In good news for small exploration companies, legislation implementing the Exploration Development Incentive (Incentive) passed the Federal Parliament on 3 March 2015 and is currently awaiting royal assent.
The Incentive allows eligible exploration companies to convert tax losses to ‘exploration credits’ which are then distributed to shareholders who may claim a tax deduction. We discussed the way the Incentive operates in detail in our previous Alert.
To recap the key points:
- An exploration company must have no taxable income for the relevant year to be eligible to apply for the Incentive;
- Expenditure must be incurred from 1 July 2014 in Australia on ‘greenfields’ exploration for minerals to be eligible for the Incentive;
- The Incentive is capped at $100 million over the next 3 financial years;
- Where a company uses the Incentive to distribute exploration credits to its shareholders, it will reduce its tax loss by the amount distributed; and
- Companies must decide to provide exploration credits to either all shareholders or only those shareholders issued shares after 30 June 2014.