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:

  1. An exploration company must have no taxable income for the relevant year to be eligible to apply for the Incentive;
  2. Expenditure must be incurred from 1 July 2014 in Australia on ‘greenfields’ exploration for minerals to be eligible for the Incentive;
  3. The Incentive is capped at $100 million over the next 3 financial years;
  4. Where a company uses the Incentive to distribute exploration credits to its shareholders, it will reduce its tax loss by the amount distributed; and
  5. Companies must decide to provide exploration credits to either all shareholders or only those shareholders issued shares after 30 June 2014.