treatment plant and
associated infrastructures are not regarded by the Committee as unique to the mining industry and, accordingly, do not
warrant any differential treatment under the Act.