SANDVIK AUSTRALIA
2020 TAX REPORTYEAR ENDED 31 DECEMBER 2020

CONTENTS
INTRODUCTION .............................................................................................................................................................. 3
SANDVIK AUSTRALIA GROUP OVERVIEW ..................................................................................................................... 4
OUR APPROACH TO TAX STRATEGY AND GOVERNANCE ............................................................................................. 5
The Sandvik Way - Our Governance Framework ............................................................................................................ 5
The Sandvik Way - Our Finance Framework ................................................................................................................... 7
The Sandvik Way - Our Tax Framework .......................................................................................................................... 7
Our Tax Principles .......................................................................................................................................................... 7
AUSTRALIAN TAX CONTRIBUTION ............................................................................................................................... 9
INCOME TAX POSITION ............................................................................................................................................... 10
Tax Structure ................................................................................................................................................................ 10
Income Tax Profile ........................................................................................................................................................ 10
Reconciliation Of Accounting Position To Income Tax Position .................................................................................... 10
Effective Tax Rate ........................................................................................................................................................ 12
INTERNATIONAL RELATED PARTY DEALINGS ............................................................................................................ 13

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SANDVIK AUSTRALIA GROUP - 2020 TAX REPORTINTRODUCTION
The Sandvik Australia Group is a high-tech engineering group, with operations in Australia dating back to 1961.
It is committed to open and honest communication on regulatory and financial disclosures and supports theintroduction of the Board of Taxation’s Voluntary Tax Transparency Code.
As part of the Sandvik Australia Group’s commitment to transparent relations with its stakeholders, the Sandvik
Australia Group is pleased to publish its fourth Tax Report, for the year ended 31 December 2020. This reporthas been prepared in accordance with the Board of Taxation’s Voluntary Tax Transparency code.
The Tax Report supplements information already available to stakeholders and the broader community,
providing an overview of the Sandvik Australia Group’s tax profile, tax contribution and tax strategy andgovernance. For the year ended 31 December 2020 total taxes paid, collected and remitted by the Sandvik
Australia Group to the Australian tax authorities was AUD $165M.
In response to the Covid-19 pandemic, Sandvik did not seek to take advantage of any Federal or State
Covid-19 concessions or stimulus packages announced. In the spirt of upholding its social responsibility to
the community, it continued to pay, collect and remit its taxes throughout the year.
The tax contribution made by the Sandvik Australia Group is but one of many meaningful contributions madeby the Group. We actively contribute to the Australian economy and the communities we work in throughproviding employment, purchasing local goods and services, and supporting community programs.
We welcome feedback on this report and look forward to making future contributions to the Australiancommunity and economy.

Christopher Parham
CHRISTOPHER PARHAM
General Manager - Finance and Business Control – Sandvik Australia Group3SANDVIK AUSTRALIA GROUP - 2020 TAX REPORTSANDVIK AUSTRALIA GROUPOVERVIEWThe Sandvik Australia Group (as referred to in this document) is the group of Australian entities, which are
members of the Sandvik Australia Holdings Pty Ltd multiple entry consolidated group, a group formed forAustralian income tax purposes (refer to the “tax structure” section for further detail).
The group of Australian entities forming the Sandvik Australia Group are controlled indirectly by Sandvik AB, thelisted Swedish parent of the global Sandvik Group. The global Sandvik Group is headquartered in Stockholm,
Sweden and has sales in more than 160 countries.
In 2020, the Sandvik Group was organised into three business areas:
SANDVIK MACHINING SOLUTIONS
A market-leading manufacturer and supplier of tools and tooling systems for advanced metal cutting.
SANDVIK MINING AND ROCK TECHNOLOGY
A leading supplier in equipment and tools, service and technical solutions for the mining industry and rockexcavation within the construction industry.
SANDVIK MATERIALS TECHNOLOGY
A leading developer, manufacturer and supplier of advanced stainless steels and special alloys for the mostdemanding industries.

The Sandvik Australia Group is a major supplier of equipment and tools, service, digital solutions andsustainability-driving technologies for the mining and infrastructure industries throughout the region.
Our products and services are used in surface and underground mining, bulk materials handling andtransportation, as well as exploration. We are one of the largest suppliers of mining equipment.
The Sandvik Australia Group also services the engineering, aerospace, automotive and energy sectors,
supplying tools and tooling systems for advanced metal cutting, expanding into digital manufacturing andsoftware solutions.

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SANDVIK AUSTRALIA GROUP - 2020 TAX REPORTOUR APPROACH TO TAX STRATEGYAND GOVERNANCE
The way Sandvik operates and does business is steered by Sandvik’s governance framework: The Sandvik
Way (depicted below). The Sandvik Way therefore transcends Sandvik’s tax policy, tax strategy and approachto governance.

The Sandvik Group is a global business that needs to run its day to day operations in a consistent manner witha clear focus on proper governance of the business. The Sandvik Way describes the principle of how common
ways of working are implemented throughout the entire organisation, starting with the Annual General Meeting(AGM) and Board of Directors and through to all Sandvik entities (including the Sandvik Australia Group) andemployees.
THE SANDVIK WAY - OUR GOVERNANCE FRAMEWORKOur operations are underpinned by the ambitions and requirements of Sandvik’s vision, core values, Code of
Conduct and leadership principles.
The philosophy is shared across the organisation and adopted through the direction set by the shareholders
and cascaded through the Board of Directors and the senior executives.
Sandvik’s business philosophy is shaped by our Vision to excel; guided by the Core Values to which we aspirethat are Customer Focus, Innovation, Fair Play and Passion to Win; translated into the behaviours we outline in
our Code of Conduct and motivated through the qualities outlined in Sandvik’s Leadership Model.
VISION
Sandvik’s vision: We set the industry standard means that we set the benchmark for others to follow. We willachieve this not only through technologies and expertise, but equally and importantly through our people, andthe relationships we build with our customers and stakeholders. It requires a high level of innovative thinking
throughout the company, across all processes, and within our operations in our day-to-day business.

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SANDVIK AUSTRALIA GROUP - 2020 TAX REPORTOur vision supports the importance of constantly striving to be the leader in the industry and in our chosensegments.
CORE VALUESCUSTOMER FOCUS

INNOVATIONFAIR PLAYPASSION TO WIN

We constantly strive to exceed ourcustomers’ expectations and enable
them to excel in their business.

We shape the future by creating
pioneering solutions throughout ouroperations.

We conduct business in a sustainable
and responsible manner.

We are passionate about making ourcompany number one.

−

−

−

−

−
−

I ensure that my daily work adds
value for our customers.
I am proactive and always
have the expectations of ourcustomers in mind.
I seek and respond to the trueneeds of our customers.

−−

I have the courage to think incompletely new ways and I
embrace new perspectives.
I proactively share knowledge
and experience.
I constantly seek to improve ourways of working.

−−I always act in line with our highethical standards and put safety
first.
I always show consideration
for the environment and thecommunities in which we
operate.
I care about others and build
relationships based on honesty,
respect and trust.

−−I am courageous and enjoy
taking the lead.
I set ambitious targets anddeliver on my promises.
I am determined to walk theextra mile.

CODE OF CONDUCT
We want to be a fair, respectful and trusted employer, partner and a good corporate citizen wherever in theworld we do business. This approach has played a significant role in the success of our company globally.
Our Code of Conduct sets the principles for how we turn our vision and values into everyday behaviour tosupport the long-term goals of our business. It sets a high standard for business conduct, applicable to all ofus, from our Board of Directors to all colleagues worldwide.
With the Code as the backbone of our operations, we can ensure that we are taking the correct decisions andthe right actions both as individuals and as a company.
Our ethical and responsible business practices bring several advantages. It creates solid and strong
relationships with our customers built on trust and confidence. We create a sound and performance-oriented
culture in our company. Taking care of our people, our business partners as well as the communities we operate
in will enable us to be the industry leader.
LEADERSHIP MODEL
Leaders drive the organisation and develop teams to reach Sandvik’s business objectives. The Leadership
Model sets clear expectations on our leaders and acknowledges that excellent leaders are key to Sandvik’s
success. It rests on set capabilities that capture behaviours and driving forces necessary to secure successful
leadership.

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SANDVIK AUSTRALIA GROUP - 2020 TAX REPORT

THE SANDVIK WAY - OUR FINANCE FRAMEWORKThe global Sandvik Group Finance Function is governed under a common vision and mission:
VISIONThe Sandvik Global Finance Organisation protects and enhances shareholder value by acting as an expert
function and by ensuring better decision making.
MISSION
By understanding the operations and business drivers, we take an active part in achieving the businessobjectives:− Develop a clear vision of the future - generate energy and excitement in driving towards a common
goal− Strive to streamline, simplify and standardise the way we do business− Effective performance management and excellent communication− Lead and manage continuous improvement and effective change management.
We ensure quality in reporting as well as in all other products owned and delivered by Finance.
We work to ensure that Sandvik is compliant with all relevant internal and external rules and regulations, both
locally as well as on a consolidated level.
Our work is performed by highly competent staff in a diverse and dynamic work environment.

THE SANDVIK WAY - OUR TAX FRAMEWORKOUR TAX PRINCIPLESIn accordance with Sandvik’s Code of Conduct, efficient and accurate tax management means that we conduct
our business and support tax processes with demonstrable integrity in a manner that produces correct tax
outcomes at accurate cost.
We are committed to our social and legal obligation to pay the correct tax in each jurisdiction, as required bycountry legislation.
We are also committed to the obligation to our shareholders to administer supporting tax processes as
efficiently as possible and to produce efficient and correct tax outcomes.
We believe in open and transparent dialogue related to tax issues.
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SANDVIK AUSTRALIA GROUP - 2020 TAX REPORTTAX RISK MANAGEMENT AND GOVERNANCE
The global Sandvik Group has a tax policy which has been endorsed by Sandvik AB’s Board of Directors. The
purpose of this policy is to ensure that the global Sandvik Group has a clear governance framework around taxes.
The Tax Policy is part of The Sandvik Way and applies to all Sandvik entities (including the Sandvik Australia Group)and employees.
The key principles established by the global Sandvik Group tax policy are summarised below:
TAX PLANNING
Short term gains through aggressive planning in the area of tax may, and likely will, have long term negative
consequences for Sandvik’s brand, reputation and customer relationships, and should therefore be avoided. Where
possible, those responsible for tax should take appropriate action to optimise the after-tax result of Sandvik’s
transactions by using existing incentives and reliefs.
TRANSFER PRICINGAll cross border related party transactions within Sandvik shall be priced in accordance with the Arm’s Length
Principle as defined in the Organisation of Economic Co-operation and Development (OECD) Transfer Pricing
Guidelines for Multinational Enterprises and Tax Administrations.
TAX COMPLIANCE
Sandvik has a commitment to comply with all applicable laws and regulations, including paying all tax that Sandvik
is legally obliged to pay as and when it becomes payable, as well as making every effort to consider the “spirit” ofthese laws.
TAX AUTHORITY RELATIONS
Sandvik actively pursues collaborative relationships with tax authorities and supports initiatives to proactively
discuss topics with tax authorities to obtain certainty in Sandvik’s tax position. Openness, honesty andtransparency are paramount in all dealings with tax authorities and other relevant governmental stakeholders.
TAX RISK MANAGEMENT
Sandvik’s approach to tax risk management is to ensure that tax related risks are acceptable relative to theassociated value or financial return and that, where available, further risk mitigation measures are taken in relation tosignificant risks where appropriate.
Consistent with Sandvik’s broader risk approach, the tax risk management processes include the proactive
identification, evaluation, control and monitoring of tax risks and opportunities.
The Sandvik Group tax policy is operationalised by the Australian management team and Australian tax teamin managing the Sandvik Australia Group’s tax affairs both at a transaction level and on a day-to-day basis. In
this regard:− The Sandvik Australia Group has also implemented tax policies and procedures that supplement the Sandvik
Group Tax Policy and which have been endorsed by the Australian Board of Directors.
− The Australian tax team is comprised of qualified professionals.
− The Australian Board of Directors’ oversees tax risk, tax compliance and reporting obligations. The AustralianFinancial Controller and Tax Manager communicates tax matters to the Board of Directors, both formally at
meetings and informally.
− External tax advisors are regularly engaged to provide assurance in respect of the Sandvik Australia Group’s
compliance obligations and transactions.
The Sandvik Australia Group is committed to continually improving tax risk management and governance byreviewing current policies and procedures, and identifying and implementing improvements.

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SANDVIK AUSTRALIA GROUP - 2020 TAX REPORTAUSTRALIAN TAXCONTRIBUTION
The Sandvik Australia Group is proud of the economic, fiscal and social contribution it makes within Australia
through a range of taxes, duties and levies. A summary of the taxes borne and paid, and taxes collected andremitted by the Sandvik Australia Group in the year ended 31 December 2020 to the Australian Federal andState tax authorities is outlined in the table below.

Taxes Borne and Paid
Income Tax(42)

Property Taxes

116

Customs Duty

5,583

Employer/Payroll Taxes

21,201

Stamp Duty

(645)

Other taxes

4

Total Taxes Borne and Paid

Taxes Collected and Remitted

26,21731 December 2020 AUD ($’000)

Goods and Services Tax (net ofrecoveries)

103,255

Employer/Payroll Taxes

35,448

Withholding Taxes

258

Total Taxes Collected and Remitted

138,961

Total¹

165,1771

931 December 2020 AUD ($’000)

Taxes paid, collected and remitted during the year ended 31 December 2020 has been determined on a cash flow basis.

SANDVIK AUSTRALIA GROUP - 2020 TAX REPORTINCOME TAX POSITIONTAX STRUCTURE
For Australian income tax purposes, Sandvik Australia Holdings Pty Ltd is the nominated head company of amultiple entry tax consolidated group (the Sandvik Australia Group), which comprises wholly owned Australiansubsidiaries of Sandvik AB. The members of the Sandvik Australia Group are treated as a single taxpayer andtherefore, lodge a single company tax return for income tax purposes.

INCOME TAX PROFILE
Due to prevailing business conditions within the global economy and a slowdown in the mining sector inprevious years, the Sandvik Australia Group had historically recorded losses for both accounting and tax
purposes. However, in the year ended 31 December 2020 there continued to be an upturn in the mining sector
resulting in profits for both accounting and tax purposes. As a result, the Sandvik Australia Group fully utilised
carry forward tax losses in the year ended 31 December 2020.
The carried forward tax losses of the Sandvik Australia Group at 31 December 2020 are summarised
below1:
Carried Forward Revenue Losses
As at 31 December 201931 December 2020 AUD ($’000)(66,669)

Prior Year Amendments

280

Current Year Utilisation

66,380As at 31 December 2020

(0)

The Sandvik Australia Group continues to invest in research and development activities. Due to the previous
tax loss position of the Sandvik Australia Group, the group has accumulated carried forward non-refundable
research and development tax offsets of $13M at 31 December 2020.
The Sandvik Australia Group’s profitable position is driven predominantly by enhanced business performance.
During the year, the Group also continued to restructure its operations to ensure its business is sustainable
in the medium to long term, which also assisted in returning the group to a profitable position. This, amongst
other factors, is anticipated to return the Sandvik Australia Group to a taxable position in less than 1 year from31 December 2020.

RECONCILIATION OF ACCOUNTING POSITION TO INCOME TAX POSITION
The accounting position of the Sandvik Australia Group has been determined in accordance with the Australian
Accounting Standards, whereas the tax position has been determined in accordance with the Australian
income tax legislation.
Outlined below is a reconciliation of:−−

Accounting profit/(loss) before income tax to income tax expense/(benefit)
Income tax expense/(benefit) to income tax payable/(loss)

1 The year ended 31 December 2020 income tax return is subject to an amendment for a transfer pricing matter. At the date of preparing thisreport the Notice of Assessment in this regard had not issued and therefore the amendment is not reflected in the below.
2 As per note 1 above.
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SANDVIK AUSTRALIA GROUP - 2020 TAX REPORT

Income tax expense/(benefit) is an accounting concept, which is calculated by adjusting the accounting
profit/(loss) before income tax at the corporate tax rate, being 30% for the Sandvik Australia Group, by “nontemporary differences”. Non-temporary differences arise due to differences between how transactions arerecognised for accounting purposes and tax purposes.
Reconciliation of Accounting Profit
to Income Tax Expense
31 December 2020 AUD ($’000)
Accounting profit/(loss) before tax

73,346

Increase/(decrease) for nontemporary differences
Losses on divestments0

Non-deductible expenses

956

Non-assessable income(1,700)

Income tax expense/(benefit)

72,602

Income tax expense/(benefit) at
the statutory rate of 30%

21,781

Income tax expense/(benefit) does not equate to income tax payable/(loss). For any given income year,
temporary differences arise due to differences in the timing of recognition of income and expenses foraccounting purposes and tax purposes.

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SANDVIK AUSTRALIA GROUP - 2020 TAX REPORT

Reconciliation of Income Tax
Expense to Taxable Income
Income tax expense/(benefit)

31 December 2020 AUD ($’000)
72,602

Increase/(decrease) for temporary
differences
Property, plant, equipment andintangibles(3,763)

Provisions and accruals

2,502

Unrealised foreign exchange (gains)/
losses

154

Research and development
expenditure907

Prepayments(463)

Carried forward tax losses deducted(66,389)

Other

1,470

Taxable income/(loss) (A)7,030

Income tax payable/(loss) (A *statutory rate 30%)

2,109

EFFECTIVE TAX RATE
Effective Tax Rate

31 December 2020 AUD ($’000)

Accounting profit/(loss) before tax(B)73,346

Income tax expense/(benefit) at thestatutory rate of 30% (C)21,781

Effective tax rate (C/B)¹29.70%

1
The deviation of the effective tax rate compared to the statutory tax rate primarily relates to timing differences in respect ofdepreciating assets and non-assessable income related to an operating branch during the year ended 31 December 2020.

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SANDVIK AUSTRALIA GROUP - 2020 TAX REPORTINTERNATIONAL RELATED PARTYDEALINGS
In order to streamline and optimise Sandvik’s global operations, whilst serving the needs of the group as
efficiently as possible, some of the functions of Sandvik’s global operations are centralised. Accordingly, theSandvik Australia Group and its international related parties routinely deal with each other.
The international related party dealings of the Sandvik Australia Group, are undertaken on an arm’s length basis
in accordance with OECD guidelines and local legislation in order to ensure that the correct pricing model isdeployed and that a correct amount of tax is paid.
Given the somewhat subjective nature of transfer pricing, and in keeping with Sandvik’s undertaking toproactively and transparently engage with tax authorities, the Sandvik Australia Group has negotiated an
Advance Pricing Arrangement (APA) with the ATO. This APA provides certainty of tax outcomes in respectof international related party dealings until 31 December 2021. It is noted for completeness that at the timeof publication of this report the Sandvik Australia Group had negotiated a renewal of its APA with the ATO
covering the period 1 January 2022 to 31 December 2026. The Sandvik Australia Group will continue to work
collaboratively with the ATO to ensure that it is paying its fair share of tax in Australia.
During the year ended 31 December 2020, the material international related party dealings impacting thetaxable income of the Sandvik Australia Group are outlined in the following table.

Related party transaction

Why it is in the best interests of the Sandvik Australia Group

Purchase and sale of raw materials,
other production inputs and finishedproducts

Raw materials, other production inputs and finished products are
acquired and manufactured in various locations globally, including
Australia. However, it is inefficient for each country within the global
Sandvik Group to acquire inputs and manufacture the same goods.
Accordingly, raw materials, other production inputs and finishedproducts are routinely purchased and sold between group members,
including the Sandvik Australia Group.

Provision and receipt of services
including technical services,
software and IT services, sales andmarketing services and corporate
support services

A number of shared services functions are performed centrally by
the global Sandvik Group for the benefit of group members. The
Sandvik Australia Group is both a provider and recipient of sharedservices. This is more efficient than if each country performed thesame functions globally.

FinancingDue to the nature of the industry that the Sandvik Australia Group
operates in, its cash flows are managed on a conservative basis.
It has not sought financing from other third parties but instead
utilises and contributes to the global Sandvik Group’s cash poolarrangement.

i The income tax payable of is pre-utilisation of foreign tax credits

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SANDVIK AUSTRALIA GROUP - 2020 TAX REPORT