Source: https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/bd/bd1718a/18bd059
Timestamp: 2019-11-19 21:12:08
Document Index: 75740811

Matched Legal Cases: ['art 1', 'art 2', 'art 3', 'art 4', 'art 1', 'art 2', 'arts 3', 'arts 1', 'arts 1']

Treasury Laws Amendment (Junior Minerals Exploration Incentive) Bill 2017 – Parliament of Australia
Home Parliamentary Business Bills and Legislation Browse Bills Digests Bills Digests alphabetical index 2017–18 Treasury Laws Amendment (Junior Minerals Exploration Incentive) Bill 2017
Bills Digest no. 59, 2017–18
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Explanation of the exploration development incentive
Creation of exploration credits
Exploration credits allocation
Excess exploration credits
Modified capital gains tax treatment
Repeal of the JMEI from 1 July 2023
The Treasury Laws Amendment (Junior Minerals Exploration Incentive) Bill 2017 (the Bill) amends the Income Tax Assessment Act 1936 (ITAA 1936), the Income Tax Assessment Act 1997 (ITAA 1997), and the Taxation Administration Act 1953 (Tax Administration Act) to provide concessional tax treatment for investors in certain greenfields minerals exploration entities. The Bill does this by replacing the Exploration Development Incentive with the Junior Minerals Exploration Incentive (see below).
The Bill has two Schedules. Schedule 1 has four parts:
Part 1 provides for the main amendments to the ITAA 1997 to establish the Junior Minerals Exploration Incentive
Part 2 provides for other amendments to the ITAA 1936, ITAA 1997 and the Tax Administration Act to reflect the replacement of the Exploration Development Incentive with the Junior Minerals Exploration Incentive
Part 3 provides for the repeal on 1 July 2023 of Division 418 of the ITAA 1997 which covers the junior minerals exploration incentive and
Part 4 contains application, transitional and savings provisions.
The Bill replaces the effectively expired exploration development incentive (EDI) with the junior minerals exploration incentive (JMEI).
The EDI was first announced by the Coalition in the lead-up to the 2013 federal election.[1] According to the Explanatory Memorandum to the Bills introducing the EDI, two key problems were identified:
a tax disadvantage junior companies face relative to larger mining and exploration companies and
the general difficulty in attracting the capital necessary to conduct greenfields exploration.[2]
The objective of the Bills was ‘to increase greenfields mineral exploration by incentivising investment in junior mineral exploration companies’.[3]
The Exploration Development Incentive is expected to attract additional investment in small companies undertaking greenfields mineral exploration. Additional exploration activity will lead to increased employment. Stakeholder feedback suggests this increased investment will also have a significant multiplier effect. Long term benefits include new mineral discoveries, and in turn, new mines. Such benefits would include the possibility of new infrastructure in regional areas, new and diversified employment opportunities, and increases in royalty and taxation revenue. [footnotes omitted][4]
As the EDI was an election commitment, the regulation impact statement only considered the implementation of the commitment, as opposed to alternative measures to achieve the same objective.[5] However, it was important to review the effectiveness of the EDI given the modified regulation-making treatment. This was acknowledged in the Explanatory Memorandum:
The Department of Industry will monitor greenfields exploration and the scheme throughout its operation, with a review of the scheme in 2016. Key performance indicators for the scheme, against which the review will be conducted, will be finalised by the end of 2014. Subject to the outcome of the review, the programme may be extended for a further period.[6]
Generally, most small minerals exploration companies’ expenditure would be classified as capital in nature for the purposes of income tax law. The full value of any expenditure for a depreciating asset (generally considered to be an asset with a limited useful life) used for minerals exploration can be immediately deducted under ITAA 1997 section 40‑80. Other expenditure incurred (whether capital or revenue in nature) can be immediately deducted under ITAA 1997 section 40-730. Therefore, the vast majority of expenditure incurred by such companies is likely to be deductable. As noted in the Explanatory Memorandum to the Bill:
...smaller companies engaged solely in exploration for minerals may earn less assessable income in a given income year than they outlay on exploration or prospecting. Such companies therefore will generally have a tax loss for the income year. This tax loss will not provide any benefit unless a company earns sufficient assessable income in a future income year against which the loss can be deducted.[7]
[...]This is a source of non-neutrality in the tax system that favours companies with profits against which to offset expenses over companies that accumulate losses they are unable to utilise. Junior explorers, with no production and therefore no (or little) assessable income, are unable to offset their exploration expenditure. While a tax deduction allows a company with assessable income to reduce its tax liability, a company will not gain any immediate benefit from its deductions that exceed its assessable income.[8]
The EDI commenced in March 2015 and essentially permitted small mineral exploration companies which undertook greenfields minerals exploration in Australia to convert some of their tax losses into exploration credits. In turn, those exploration credits could be distributed to investors as a tax offset, or as a franking credit, depending on the investor entity.[9]
Subdivision 418-A sets out the object of the Division to provide for concessional tax treatment for investors who invest in small mineral exploration companies which undertook greenfields minerals exploration in Australia.
Subdivision 418-B contains the entitlement to receive the EDI tax offset, which is dependent upon the type of investor entity (for example, there are different rules depending on whether the investor is a life insurance company or a member of a trust). It also covers the amount of the tax offset.
Subdivision 418-C covers EDI franking credits, which again differ depending on the type of investor entity.
Subdivision 418-D covers the creation of exploration credits, in particular the entities which are eligible to create exploration credits, as well as a number of important related definitions. The Subdivision provided that an entity cannot create exploration credits in excess of their maximum exploration credit amount. The maximum exploration credit amount was calculated on either the estimated or actual tax loss or estimated or actual greenfields mineral expenditure (whichever was the smallest), multiplied by the corporate tax rate, which was then multiplied by the modulation factor. The modulation factor was in turn calculated where the exploration credits were expected to exceed the exploration cap (the values are listed above), otherwise it was set at a value of one.
Subdivision 418-E covered the issue and expiry of exploration credits, which could be provided to member shareholders of the entity, proportionately in accordance with their shareholding.
Subdivision 418-F covered excess exploration credits—entities which issued exploration credits in excess of their maximum exploration credit amount were liable to pay excess exploration credit tax. This subdivision also provided for a range of related administrative measures such as when payment of excess exploration credit tax fell due, whether interest was also payable, refunds for overpaid amounts, and general record keeping requirements. In the event that an entity was liable to pay excess exploration credit tax that entity may have been excluded from accessing the EDI in the future.
The EDI ceased to have effect after the 2016–17 income year, although exploration credits accrued could be distributed in the 2017–18 income year.
The 2017–18 Budget let the EDI run its course, and as such did not extend it. This decision was reported to have angered industry participants,[10] and, perhaps as a result of industry feedback, the JMEI was first announced by the Prime Minister and Deputy Prime Minister on 2 September 2017.[11] It was reported that the reason for changing from the EDI to the JMEI was because the EDI ‘had not been as effective as hoped’.[12]
Finally, the amendments extend the application of the excess exploration credit tax rules.[13]
The Explanatory Memorandum to the Bill provides that the government intends to review the operation of the JMEI by 30 June 2020 ‘to assess both its uptake and efficacy in attracting investment’.[14] However, it is not clear whether the review will be public.
The Committee for the Selection of Bills recommended that the Bill not be referred to a committee for inquiry.[15]
The Committee for the Scrutiny of Bills made no comment in relation to the Bill.[16]
At the time of writing, the position of non-government parties is not known. However, the Labor Party supported the Bills which introduced the EDI in 2015.[17] Greens Senator Whish-Wilson expressed ‘disbelief’ at the introduction of the original Bills,[18] and the party unsuccessfully sought to amend Schedules 1 and 6 of the Tax and Superannuation Laws Amendment (2014 Measures No. 7) Bill 2014, which would have had the effect of removing the EDI entirely.[19]
Concerns had been raised by the mining industry at the budget decision to let the EDI expire.[20]
Chief Executive of the Association of Mining and Exploration Companies, Simon Bennison, has reportedly said there is appetite among junior companies for exploration and stated ‘...we are looking forward to this new initiative turning [one of the worst periods of greenfield exploration] around’ and that ‘[i]t will give those companies with some highly prospective and clearly identified quality assets a much better chance of raising that capital’.[21]
The Federal Government’s recently announced $100m over 4 years Junior Mineral Exploration Tax Credit (JMETC) is a timely and important step to boosting that investment in exploration. This will allow eligible companies to renounce their losses in the form of tax credits back to their shareholders.[22]
The South Australian Chamber of Mines & Energy was reported to have welcomed the JMEI initiative.[23]
The Explanatory Memorandum to the Bill states that the measure is expected to reduce government revenues by $100 million over the forward estimates.
The Joint Committee on Human Rights considered that the Bill did not raise human rights concerns.[25]
As noted above, the key issues are whether the EDI has worked as intended, and whether it (or an alternative, such as the JMEI) remains necessary, especially given the modified regulation-making treatment afforded to the Bills that introduced the EDI. A review of the EDI could evaluate both of these issues.
A review of the EDI had been foreshadowed on numerous occasions,[26] and a review was signalled by (then) Resources Minister Josh Frydenberg in mid-2016.[27] Pursuant to freedom of information documents, it appears that the Department of Industry, Innovation and Science was responsible for conducting the review, and had engaged consultants to prepare a report.[28] However, the budget decision to let the EDI expire at the end of its three-year period was heavily criticised by the Association of Mining and Exploration Companies national policy manager Graham Short:
The Government has had a non-transparent and unpublished internal review but it has been based on a short time frame and limited data...
It appears as though the Government just doesn't understand, or its advisors just don't understand the importance of this program.[29]
Given that the review has not been made public, it is difficult to evaluate the efficacy of the EDI. It was reported that the Government decision not to extend the scheme was because few businesses took advantage of the scheme and that the number of participants significantly fell between the first and second years of operation.[30] Resources Minister Matt Canavan stated that ‘[t]he review did consider options to improve the scheme but found these would have benefited only a small number of participants rather than improving the scheme’s overall operation’.[31]
Available information suggests that the EDI has not been as attractive to junior minerals companies as intended. It was estimated that approximately 200 entities would participate in the EDI annually,[32] yet data from the Australian Taxation Office (ATO) indicate that participation in the EDI was not that successful (table 2).
2014–15 84 $70,323,723 1.00 $25 million $21.1 million
2015–16 54 $45,672,570 1.00 $35 million $13.7 million
2016–17 40 $44,482,118 1.00 $40 million $13.3 million
As shown in table 2, less than half of the estimated number of applications were received in 2014–15, falling to almost a quarter of the estimated applications in 2015–16. Despite the relatively low take-up, over 84 per cent of the $25 million cap in 2014–15 was allocated to applicants, suggesting that had there been 200 applicants, the modulation factor would have been substantially less than one,[33] resulting in a smaller return (in the form of a tax concession) to investors.
The number of applications fell by over a third between 2014–15 and 2015–16, with commensurate falls in both exploration expenditure and exploration credits issued. In 2015–16, the take-up was only 27 per cent of that originally estimated, with 54 applications.
In the 2016–17 income year, the number of applications fell further, to just 20 per cent of the estimated number of applications. The results in 2016–17 compared with 2014–15 indicate that the EDI has become relatively less important to eligible entities.
There are no strong grounds to believe that exploration generates unusually large positive spillovers that would justify a subsidy. Exploration does produce information of public value, and explorers are required to make such information publicly available. However, nearly all activities generate information that is of benefit to others; for example, that a particular business model does or does not work.[34]
Some stakeholders have expressed the view that no market failure exists preventing an efficient level of investment in greenfields projects. Accordingly these stakeholders consider there will only be limited take-up of the Exploration Development Incentive. This appears to be a minority view based on the consultation that has been undertaken.[35]
The minority view of stakeholders however appears to more accurately reflect the outcomes of the EDI than that of the majority which identified that the ‘main limitation’ was the exploration credits cap which was ‘generally considered too small based on the expected demand for the scheme’.[36] This is because in the three years that the EDI operated, the cap was not reached.
The Explanatory Memorandum to the Bill notes that stakeholders provided feedback on the EDI. Two key issues identified were that the benefits to new investors were diluted, and that the modulation factor created uncertainty.[37]
The Bill remedies the issue regarding diluted investor returns by ensuring that where credits are issued they are issued to the investors which contributed to the capital raisings.[38] The Bill remedies the latter issue as a result of the proposed repeal of section 418-90, which covers the modulation factor. However, the removal of the modulation factor is substituted by the determination process by the Commissioner of Taxation.[39] Whether this process creates uncertainty (or additional uncertainty compared to the modulation factor) is yet to be seen.
Part 1 of Schedule 1 amends Division 418 of the ITAA 1997, which currently provides for the EDI. The amendments reflect the changes introduced by the JMEI. The main changes are:
in relation to the timing of both the creating and issuing of exploration credits
the removal of the modulation factor and introduction of the Commissioner of Taxation being responsible for allocating exploration credits
the ability to rollover an unused allocation of exploration credits (which currently does not exist)
the introduction of rules to ensure that exploration credits are provided proportionately to all investors, based on the size of their investment and
allocations of exploration credits are on a first come first served basis (which is currently not the case due to the operation of the modulation factor).
Item 2 repeals and substitutes Subdivision 418-D which deals with the creation of exploration credits. Proposed subsection 418-70(1) reflects the changes to the timing in relation to the creation of exploration credits. Currently, eligibility is based on being a greenfields minerals explorer in the previous income year, as well as the provision of a declaration estimating both their tax loss and greenfields minerals expenditure for that previous income year. Proposed subsection 418-70(1) now permits entities to create exploration credits in the income year, and (as opposed to requiring a declaration) the entity must have an exploration credits allocation[40] for the income year (or an unused allocation of exploration credits from the immediately preceding income year).[41]
Proposed subsection 418-70(2) reflects necessary changes as a result of the repeal of the modulation factor (see below). Proposed subsection 418-70(3) provides that exploration credits cannot be created for the 2021–22 income year (or any later income year).
The definition of greenfields minerals explorer (under section 418-75) is unchanged, meaning that the JMEI will apply to the same entities as did the EDI. The definition of greenfields minerals expenditure (under section 418‑80) is extended to include transferees under farm-in farm-out arrangements.[42] The effect of this change is to broaden the application of the JMEI compared to the EDI. This extension is acknowledged in the Explanatory Memorandum to the Bill, but no reason for its extension is provided.[43]
the smallest amount of:
the entity’s estimated tax loss
the entity’s actual tax loss
the entity’s estimated greenfields minerals expenditure or
the entity’s actual greenfields minerals expenditure.
multiplied by the corporate tax rate that applied in the previous income year and
multiplied by the modulation factor.[44]
the entity’s greenfields minerals expenditure for the credit year, multiplied by the entity’s corporate tax rate for the credit year
the entity’s tax loss for the credit year, multiplied by the entity’s corporate tax rate for the credit year or
the sum of the entity’s exploration credits allocation for the credit year and the entity’s unused allocation of exploration credits from the income year immediately preceding the credit year.
The changes reflect the policy decision to alter the timing of the JMEI compared to the EDI.[45] The removal of the requirement for an entity to provide estimates of their tax loss and greenfields minerals expenditures, respectively, reflects this change.[46] That change is also reflected in bringing forward the relevant year to which the corporate tax rate relates. Proposed paragraph 418-85(2)(c) reflects the policy decision to allow entities to distribute their unused allocation of exploration credits from the income year immediately preceding the credit year.
As explained earlier in this Digest, the EDI currently relies on modulation factors. Section 418-90 covers the modulation factors and is proposed to be repealed by item 2. The reason for repealing the modulation factor was due to industry feedback that it created additional uncertainty as to the amount of exploration credits which could be issued.[47]
Item 2 also inserts proposed Subdivision 418DA which deals with the exploration credits allocation. As outlined earlier, under proposed section 418-70, an entity must have been a greenfields minerals explorer in the income year, and the entity must have an exploration credits allocation for the income year or an unused allocation of exploration credits from the immediately preceding income year—in order to be able to create exploration credits. An entity can therefore only create exploration credits if exploration credits have been allocated to it.[48] The process of gaining an exploration credits allocation involves:
An application to the Commissioner of Taxation (proposed section 418-100)—an entity may apply to the Commissioner for Taxation for a determination to allocate exploration credits to the entity for an income year. The application must be made within one month from the start of the financial year corresponding to the income year for which the application is sought,[49] and must include estimates of the entity’s greenfields minerals expenditure, tax loss, and corporate tax rate.
A determination by the Commissioner of Taxation (proposed section 418-101)—the Commissioner may make a determination allocating exploration credits of a specified amount for an income year. The Commissioner must not make a determination if the Commissioner[50] is not satisfied that there is a reasonable possibility that the entity will have greenfields minerals expenditure, applicable tax loss, and applicable corporate tax rate of the amount estimated or greater,[51] and that the entity meets any other prescribed requirements.[52] The amount of exploration credits specified in the determination must be the smallest of:
the entity’s estimated greenfields minerals expenditure for the income year, multiplied by the entity’s estimated corporate tax rate for the income year or
the entity’s estimated tax loss for the income year, multiplied by the entity’s estimated corporate tax rate for the income year or
five per cent of an amount equal to the annual exploration cap for the income year or
if another amount, or a method for working out another amount is prescribed—the other amount.[53]
The method for calculating the first two amounts relating to an entity’s greenfields minerals expenditure and tax loss is analogous to the current process under section 418-85 (as far as the entity’s estimated values are concerned). However the introduction of five per cent of the annual exploration cap is a new provision unique to the JMEI. The Explanatory Memorandum provides that this provision ‘ensures that there is a broad spread of the benefit of the JMEI amongst exploration companies each income year’.[54] Given the annual exploration cap (see proposed section 418-103 below), five per cent of each annual cap (assuming that there are no unused allocations or different amounts prescribed) would mean a maximum allocation of exploration credits to just 20 entities of:
$750,000 for the 2017–18 income year
$1.25 million for the 2018–19 income year and
$1.5 million for each of the 2019–20 and 2020–21 income years.
It should be noted that this would only apply in the event that the greenfields minerals expenditure and the tax loss were such that more than five per cent of the annual exploration cap would be allocated to a particular entity. If there were 20 such entities then the cap would breached, and accordingly each entity would receive five per cent of the annual exploration cap, and the associated investors would receive a resultant smaller tax offset. The likelihood of such an event is unknown at present, but the limited information about various greenfields minerals explorers that does exist in relation to the EDI indicates that the majority of entities would be below the five per cent threshold.[55]
Compliance with the general allocation rules (proposed section 418-102)—the total amount of exploration credits must not exceed the annual exploration cap. The Commissioner of Taxation must consider applications on a first-come, first-served basis; with the possibility that entities which apply later than others may not receive their full entitlement of exploration credits as a result of the process outlined above.[56]
The definition of annual exploration cap (proposed section 418-103) with the amounts allocated to each income year as follows:
$15 million for the 2017–18 income year
$25 million for the 2018–19 income year and
$30 million for each of the 2019–20 and 2020–21 income years.
A safeguard provision in the event of a failure by the Commissioner of Taxation to comply with the requirements in proposed Subdivision 418DA.[57] This is to ensure that any inadvertent error by the Commissioner of Taxation in relation to any one application does not affect all subsequent determinations.
Item 2 also repeals and substitutes Subdivision 418E which deals with issuing exploration credits. In summary, the issuing of exploration credits relates to the tax treatment of certain investments by investors in minerals explorers.
income year or
immediately preceding income year.
shares in the mineral explorer are issued to the investor by the minerals explorer on or after the day the Commissioner of Taxation makes a determination (under proposed section 418-101) allocating exploration credits to the minerals explorer for the income year and
the shares are issued before the end of the income year and
those shares are equity interests.[58]
Proposed section 418-116 provides that each investor is entitled to a distribution that is proportionate to the value of their investment, as a percentage of the total value to be distributed in the relevant issue pool. This helps to ensure that each investor is treated equally, whilst also ensuring that those investors who have funded the capital raising are the ones receiving the tax benefit (since entitlement to a distribution is based on initial capital contribution and not current shareholding). As noted in the Explanatory Memorandum, this is a superior approach to that which applied under the EDI ‘where all shareholders were entitled to receive a proportion of the exploration credits that were received’.[59]
Item 4 inserts proposed section 418-151 which relates to the complying exploration credit amount. Entities are liable to pay excess exploration credit tax where they have issued exploration credits in excess of the complying exploration credit amount.[60] In the event that an entity issues exploration credits that it is not entitled to (for example, an entity issued credits where it did not undertake qualifying expenditure) then that entity is liable to pay excess exploration credit tax. Items 3 and 5-6 make minor consequential amendments to reflect the changes in terminology and timing in relation to the JMEI.
Items 13–15 amend the ITAA 1997 to provide for modified capital gains tax (CGT) (see box 1) treatment in the event of a disposal of shares issued to an investor by a minerals explorer. The modified CGT treatment reflects the fact that investors are entitled to a share of exploration credits that are distributed in the income year, provided that the other requirements are met (see above). As a result of having access to the exploration credits—which cannot be transferred—investors may have paid a premium for the shares, and that premium is not reflected in the sale price in the event that the shareholder decides to sell their shares. In effect, that means that the sale price would be ‘too high’. Since the sale price cannot be reduced (that is simply the market price paid for the shares), items 13–15 have the effect of reducing the reduced cost base of the shares, which thereby affects the amount of capital loss incurred. The reduced cost base is reduced by the corporate tax rate that applied to the minerals explorer when the share was issued, multiplied by the amount paid up by the investor on the share during the investment period.[61] This has the effect of lowering the reduced cost base of the shares, which in turn lowers the amount of capital loss that can be claimed by the investor.
Items 7–10 in Part 2 of Schedule 1 make consequential amendments to the ITAA 1936 as a result of the change in the name from EDI to JMEI. Items 11–12 and 16–26 make similar changes to the ITAA 1997. Items 27 and 28 make similar changes to the Tax Administration Act.
Sources: ITAA 1997, Parts 3-1 and 3-3, section 995-1; Explanatory Memorandum, Treasury Laws Amendment (Junior Minerals Exploration Incentive) Bill 2017, pp. 33–5.
Items 29–41 repeal cross-references to Division 418 of the ITAA 1997 (which is the Division where the JMEI is inserted by Parts 1 and 2) in the ITAA 1936. Items 42–44 and 46–52 repeal Division 418 and references to that Division in the ITAA 1997. Item 45 ensures that the future disposal of shares by investors after 1 July 2023 remain subject to a reduction in the reduced cost base, as was introduced by items 13–15 of Schedule 1. Items 53–64 repeal cross-references to Division 418 of the ITAA 1997 in the Tax Administration Act. These amendments will commence on 1 July 2023 and reflect that the JMEI is time-limited and only applies to the 2017–18 to 2020–21 income years.
Item 2 of Schedule 2 similarly repeals and substitutes table item 14 in subsection 2(1) of the Tax and Superannuation Laws Amendment (2014 Measures No. 7) Act 2015.[62]
Item 66 of Schedule 1 provides that an application to the Commissioner of Taxation for an allocation of exploration credits for the 2017–18 income year must be made on or after 1 February 2018 but before 1 March 2018, as opposed to the usual time of one month prior to the start of the financial year. This reflects the fact that the 2017–18 financial year has already commenced and the JMEI was not announced until September 2017.
Item 67 provides that greenfields minerals explorers in the 2016–17 income year can still create and issue exploration credits under the EDI, despite the fact that the EDI is repealed and replaced with the JMEI in Parts 1 and 2 of Schedule 1.
[1]. Liberal Party of Australia and the Nationals, The Coalition’s Policy for resources and energy, Coalition policy document, Election 2013.
[2]. Explanatory Memorandum, Tax and Superannuation Laws Amendment (2014 Measures No. 7) Bill 2014 and Excess Exploration Credit Tax Bill 2014, pp. 114–15. For simplicity, references are only made to the Tax and Superannuation Laws Amendment (2014 Measures No. 7) Bill 2014 and associated materials from hereon. A greenfields minerals explorer and greenfields minerals expenditure are defined in sections 418-75 and 418-80 of the ITAA 1997, respectively.
[3]. Explanatory Memorandum, Tax and Superannuation Laws Amendment (2014 Measures No. 7) Bill 2014, p. 119.
[4]. Ibid., p. 120.
[6]. Ibid., p. 129.
[7]. Explanatory Memorandum, Treasury Laws Amendment (Junior Minerals Exploration Incentive) Bill 2017, p. 11.
[8]. Ibid., p. 45.
[9]. For more information on the background and anticipated impacts of the EDI, see: K Swoboda and L Nielson, Tax and Superannuation Laws Amendment (2014 Measures No. 7) Bill 2014 [and] Excess Exploration Credit Tax Bill 2014, Bills digest, 75, 2014–15, Parliamentary Library, Canberra, 2015, pp. 22–31. A greenfields minerals explorer and greenfields minerals expenditure are defined in sections 418-75 and 418-80 of the ITAA 1997, respectively.
[10]. See, for example: S McKinnon, ‘Scheme axing angers juniors’, The West Australian, 12 May 2017, p. 62; B Harvey, ‘Feds throw explorers a bone’, The West Australian, 7 June 2017, p. 33.
[11]. M Turnbull (Prime Minister) and B Joyce (Deputy Prime Minister), Investing in the future strength of the Australian resources sector, joint media release, 2 September 2017.
[12]. S Martin, ‘$100m mining boost’, The Weekend West, 2 September 2017, p. 1.
[13]. Explanatory Memorandum, Treasury Laws Amendment (Junior Minerals Exploration Incentive) Bill 2017, p. 16.
[15]. Senate Standing Committee for Selection of Bills, Report, 13, The Senate, 16 November 2017, p. 3.
[16]. Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 13, The Senate, 15 November 2017, p. 60.
[17]. G Gray, ‘Second reading speech: Tax and Superannuation Laws Amendment (2014 Measures No. 7) Bill 2014, Excess Exploration Credit Tax Bill 2014’, House of Representatives, Debates, 24 February 2015, p. 1184. See also T Hammond, Delivering a stable policy environment: Labor’s approach to the resources sector, speech delivered to the AMEC Convention 2017, 7 June 2017.
[18]. P Whish-Wilson, ‘Second reading speech: Tax and Superannuation Laws Amendment (2014 Measures No. 7) Bill 2014, Excess Exploration Credit Tax Bill 2014’, Senate, Debates, 3 March 2015, p. 943.
[19]. Australia, Senate, Journals, 80, 2014–15, 3 March 2015, p. 1026. The effect of the amendments would have entirely removed the provisions relating to the EDI.
[20]. See below for further information, but also see, for example, A Hobbs, Exploration incentive axed for 2018 media release, 11 May 2017.
[21]. Martin, ‘$100m mining boost’, op. cit.
[22]. G Short, Exploration crucial for the future of mining, media release, 16 October 2017.
[23]. L Griffiths, ‘Explorer spend up $1m in SA’, The Adelaide Advertiser, 5 September 2017, p. 29.
[24]. The Statement of Compatibility with Human Rights can be found at page 39 of the Explanatory Memorandum to the Bill.
[25]. Parliamentary Joint Committee on Human Rights, Twelfth report of the 45th Parliament, 28 November 2017, p. 96.
[26]. See, for example: Explanatory Memorandum, Tax and Superannuation Laws Amendment (2014 Measures No. 7) Bill 2014, p. 82; Senate Economics Legislation Committee, Answers to Questions on Notice, Industry Portfolio, Budget Estimates 2014–15, Question BI-64; Senate Economics Legislation Committee, Answers to Questions on Notice, Industry Portfolio, Budget Estimates 2014–15, Question BI-84.
[27]. J Lucas, ‘Tax scheme under review’, The West Australian: Kalgoorlie Miner, 26 May 2016, p. 7.
[28]. Treasury, FOI disclosures, ‘Exploration development incentive’, Review of the Exploration Development Incentive, 28 July 2017.
[29]. B Fitzgerald, ‘Mining exploration companies say Federal Government “betrayal” will cost jobs in regional WA and Queensland’, ABC News, 12 May 2017. See also, B Pearson, Budget investment focus welcome but reform challenge remains, media release, 9 May 2017.
[30]. Harvey, ‘Feds throw explorers a bone’, op. cit.
[32]. Calculation based on Explanatory Memorandum, Tax and Superannuation Laws Amendment (2014 Measures No. 7) Bill 2014, pp. 125–6.
[33]. The modulation factor is determined by the Commissioner of Taxation so as to ensure that the total amount of exploration credits created by eligible entities is no greater than the annual cap of exploration credits that may be issued (see table 2 for the exploration credit cap amounts).
[34]. K Henry, J Harmer, J Piggott, H Ridout, and G Smith, Australia's future tax system: report to the Treasurer, (Henry Tax Review), pt 2, vol. 1: detailed analysis, [The Treasury], [Canberra], December 2009, p. 177.
[35]. Explanatory Memorandum, Tax and Superannuation Laws Amendment (2014 Measures No. 7) Bill 2014, p. 128.
[37]. Explanatory Memorandum, Treasury Laws Amendment (Junior Minerals Exploration Incentive) Bill 2017, p. 44.
[38]. Proposed section 418-110.
[39]. Proposed section 418-81 and proposed Subdivision 418DA.
[40]. An exploration credits allocation is explained below.
[41]. An income year is defined in section 995-1 of the ITAA 1997.
[42]. Proposed paragraph 418-80(3)(b). A Farm-in farm-out arrangement is defined in section 40-1100 of the ITAA 1997.
[43]. Explanatory Memorandum, Treasury Laws Amendment (Junior Minerals Exploration Incentive) Bill 2017, p. 28.
[44]. See above for the explanation of the modulation factor.
[45]. The decision for amending the timing is explained in: Explanatory Memorandum, Treasury Laws Amendment (Junior Minerals Exploration Incentive) Bill 2017, pp. 31–3.
[46]. Although it should be noted that entities do need to provide these estimates when applying for an exploration credits allocation under proposed section 418-100.
[47]. Explanatory Memorandum, Treasury Laws Amendment (Junior Minerals Exploration Incentive) Bill 2017, p. 44.
[48]. See proposed subsections 418-70(1) and 418-81(1).
[49]. Proposed subsection 418-100(2).
[50]. A discussion about where such a situation may arise is noted in: Explanatory Memorandum, Treasury Laws Amendment (Junior Minerals Exploration Incentive) Bill 2017, pp. 21–2.
[51]. Proposed paragraph 418-101(2)(a).
[52]. Proposed paragraph 418-101(2)(b).
[53]. Proposed subsection 418-101(3).
[54]. Explanatory Memorandum, Treasury Laws Amendment (Junior Minerals Exploration Incentive) Bill 2017, p. 19.
[55]. Lucas, ‘Tax scheme under review’, op. cit., p. 7.
[56]. Proposed subsection 418-102(4).
[57]. Proposed section 418-104.
[58]. Proposed subsection 418-111(1).
[59]. Explanatory Memorandum, Treasury Laws Amendment (Junior Minerals Exploration Incentive) Bill 2017, p. 27.
[60]. Item 3 amends section 418-150 to reflect the introduction of the complying exploration credit amount by proposed section 418-151.
[61]. Proposed section 130-110 as inserted by item 15.
[62]. There appears to be a small error in the drafting of item 2 of Schedule 2 to the Bill. The replacement provision is incorrectly identified as table item 12, rather than table item 14.