Western Australia's Government has declared in its state budget that gold producers will have to pay an increased royalty from next year.
Under the proposed move, miners will be required to pay an additional A$20 ($16) per ounce.
The decision is set to bring $392m in additional royalty revenue and aimed at improving the state's finances.
As per the plan, the government has introduced a two-tiered royalty structure wherein companies are expected to pay the existing tax rate of 2.5% per month if the gold spot price is A$1,200 per ounce or less.
However, if the gold spot price breaches the A$1,200 per ounce mark, miners will be required to shell out the new royalty rate of 3.75%.
Western Australia Mines and Petroleum Minister Bill Johnston said: "These changes are consistent with the 2015 Mineral Royalty Rate Analysis report, which found the gold industry provided a lower return to the state than other commodities.
"Recent increases in exploration expenditure, employment and the value of gold sales, and high gold prices, indicate strong conditions for the gold industry.
"Given these strong conditions, and that WA ranked third for investment attractiveness in the recent Fraser Institute 2016 Survey of Mining Companies, ahead of other major gold producers, the changed royalty arrangements are not expected to impact investment in the state's gold industry."
Once the tax model is implemented, the current exemption of tax levied on the first 2,500oz of gold for companies producing more than this amount per annum will be ended from 1 July next year.
Disagreeing with the government’s decision, the Chamber of Minerals and Energy of Western Australia (CME) acting chief executive Nicole Roocke said: "CME will be strongly opposing this increase in gold royalties on behalf of our members as it will have long-term consequences for the resources industry and the WA economy as a whole.
"It doesn’t make sense to jeopardise the continued growth of the WA economy by imposing higher fees, taxes, and royalties on the sector, which is largely behind the state’s remarkable change in economic fortunes."