SANDVIK AUSTRALIAGROUP
2016 TAX REPORTYEAR ENDED 31 DECEMBER 2016

CONTENTINTRODUCTION ................................................................................................................................3SANDVIK AUSTRALIA GROUP OVERVIEW .....................................................................................4OUR 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 .......................................................................................... 7AUSTRALIAN TAX CONTRIBUTION .................................................................................................9INCOME TAX POSITION..................................................................................................................10Tax Structure................................................................................................................................. 10
Income Tax Profile ........................................................................................................................ 10
Reconciliation Of Accounting Position To Income Tax Position ...................................................... 10
Effective Tax Rate ......................................................................................................................... 12
INTERNATIONAL RELATED PARTY DEALINGS............................................................................ 132SANDVIK AUSTRALIA GROUP ‒ 2016 TAX REPORTINTRODUCTION
The Sandvik Australia Group is a high-tech engineering group, with operations in Australia dating back to1961. The Sandvik Australia Group is committed to open and honest communication on regulatory andfinancial disclosures and supports the introduction 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, theSandvik Australia Group is pleased to publish its first Tax Report, for the year ended 31 December 2016.
This report has 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 2016 total taxes paid, collected and remitted by theSandvik Australia Group to the Australian tax authorities was $112M.
The tax contribution made by the Sandvik Australia Group is only but one of the meaningful contributions
made by the Group. We actively contribute to the Australian economy and the communities we work inthrough providing employment, purchasing local goods and services, and supporting communityprograms.
We welcome feedback on this report and look forward to making future contributions to the Australiancommunity and economy.

CHRISTOPHER PARHAM
General Manager - Finance and Business Control – Sandvik Australia GroupSANDVIK AUSTRALIA GROUP - 2016 TAX REPORT3

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 groupformed for Australian 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, the listed Swedish parent of the global Sandvik Group. The global Sandvik Group is headquarteredin Stockholm, Sweden and has sales in more than 150 countries.
The Sandvik Group is 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 androck excavation within the construction industry.
SANDVIK MATERIALS TECHNOLOGYA leading developer, manufacturer and supplier of advanced stainless steels and special alloys for themost demanding industries.

The Sandvik Australia Group is a major supplier of mining equipment and service support to the resource
sectors throughout the region. Our products and services are used in surface and underground mining,bulk materials handling and transportation, as well as exploration. We are one of the largest suppliers ofmining equipment.
The Sandvik Australia Group also services the construction sector, supplying a wide range of quarrying
products, including drill rigs, breakers, crushers, screens, conveyors, drill consumables and turnkey
plants, and hydraulic breakers and other attachments, as well as mobile crushing equipment,
construction drills and tunnelling equipment.

4SANDVIK AUSTRALIA GROUP ‒ 2016 TAX REPORTOUR APPROACH TO TAX STRATEGYAND GOVERNANCE
The way Sandvik operates and does business is steered by Sandvik’s governance framework, “TheSandvik Way” (depicted below). The Sandvik Way therefore transcends Sandvik’s tax policy, tax
strategy and approach to governance.

The Sandvik Group is a global business that needs to run its day to day operations in a consistentmanner with a clear focus on proper governance of the business. The Sandvik Way describes theprinciple of how common ways of working are implemented throughout the entire organisation, startingwith the Annual General Meeting (AGM) and Board of Directors and through to all Sandvik entities(including the Sandvik Australia Group) and employees.
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 theshareholders 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
aspire that 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.

SANDVIK AUSTRALIA GROUP - 2016 TAX REPORT5VISION
Sandvik’s vision, “We set the industry standard” means that we set the benchmark for others to follow.
We will achieve this not only through technologies and expertise, but equally and importantly through ourpeople, and the relationships we build with our customers and stakeholders. It requires a high level ofinnovative thinking throughout the company, across all processes, and within our operations in our dayto-day business.
Our vision supports the importance of constantly striving to be the leader in the industry and in ourchosen segments.
CORE VALUESCODE OF CONDUCT
We want to be a fair, respectful and trusted employer, partner and a good corporate citizen wherever inthe world 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
to support the long-term goals of our business. It sets a high standard for business conduct, applicable toall of us, from our Board of Directors to all colleagues worldwide.
With the Code as the backbone of our operations, we can secure that we are taking the correct decisions
and the 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 performanceoriented culture in our company. Taking care of our people, our business partners as well as thecommunities 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.

6SANDVIK AUSTRALIA GROUP ‒ 2016 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 anexpert 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 standardize 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 supporting 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 requiredby country legislation.
We are also committed to the obligation to our shareholders to administer supporting tax processes as
efficiently as possible and to product efficient and correct tax outcomes.
SANDVIK AUSTRALIA GROUP - 2016 TAX REPORT

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We believe in open and transparent dialogue related to tax issues.
TAX RISK MANAGEMENT AND GOVERNANCE
The global Sandvik Group has a tax policy which has been endorsed by Sandvik AB’s Board ofDirectors. The purpose of this policy is to ensure that the global Sandvik Group has a clear governanceframework 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 tooptimise 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 OECD Transfer Pricing Guidelines for Multinational Enterprises andTax 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” of these laws.
TAX AUTHORITY RELATIONS
Sandvik actively pursues collaborative relationships with tax authorities and supports initiatives toproactively discuss topics with tax authorities to obtain certainty in Sandvik’s tax position. Openness,honesty and transparency 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 the associated value or financial return and that, where available, further risk mitigation measures
are taken in relation to significant risks where appropriate.
Consistent with Sandvik’s broader risk approach, the tax risk management processes include theproactive 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
team in managing the Sandvik Australia Group’s tax affairs both at a transaction level and on a day-today basis. In this regard:− The Australian tax team is comprised of qualified professionals.
− The Australian Board of Directors’ oversees tax risk, tax compliance and reporting obligations. The
Australian Financial 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 governanceby reviewing current policies and procedures, and identifying and implementing improvements.

8SANDVIK AUSTRALIA GROUP ‒ 2016 TAX REPORTAUSTRALIAN TAX CONTRIBUTION
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 and remitted by the Sandvik Australia Group in the year ended 31 December 2016 to theAustralian federal and state tax authorities is outlined in the table below.

1
No income tax was payable by the Sandvik Australia Group during the year ended 31 December 2016, as a result of thetaxable loss position of the Sandvik Australia Group. Refer to the “income tax profile” section for further detail.
2Taxes paid, collected and remitted during the year ended 31 December 2016 has been determined on a cash flow basis.

SANDVIK AUSTRALIA GROUP - 2016 TAX REPORT

9INCOME TAX POSITIONTAX STRUCTURE
For Australian income tax purposes, Sandvik Australia Holdings Pty Ltd is the nominated head company
of a multiple entry tax consolidated group (the Sandvik Australia Group), which comprises all the wholly
owned Australian subsidiaries of Sandvik AB. The members of the Sandvik Australia Group are treatedas a single taxpayer and therefore, 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
over the last 3 years, the Sandvik Australia Group has recorded losses for both accounting and tax
purposes. The carried forward tax losses of the Sandvik Australia Group at 31 December 2016 aresummarised below:

The Sandvik Australia Group continues to invest in research and development activities. Due to the tax
loss position of the Sandvik Australia Group, the group has accumulated carried forward non-refundable
research and development tax offsets of $13.55M at 31 December 2016.
The Sandvik Australia Group is restructuring its operations to ensure its business is sustainable in themedium to long term and return the group to a profitable position. This restructure amongst otherfactors, is anticipated to return the Sandvik Australia Group to a taxable position within 3-5 years.
RECONCILIATION OF ACCOUNTING POSITION TO INCOME TAX POSITION
The accounting position of the Sandvik Australia Group has been determined in accordance with theAustralian Accounting Standards, whereas the tax position has been determined in accordance with theAustralian 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)
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“non-temporary differences”. Non-temporary differences arise due to differences between howtransactions are recognised for accounting purposes and tax purposes.
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.

10SANDVIK AUSTRALIA GROUP ‒ 2016 TAX REPORTSANDVIK AUSTRALIA GROUP - 2016 TAX REPORT

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EFFECTIVE TAX RATE

1
In the year ended 31 December 2016, the Sandvik Australia Group recognised impairments in respect of goodwill and aproperty. Excluding the impact of the asset impairments, the effective tax rate for the Sandvik Australia Group is 36%.

12SANDVIK AUSTRALIA GROUP ‒ 2016 TAX REPORTINTERNATIONAL RELATED PARTYDEALINGSIn 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,
the Sandvik 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 Organisation of Economic Co-operation and Development (OECD)
guidelines and local legislation in order to ensure that the correct pricing model is deployed and that acorrect amount of tax is paid. The Sandvik Australia Group is negotiating an Advanced Pricing
Arrangement with the Australian Taxation Office to confirm that an arm’s length outcome has beenachieved with respect to the Sandvik Australian Group’s international related party dealings.
During the year ended 31 December 2016, the material international related party dealings impacting thetaxable income of the Sandvik Australia Group are outlined in the following table.

SANDVIK AUSTRALIA GROUP - 2016 TAX REPORT13