Newmont v Commissioner of Taxation: is mining equipment 'real property' and how is it valued?

The Federal Court handed down its decision in Newmont Canada FN Holdings ULC v Commissioner of Taxation (No 2) [2025] FCA 1356 (Cth) (Newmont) on 10 November 2025. 

In broad terms, the case concerns whether Australian capital gains tax applies to foreign residents selling an interest in a company with mining assets in Australia, in particular regarding the assessment of which particular assets of the company are taxable Australian real property (TARP) and what proportion of assets of the company are TARP and which are non-TARP for the purposes of Division 855 of the Income Tax Assessment Act 1997 (Division 855). 

Newmont was handed down shortly after the decision in YTL Power Investments Limited v Commissioner of Taxation [2025] FCA 1317 (YTL). Notably, in his decision in Newmont, Colvin J endorsed, in a mining context, the approach of his colleague at the Federal Court, Justice Hespe. In finding that he considered her Honour’s reasons “accord with conclusions I have reached”, there is now an established consensus at the Federal Court level that:

• 'real property' takes its technical, legal meaning, rather than some other ordinary meaning (of broader ambit); and
   
• the assessment of whether an asset is 'real property' may be undertaken by analysing the specific rights held and testing whether those rights have the character of an interest in land.

Whilst the ultimate outcome will fall to a referee for later determination, Colvin J made certain findings in relation to classifying certain plant and equipment as TARP or non-TARP assets that may limit the extent to which capital gains tax applies to the sale of shares in an Australian company by non-residents.  

In particular, the decision is significant for Colvin J’s finding that whilst TARP includes a mining, quarrying or prospecting right, the nature of a mining right as personal property may effectively mean that it is not the case that anything affixed to land under such an interest becomes 'real property'. The practical upshot would appear to be that plant and equipment, even where a fixture under general law, may in certain circumstances not qualify as TARP where installed pursuant to rights under a mining tenement.

The decision also clarified the process to evaluate pools of TARP and non-TARP assets where the shares in a mining company derive their underlying value from a bundle of assets of synergistic value. These clarifications address fundamental aspects of the taxation of capital gains made by foreign resident investors under Australian tax law, with broad ramifications across a wide range of industry sectors that involve the sale of real assets.

Ultimately, Newmont (and, for that matter, YTL) may be appealed, with legislative amendment to Division 855 also slated by Treasury. These caveats overshadow the clarification provided by the decision, meaning the rules remain complex and uncertain for foreign investors. 

Background

The relevant dispute centred on whether Newmont Canada and Newmont US (the Newmont Vendors), non-residents of Australia, could disregard capital gains on their respective 16% and 13% shares interests in an Australian entity, Newmont Australia, under Division 855. The divestment was undertaken as part of an internal group restructure, such that the acquirer was a related party (Newmont Australia Holdings), which increased its stake from approximately 71% to 100% as a result of the restructure. 

Newmont Australia ran a substantial gold mining business in Australia at the time of the sale in 2011. Its main assets related to its mining operations at four mines, three of which were located in Western Australia and the other in the Northern Territory. 

The mining operations were conducted on land held under various separate mining leases, general purpose leases, and miscellaneous licences.

The assets in question were many and varied, however, the primary focus was on the assets used in each mining operation, with particular attention directed to three classes of assets:

1. Plant and equipment.
    
2. Mining information.
    
3. Mining tenements.

For completeness, there was also a range of other significant assets, such as intercompany receivables, derivatives and exploration project interests (among others). The crucial issues in this case, on which this article will focus, are:

• whether the relevant assets constituted TARP for the purposes of Division 855; and
   
• the valuation process as part of the TARP Calculation (i.e. evaluating pools of TARP and non-TARP assets) by allocating the portion of the overall pool of value generated by conducting mining operations that is attributed to the synergy between the assets in each of the three categories of assets denoted above.

Technical analysis of the term ‘real property’

Of key concern was 'the proper construction of the language in the statutory definition of TARP when deployed in the principal asset test provisions in s 855-30'. The central issue in this regard was whether the mining plant and equipment affixed to land was real property. Colvin J began with a useful reminder of the duty of the Court in undertaking statutory construction, which he framed as:

“… to give effect to the words used by the legislature and context cannot take the process beyond the language chosen by Parliament when understood according to established principles of construction.” 

Tracing through the analysis of 'real property' in its statutory context (including the appropriate legislative history, by which Division 855 repealed the former Division 136, as well as the 2009 amendment to specifically clarify that 'real property' includes a 'lease of land') as complemented by extrinsic material such as the associated explanatory memorandum and international practice (to which the objects of Division 855 refer), Colvin J rejected the Commissioner’s contention that 'real property' should take its ordinary meaning. The upshot was that the Commissioner’s broad contentions regarding the ambit of 'real property' were rejected. 

Instead, as regards certain mining plant and equipment, Colvin J found (at [621]):

“…the relevant mining plant and equipment will only be real property if it forms part of the land according to general law principles, or if it forms part of a lease of land at general law. The claim by the Commissioner that the plant and equipment is taxable Australian real property simply because it is an asset of Newmont Australia (or one of its subsidiaries) that has been erected on or attached to land (or otherwise affixed to the land in a way that it would be real property in some ordinary sense), irrespective of the actual freehold or any leasehold of the land must be rejected… for any of the plant or equipment to be 'real property’…  … it must be brought within those general law concepts.”

Having usefully set out the relevant general law principles concerning fixtures as applied to mining plant and equipment from TEC Desert Pty Ltd v Commissioner of State Revenue (WA) [2010] HCA 49; (2010) 241 CLR 576 (TEC Desert) ([660]), and setting out the matters considered to be relevant by reference to Valuer-General (Vic) v AWF Prop Co 2 Pty Ltd) ([666]) and an examination of matters relevant to the present case ([687]–[694]), Colvin J remarked (at [626]) that: 

“… had I upheld the Commissioner's case to the effect that the meaning of the term 'real property' included anything erected on or attached to land, then I would have found that the relevant mining plant and equipment at issue, excluding mobile equipment, was real property for the purposes of s 855-20(a) and was TARP for the purposes of the application of Division 855. I would have invited further submissions to identify precisely the extent of the items that were to be excluded based upon that finding.”

Then, similarly (at [696]):

“… had I concluded that plant and equipment at the Boddington mine could form part of an interest in land if it was a fixture at common law then… I would have concluded that the plant and equipment at the Boddington mine had the necessary characteristics to be fixtures.”

Accordingly, it was critical to examine the nature of the interest being exercised by the miner. In this regard, in TEC Desert, the High Court had held that objects placed on land the subject of a mining lease would be chattels. However, the High Court had not determined, in that case, whether the law as to fixtures applied to mining machinery and buildings brought on to the land of a third party by the miner for the purpose of carrying out mining operations.  

To answer that question, Colvin J observed both the legal status of the party undertaking the affixation, as well as the nature of the right exercised by the person as a right to mine, were relevant considerations. From this premise, Colvin J found (at [673]):

“… when it comes to considering whether the relevant plant and equipment for the Boddington mine that is on land owned as to the freehold by Newmont Boddington or its subsidiaries is a fixture at general law, it is necessary to have regard to the nature of the statutory right being exercised by those entities when it comes to mining. As has been explained, the statutory rights being exercised were those conferred by the mining tenements. They were personal in nature. They did not confer any interest in the land. They did not give rise to any right to sever on the basis that the relevant plant and equipment were tenant's fixtures. They carried with them statutory obligations to comply with conditions in relation to removal of the plant and equipment.”

These findings suggest that the definition of 'real property', by reference to certain plant and equipment in this case, may limit the extent to which capital gains tax applies to the sale of shares in an Australian company by non-residents. This ultimately turns on the particular statutory rights being exercised by the mining entity in each case. The significance of this in a mining context is potentially considerable, if this position is able to withstand any subsequent appeal and/ or legislative amendment.

Valuation 

The second key, and related, issue, was 'the appropriate way in which to determine the sum of the market values of TARP and non-TARP assets respectively for the purpose of determining whether the capital gains from the sale by the Newmont Vendors of their shares in Newmont Australia may be disregarded.'

This essentially related to the application of Division 855 as regards the requirement to assess the 'underlying value' of the entity and whether this is principally derived from 'Australian real property'. 

This assessment is critical because in order for Division 855 to apply, the capital gain must pass the 'principal asset test'. This requires the sum of the market values of Newmont Australia’s assets that are TARP (defined to include 'Australian real property') exceed the sum of the market values of its assets that are non-TARP (i.e. the TARP Calculation).

The term 'underlying value' is not defined. It calls for an assessment of 'the source of the value attributable to the shareholding or other ownership interest held in the entity'.

Colvin J has clarified the appropriate application of this assessment in some detail. Key points include:

• that it is relevant to consider the market value of the bundle of assets sold together to the same buyer (consistent with Federal Commissioner of Taxation v Resource Capital Fund III LP [2014] FCAFC 37; (2014) 225 FCR 290 (RCF III) and Federal Commissioner of Taxation v Resource Capital Fund IV LP [2019] FCAFC 51; (2019) 266 FCR 1 (RCF IV));
   
• where assets comprise interests in mining operations, one must consider the market value of the whole of the assets on the basis that those assets are deployed in those mining operations (where the highest and best use of those assets); and
   
• one must also allocate the overall pool of market value of the entire bundle of assets between those assets to then be able to undertake the calculation of the relative value derived from TARP and non-TARP assets. 

Colvin J provided a useful instructive guide as to the requirements of applying the statutory language to the 'principal asset test', i.e.:

1. The objective of the statutory valuation task is to determine whether the test entity’s underlying value is principally derived from ‘Australian real property’, and the valuations of individual assets and any allocation of a pool of value between them must be ‘informed by a logic’ consistent with that task. This means that although the task refers to comparing the market values of TARP against non-TARP assets, the market values referred to are those that flow to the holder of all assets. 
    
2. Regard must be had to the market value of certain of those assets on the basis that they form part of a bundle of assets which have value because they are used to earn income in a particular way, i.e. as part of a mining operation. 
    
3. The residual valuation approach was an appropriate means of allocating the overall pool of value between the key assets. 
    
4. It is appropriate to apply the net present value of the revenues expected to be earned from those mining operations to determine the market value of the assets of a mining operation. 

It was the above understanding of the requirements of the 'principal asset test' that directed Colvin J to identify the key assets at hand, being the plant and equipment, mining information, and mining tenements.

A key tenet of the valuation attributed to the key assets was the proposition that 'almost all of the value of the relevant assets that have been committed to conducting the mining operations is synergistic value'. In short, this is because the value in the plant and equipment, mining information, and mining tenements, each relied upon the other assets to obtain synergistic value in the hands of a party who holds all assets. In other words, there is limited value in plant and equipment without rights to access the relevant land and an understanding of its geology. 

This approach is consistent to that in RCF III and RCF IV, in which the market value of the assets was stated to be determined on the basis that the assets are sold together so as to include any synergistic value. Newmont extends the precedential value of those decisions by embarking on the process of engaging ([74]):

“… with the allocation, as between the assets deployed in undertaking the mining operations that constitute the highest and best use of those assets, of the synergistic value created by their joint use.” 

Colvin J instructs that the statutory task requires one to determine the extent to which the underlying value of the shares is sourced in specified types of property located in Australia. From there, the exercise is one requiring expert valuation (upon which there may be 'considerable divergence in opinions' on key points). Notwithstanding this, consensus reached by reference to the expert evidence on valuation given in the proceedings was to take certain steps to determine whether the capital gain derived by each of the Newmont Vendors was subject to Australian capital gains tax.

In this case, the assessment was particularly involved due to the nature of the divestment as a related party transaction (refer steps 1-3 below), although even in a third party transaction, the below steps attest to the complexity of the assessment required in applying Division 855:

1. Determine the net present value of the future cash flows from each of the four mining operations using a discounted cashflow analysis (DCF Analysis).
    
2. Consider whether it was appropriate the adjust the results of the DCF Analysis for the 'gold premium'.
    
3. Determine how much of the net present value of future cash flows was to be allocated to each of the three key asset categories used to generate those cash flows.
    
4. Determine the value of other assets of Newmont Australia and its subsidiaries that were not part of the DCF Analysis.
    
5. Identify which of the assets of Newmont Australia and its subsidiaries were TARP assets and which were non-TARP assets (which requires proper construction of the concept of TARP and whether the law of fixtures applies to the plant and equipment included in the relevant assets generating the DCF analysis in the relevant mines).
    
6. Undertake the TARP Calculation.
    
7. If the TARP Calculation indicated the 'principal asset test' is passed, determine the arm’s length market value for the shares in Newmont Australia that were sold by the Newmont Vendors to Newmont Australia Holdings.
    
8. Determine the cost base for shares in Newmont Australia held by the Newmont Vendors.
    
9. Conclude whether the assessments for capital gains tax issued by the Commissioner had been demonstrated to be excessive. 

Whilst the decision has determined various appropriate inputs and values relevant to the purposes of undertaking the TARP Calculation, ultimately the outcome will be decided at a later date by reference to the subsequent findings of a referee. 

Discount for lack of control and/ or marketability 

In considering the Newmont Vendor’s reserve argument that, if capital gains tax were payable, the market value substitution rule should apply in determining their capital proceeds, the query arose whether it was appropriate to apply discounts for lack of control and marketability. This was subject to a joint expert report, which considered factors relevant to assessing the appropriate discounts for the sale of a minority interest (or minority interests). The Newmont Vendors were able to obtain a discount of 9.5% applied in determining the market value of the sale shares for applying the capital gains tax provisions. This analysis may assist vendors (both foreign resident and domestic) in lowering their capital gains tax exposure in cases of a related party transaction where the argument is able to be successfully submitted. 

Other considerations

In a lengthy judgment, various other issues were considered in detail, including as to:

• the correct valuation of gold as an asset which was subject to ‘very detailed expert evidence’;
   
• the appropriate application of a discounted cashflow analysis; 
   
• the arm’s length market value of the shares sold; and
   
• the cost base used to determine the capital gain. 

This article does not address those aspects of the judgment.

Implications for foreign investors in mining and real assets sectors 

This question as to how to apply Division 855 to foreign resident investors selling shares in entities that operate Australian mining assets has been the matter of significant conjecture for the mining sector, in particular owing to the complexity in undertaking the legislatively prescribed assessment of the underlying valuation of a pool of assets into TARP versus non-TARP pools where their use is interconnected. This is particularly complex in circumstances where: 

• the miner has various interests in land, including under State-specific mining leases;
   
• the substantial plant and equipment involved is subject to analysis as to whether it is a fixture or mere chattel, giving rise to complexity in assessing at what point this plant and equipment constitutes 'real property' (further complicated by mining leases in different States being subject to different laws); and
   
• there are multiple methods available to determine the value of assets of a mining operation and, in turn, what proportion of the assets are TARP.

The key implications of the decision include the following:

1. The emergence of a consensus at the Federal Court level on the basis that the Court echoed the finding from the YTL decision that 'real property' takes its technical, legal meaning, rather than some other ordinary meaning (of broader ambit). Also consistent with YTL, the Court identified whether there was 'real property' by analysing the specific rights held and testing whether those rights have the character of an interest in land.
    
2. The Court found that in determining whether plant and equipment is 'real property', it is relevant to consider both the legal status of the party undertaking the affixation, as well as the nature of the right being exercised. In this case, the relevant statutory rights were conferred by mining tenements, which were personal in nature and did not confer an interest in land. Accordingly, whilst relevant items of plant and equipment were fixtures according to general law principles, certain relevant items of plant and equipment were non-TARP. This is a significant finding giving that a mining right itself is TARP under Division 855. 
    
3. In undertaking the legislatively prescribed process of assessing the proportion of TARP assets to non-TARP assets, it is appropriate to consider the 'synergistic value' of a bundle of assets related to the mining operations of a mining business. This valuation exercise is a complex undertaking. 

Whilst the decision may limit the extent to which capital gains tax applies to the sale of shares in an Australian company by non-residents, a case-by-case analysis will be required for each mining asset disposition, as different fact patterns may yield differing outcomes depending on the circumstances. Specifically:

• Regarding the conduct of disputes with the ATO more generally, as reflected in the considerable length of the decision and certain remarks of the Colvin J in relation to expert witnesses, the reliance on credible and compelling expert valuation evidence is key. However, there is no certainty that expert witnesses will reach the same conclusion notwithstanding Colvin J’s guidance on the approach to this task. For instance, in the transaction the subject of the Newmont decision, a relevant consideration as part of the valuation process was the view a hypothetical purchaser of the gold mines would have taken as to the future spot price for gold at the time of the transaction, so as to undertake the DCF analysis and calculate the price that a hypothetical purchaser would willingly pay. This analysis revealed a material divergence as between brokers at the time, as well as the four experts in this case applying a retrospective assessment (refer to graph at [238]). Given the valuation of TARP and non-TARP assets is to be undertaken by reference to this integer, the variation in the findings means that practically, there will remain a risk of uncertainty as to how the question of value is resolved in a dispute.  
   
• Whilst the Newmont decision contains some important findings in relation to the key issues, the decision may yet be appealed by the Commissioner through appellate courts. For Newmont, the final determination will fall to consideration by an appointed referee.
   
• Lastly, taxpayers should be aware that Treasury has proposed changes to Division 855, which could affect how Division 855 applies to analogous mining asset dispositions for capital gains tax events happening on or after 1 July 2025. Among the proposed changes is the broadening of the definition of ‘real property’, which may include, amongst other things, assets with a ‘close economic connection to Australian land and/or natural resources’, so as to bring in ‘leases or licenses to use land’, as well as ‘[i]nfrastructure and machinery installed on land situated in Australia, including land subject to a mining… right of an entity’.