For many mining and resources professionals, the real reward often lies in the long game.
Equity participation, project upside and exposure to commodity cycles have traditionally been part of how the industry aligns risk with reward. Employee Share Schemes (ESS) have been central to this approach.
Yet a proposed shift in how capital gains is taxed may begin to reshape how these long-standing incentive structures deliver value.
Against this backdrop, the Tax Reform No.1 Bill 2026 (the Bill), introduced on 28 May 2026, proposes a broader overhaul of capital gains and investment income taxation.
On face value, the Bill has little to do with the resources sector. Look closer though, and its overhaul of capital gains and investment income taxation has direct implications for ESS – a key tool for talent attraction and retention in the mining and resources sector. At its core, the Bill is designed to rebalance the tax system away from asset-based concessions and toward labour income.
Why ESS Matters in the Resources Sector
Mining businesses rely heavily on long-term incentive structures to align executive and technical talent with project value creation.
With development cycles often spanning decades, ESS arrangements, especially those linked to equity growth, have been central to rewarding risk and performance, particularly where cash flow may not be readily available at the early stages of exploration.
For executives, professionals and business owners, equity participation is often not simply a component of remuneration, but a meaningful part of their broader wealth strategy.
This is particularly relevant in the resources sector, where outcomes can be highly sensitive to timing. A successful discovery, feasibility milestone or shift in commodity pricing can significantly revalue a project, and in turn, the equity interests linked to it.
The reforms tabled by this Bill directly affect this dynamic by reshaping how equity-based returns are taxed at the individual level.
Key Change: Capital Gains Tax Reform
The most significant reform for ESS participants is the move to:
• Replace the 50% capital gains tax (CGT) discount with an inflation-based discount, and
• Introduce a minimum 30% tax on capital gains from 1 July 2027.
This change is intended to ensure that only ‘real’, that is inflation-adjusted, gains are taxed, but it also introduces a floor on the effective tax rate for equity growth.
What This Means for ESS Participants
Importantly, the Bill does not directly amend ESS taxing points or concessions.
However, it is the interaction between ESS outcomes and the broader capital gains framework that is most relevant.
For mining executives and employees participating in ESS:
• The after-tax benefit of long-term equity incentives may reduce, particularly where gains are significant
• The attractiveness of deferring tax through capital growth strategies will be diminished
• The reform may compress the differential between salary-based and equity-based remuneration
This is particularly relevant in the resources sector, where ESS outcomes can be substantial due to commodity cycles and project revaluations.
In practical terms, this may become more noticeable in scenarios where equity interests are realised at scale, or where long-term projects experience significant revaluation.
A Broader Policy Direction
More broadly, the Bill signals a clear policy intent to reduce preferential treatment of investment income and increase consistency in the taxation of capital returns.
This suggest a clear strategic shift. Future reforms may continue to narrow the tax advantages attached to equity-based remuneration, with the broader policy direction pointing towards more consistent taxation of gains regardless of how they are structured.
While the reforms announced in the Bill do not directly target Employee Share Schemes, they materially reshape the economic outcomes they deliver.
In a sector where equity-based incentives underpin remuneration arrangements, the introduction of a minimum tax on capital gains and broader constraints on investment structures signals a potential shift in how remuneration is structured and may place additional cash flow demands on the sector.
A Shift Worth Watching
While the proposed capital gains reforms are not specific to the resources sector, their indirect impact may be meaningful.
For mining businesses, this may prompt a reassessment of how incentive structures are designed and balanced over time, particularly in environments where cash flow remains a constraint.
For individuals, it reinforces the importance of understanding how equity-based rewards ultimately translate into after-tax outcomes, particularly where these arrangements form a meaningful part of long-term wealth creation.
As the Bill progresses and further detail becomes available, both companies and employees may benefit from revisiting how these arrangements are structured, communicated and understood.
The fundamentals of Employee Share Schemes in the resources sector remain strong. However, the way those incentives ultimately deliver value may be evolving, making this an area worth watching closely.
If you would like to explore how these changes may apply to your individual circumstances or business, please contact Clare Petrie on +61 (0) 7 3007 2000 or email contact@resourcesunearthed.com.au.
Read more about Clare here.
Resources Unearthed is a solutions hub that provides integrated financial, legal, property and accounting and business advisory services for executives, professionals and business owners in the mining and resources sectors.
This information is general and does not consider your personal circumstances. Professional advice is recommended before making decisions.
