Coal royalties

Progressive coal royalty rates

Coal royalties are designed to ensure all Queenslanders receive a fair and appropriate return on the state’s valuable and limited natural resources.

The royalty rate for coal is determined based on the average price per tonne of coal sold, disposed of or used in a royalty return period.

Since 1 October 2012, the highest marginal royalty rate applicable to Queensland coal royalties has been a rate of 15 per cent, payable on that part of the average price per tonne exceeding A$150.

Given the exceptional surge in coal prices experienced across 2021 and early 2022, with spot metallurgical coal prices reaching as high as around A$900 per tonne, the current royalty structure does not provide a fair return to Queenslanders during periods of such high prices.

To ensure Queenslanders receive a fair return on the use of the state’s valuable and limited natural resources in periods of high prices, the government is introducing 3 new tiers to the coal royalty structure, with effect for coal sold, disposed of or used on or after 1 July 2022:

1. an additional tier with a rate of 20 per cent on that part of the average price per tonne that is more than A$175 but not more than A$225
2. a further tier with a rate of 30 per cent on that part of the average price per tonne that that is more than A$225 but not more than A$300
3. a further tier with a rate of 40 per cent on that part of the average price per tonne that is more  than A$300.

This is estimated to generate additional royalty revenue of around $1.2 billion over the 4 years ending 2025–26. However, a substantial proportion (around $765 million) will be in 2022–23, as coal prices are expected to return to longer run prices over the next year.

The addition of the new tiers is not expected to have any material impacts on the coal industry or viability of producers, given the increases are applied only at relatively high prices.

Based on unit export values over the past 10 years, average hard coking coal prices have only been higher than A$175 per tonne around half the time, while average thermal coal prices have only been above A$175 per tonne around 2.5 per cent of the time over this period (based on monthly averages, only observed in 3 months over the 10 year period ending February 2022).

The increased return to Queenslanders received during future periods of high prices will help enable the provision of essential infrastructure and services to meet the needs of Queenslanders across all regions of the state.

*Treasury has taken an appropriately conservative approach to its coal forecasts and assumed prices will normalise in 2023.