Exploration Tax Incentives

Greenfield mineral exploration is an essential component of new project development. It is required to find new mineral deposits and ensure an investment pipeline to underpin the health of the Australian resources sector. These activities are largely undertaken by ‘junior’ explorers.

Greenfield exploration is a high risk activity that involves large upfront costs, low rates of success, and can take 15–20 years before any return on investment is made. The lack of certainty on exploration success makes it very difficult for prospective investors to evaluate the risks and returns associated with investing in these companies, and restricts the ability of junior explorers to raise capital. The Government’s exploration tax incentives are designed to encourage investment in small exploration companies undertaking greenfields mineral exploration in Australia.

Junior Mineral Exploration Tax Credit

On 2 September 2017, the Prime Minister and the Deputy Prime Minister announced that the Australian Government would commit $100 million to secure additional private investment in vital greenfield mineral exploration through the Junior Mineral Exploration Tax Credit (JEMTC) scheme. The scheme will provide a tax incentive for junior exploration companies to encourage investment and risk taking to drive the next wave of mineral discoveries. 

JMETC builds on the former Exploration Development Incentive. It will enable eligible companies to generate tax credits by giving up a portion of their tax losses from greenfield mineral exploration expenditure, which can then be distributed to shareholders. Tax credits can only be generated for shares issued in that income year. Australian resident shareholders that are issued with a tax credit will be entitled to a refundable tax offset or additional franking credits. The issuing company’s carry forward losses will be reduced to reflect the amount of the credits created.

The scheme applies from 1 July 2017 until 30 June 2021, with total expenditure limited to $100 million. The ability to generate credits will be available on a first-in, first-served basis until the annual cap has been reached.

The Department is working with relevant Commonwealth agencies to finalise the legislative package for the JMETC which will be retrospectively applied to 1 July 2017. Further details on the operation of the JMETC and how to apply will be available soon.

Previous schemes

Exploration Development Incentive

The Australian Government introduced the Exploration Development Incentive (EDI) to encourage investment in small exploration companies undertaking greenfields mineral exploration in Australia from 1 July 2014. The EDI ceased operation on 30 June 2017.

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