Talking to the Taxman About Exploration

COMMODITY CAPERS: It’s that time of year again when we ask the taxman to reimburse us for all the expenses we have incurred throughout the year as we carry out our respective businesses.

The junior exploration sector is no different to any other and is fortunate to have in place the Junior Minerals Exploration Incentive (JMEI).

A visit to the Australian Tax Office web page informs us that the JMEI encourages investment in small minerals exploration companies that carry out greenfields mineral exploration in Australia.

“Eligible exploration companies can generate tax credits by choosing to give up a portion of their losses from greenfields mineral exploration expenditure,” the ATO explains.

“These tax credits can then be distributed to investors who purchase newly issued shares in that eligible entity during a certain period.

“Australian resident shareholders issued with an exploration credit are entitled to a refundable tax offset or, if the shareholder is a corporate tax entity, additional franking credits.

“The exploration company’s carry forward losses will be reduced proportionately to reflect the amount of exploration credits issued to its shareholders.”

To participate, companies are required to lodge their interest by a due date, after which the ATO allocates each eligible entity an exploration credit allocation on a first come, first serve basis until the annual exploration credit cap for each income year is exhausted.

The JMEI came into being from the 2017–18 income year, with exploration credits capped over a four-year period as follows:

$15 million in the 2017–18 income year;
$25 million in the 2018–19 income year;
$30 million in the 2019–20 income year; and
$35 million in the 2020–21 income year.

In 2021, the Australian Government announced the availability of a further $100 million over four years to extend the JMEI to the end of June 2025.

The extension of the JMEI applies from the 2021–22 income year, with exploration credits capped over a further four-year period as follows:

$25 million in the 2021–22 income year;
$25 million in the 2022–23 income year;
$25 million in the 2023–24 income year; and
$25 million in the 2024–25 income year.

This year’s winners include: