Australia Announces Exploration Development Incentive
The Australian Government has announced a new Exploration Development Incentive (EDI) that will assist junior explorers in raising capital from private sector investors through a refundable tax offset.
The legislation is still being finalized, but Acting Assistant Treasurer Mathias Cormann has released details of the scheme in an effort to provide clarity for the industry.
Companies with no taxable income in an income year will be eligible to participate in the Incentive for that year. The scheme will exclude companies that have commenced resources production and companies connected or affiliated with an entity that has commenced production, along with those with a substituted accounting period.
Participating companies that provide exploration credits to shareholders will need to make an irrevocable choice whether to provide credits to all shareholders, or only to holders of shares issued after June 30, 2014. Credits will be apportioned on a per share basis.
Only expenditure on exploration for minerals will be eligible for the Incentive. It will not apply to exploration for quarry materials, shale oil, petroleum, or geothermal energy resources.
The cost of the Incentive is capped at AUD100m (USD94.6m). Exploration credits are capped at AUD25m for expenditure incurred in 2014-15, AUD35m for 2015-16, and AUD40m for 2016-17. Where the cost of the Incentive is less than the cap for any given year, the caps applying to subsequent years will not be adjusted.
In a joint release with Industry Minister Ian Macfarlane, Cormann said: “We have long recognised that additional investment in junior exploration companies was required to discover quality resources. This investment in turn ensures the resource sector’s continued contribution to our national economy over the medium to long term.”
“We will continue to work with industry to ensure the Exploration Development Incentive is enacted into legislation in a way that is simple and effective, without unduly burdening small companies with increased regulation.”
Commenting on the plans, Simon Bennison, CEO of the Association of Mining and Exploration Companies, said: “The Coalition Government should be applauded for recognizing the need to develop long term investment strategies to discover the mines of tomorrow, generate future revenue streams, and create jobs throughout Australia.”
He added: “The EDI should go a long way towards addressing low discovery rate of new mines. It should help to reverse the ongoing reduction in the global share of Australian greenfield exploration activities and the low number of Initial Public Offerings for minerals projects in Australia.”
The Incentive became available from July 1, 2014.
Source: taxnews
