Are Queensland Coal Mine Royalty Rates Really 40%? The answer, surprisingly, is no! Despite what some industry groups and mining companies claim, the actual average royalty rate in Queensland for 2024 was closer to 20%, a significant difference. Let's dive deeper into these numbers and uncover the truth behind the headlines.
Queensland's coal royalty system isn't a simple flat rate; it's a tiered system. This means the royalty rate changes depending on the price of coal. As coal prices have fluctuated, so too have the royalties owed. For example, based on average Australian coal prices from January to September 2025, the average royalty rate in Queensland would be approximately 10%. Interestingly, under the old royalty regime (prior to July 2022), this would have been around 9%, a difference of only one percentage point.
The adjustments to the Queensland royalty rate, implemented in July 2022, were designed to address the disconnect between royalties paid and coal prices. This decoupling became apparent during the coal price surges of 2021 and 2022. Before July 2022, the highest royalty rate in Queensland was 15% for coal sold above AU$150 per tonne. This meant that, generally, royalties closely correlated with prices, especially when coal sold for AU$200 or less. However, as global commodity supply shocks and geopolitical events drove coal prices up in 2021 and 2022, the amount of royalties paid didn't increase proportionally.
Between 2020 and 2022, average Queensland coal prices soared by AU$302, or 246% per tonne. Under the old royalty rates, the amount owed per tonne would have increased by AU$45, or 60% during the same period. The new rates, however, meant royalties owed in 2022 increased by 236% compared to 2020, aligning much better with the 246% increase in prices during that time.
In essence, the 2022 changes aimed to bring the royalty rate back in line with coal prices. As coal prices have fallen, so too have the royalties owed. (See Figure 1 for a visual representation).
But here's where it gets controversial... The commonly cited 40% royalty rate isn't applied across the board. That rate only applies when coal is sold above AU$300 per tonne, and only to the amount exceeding that threshold.
For instance, if a Queensland miner sells coal at AU$350 per tonne, the total royalty rate is actually 24%, not 40%. The 40% rate applies only to the AU$50 above the AU$300 threshold, with lower rates applied overall. This is similar to how income tax works: the first AU$18,200 for most Australian workers is tax-free, and then a higher rate is applied based on income brackets. For Queensland coal miners, the first AU$100 is taxed at only 7%, with higher rates for each price bracket.
Furthermore, the July 2022 changes only increased royalty rates for coal sold above AU$150 per tonne. Coal sold for less than AU$150 per tonne still has the same royalty rate.
Several Australian companies have criticized the 2022 royalty rate changes, citing them as a reason for worker layoffs and reduced investment. However, a recent analysis suggests that sustained high operating costs and labor shortages are putting more pressure on coal miners' margins than the royalty rate increases.
In addition to rising labor costs, coal miners face increasing costs from financing, environmental obligations, extreme weather events, and subsequent damages and production disruptions.
And this is the part most people miss... Given that the 2022 royalty rate changes primarily affect coal sold above AU$150 per tonne, if companies are blaming this for layoffs and financial difficulties, it raises questions about the viability of their business models when coal prices are below that level. It also highlights the impact of other rising cost factors on the sector.
Despite these pressures, the Australian coal mining industry's overall income in 2024 remained higher than in 2021 and 2022, before the Queensland royalty rate changes. Additionally, foreign direct investment in Australian mining has continued to rise since 2020, with AU$44 billion received between 2020 and 2024. (See Figures 4 and 5).
Overall, there isn't enough evidence to support the claim that Queensland royalty rates are causing a decrease in income and investment across the industry. Instead, other risk factors appear to be playing a more significant role.
What do you think? Do you believe the royalty rates are the primary driver of the challenges facing the coal industry, or are other factors more influential? Share your thoughts in the comments below!
