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New Junior Minerals Exploration Incentive: Are you eligible?

New Junior Minerals Exploration Incentive

Craig Yaxley, Catherine Dean and Tom Siford discuss the Junior Minerals Exploration Incentive (JMEI) which encourages greenfields mineral exploration in Australia.

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The Treasury Laws Amendment (Junior Minerals Exploration Incentive) Act 2018 received Royal Assent on 28 March 2018 replacing the Exploration Development Incentive (EDI) scheme. Similar to the EDI scheme, the aim of the Junior Minerals Exploration Incentive (JMEI) is to encourage greenfields mineral exploration in Australia.

The Government has announced that the scheme will be reviewed by June 2020 to assess its uptake and efficiency in attracting investment to the sector.

Broadly the JMEI allows companies who choose to participate in the scheme to transfer tax losses to exploration credits. These may be passed onto Australian resident shareholders as either a franking credit or refundable tax offset depending on the investor profile.

Participation in the scheme is optional and the decision to claim the JMEI is made each year.

Like the EDI, the JMEI provides a tax incentive to invest in small minerals exploration companies undertaking greenfields minerals exploration in Australia. The JMEI will enable junior mineral exploration companies to distribute their tax losses as a tax offset to initial investors.

The JMEI differs from the EDI in two respects:

  • Firstly, the JMEI is only available to shareholders who purchase newly issued shares.
  • Secondly, the JMEI is allocated by the Commissioner on a first come, first served basis, granting allocations to applicants until the annual exploration cap for an income year is reached.

The JMEI scheme will operate from 2018-2021 with exploration credits capped at $100 million. The JEMI annual exploration caps are as follows:

Income Year Cap in AUD
2017-18 15 million
2018-19 25 million
2019-20 30 million
2020-21 30 million

The scheme is available to junior explorers which have incurred greenfields mineral expenditure and have no taxable income for the income year, and which are disclosing entities as defined under the Corporations Act 2001. Companies that are excluded from the scheme include entities that have commenced resources production or are connected to an entity that has commenced production.

Credits are limited to Australian resident shareholders who acquire newly issued shares in a capital raising. Interestingly, if the shares are subsequently traded, the credit is retained by the initial investor because it attaches to the investor, not the share.

The existing EDI scheme continues to apply in relation to the 2017-18 income year and may prove relevant for some companies that have claimed the EDI credits in previous years.

Applications for the 2017-18 income year opened on 16 April 2018 and close on 15 May 2018, with 2018-19 income year applications opening on 1 June 2018 and closing on 30 June 2018. Given applications are granted on a first come first served basis, we recommend advice should be sought as to eligibility for the JMEI scheme and applications lodged as early as possible.

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