The Federal Treasury has released draft legislation to implement the government’s promised Exploration Development Incentive.

The proposed Exploration Development Incentive would be available to Australian-resident investors in small mineral exploration companies.  Under the incentive, investors may be entitled to the EDI tax offset or additional franking credits where the company in which they are a member issues them an exploration credit.

Companies may issue exploration credits to their shareholders up to a capped amount in an income year, with the cap for a company based on the company’s exploration expenditure and tax loss for the relevant income year, adjusted by a modulation factor to ensure that the total value of credits provided in respect of an income year does not exceed $25 million in respect of 2014-15, $35 million for 2015-16 and $40 million for 2016-17.

The Government made a commitment in the 2013 election campaign to provide a tax incentive to Australian resident shareholders of small mineral exploration companies to support the greenfields minerals exploration undertaken by these companies in Australia. The Government proposed that the incentive would be available in respect of expenditure on greenfields minerals exploration incurred in 2014-15, 2015-16 and 2016-17.  This proposal was confirmed in the 2014-15 Budget.

The incentive, as proposed, will not be available in respect of exploration expenditure incurred in income years after 2016-17.  The Department of Industry will monitor greenfields exploration and the scheme throughout its operation, with a review of the scheme in 2016 and, subject to these review outcomes, the programme may be extended for a further period.

Treasury has invited submissions fro interested parties regarding the proposed legislation.  Click here for additional information.  Members with a view on the proposal are encouraged to make an individual submission (which may be submitted on-line via the link provided above.  Any thoughts on the proposal may also be sent to Lynn Vigar or added to the conversation on AIG’s Linkedin members’ group to assist in compiling an AIG submission representing members’ views.

The deadline for submissions is Friday, 24 October 2014.

Andrew Waltho