Exploration Credits, Anyone?
The 2015 Financial Year saw the introduction of the Government’s Exploration Development Incentive (EDI). This is a targeted scheme designed to encourage investment in small exploration companies and thus stimulate activity in a much needed sector. Where a company elects to participate they can distribute a portion of their tax losses to shareholders as an exploration credit.
The rules have a number of eligibility requirements including:
- Having incurred greenfields minerals expenditure in the previous income year
- Not have carried on any mining operations for the extraction of minerals in the previous two income years
- Notifying the ATO the estimated greenfields minerals expenditure and estimated tax loss for the previous income year by 30 September.
There are also a number of practical strategic issues companies need to consider about shareholder eligibility in structuring their scheme and encouraging investment.
Last year some 84 companies applied for the scheme in relation to approximately $70m of exploration expenditure. This resulted in exploration credits of over $21m being passed on to shareholders.
If you are considering applying for the scheme you will need to seek appropriate advice and complete and submit the EDI Participation Form before 30 September 2016.