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HOW TO BE ELIGIBLE FOR TAX OFFSET FROM EXPLORATION DEVELOPMENT INCENTIVES?

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24
May

The Australian Government has committed to introduce an Exploration Development Incentive (EDI) to encourage investment in small exploration companies undertaking Greenfields mineral exploration in Australia from 1 July 2014. This benefits the Australian economy, enabling the mining sector to make new mineral discoveries.  Australian resident investors of these companies will receive a tax incentive where the companies choose to give up a portion of their losses relating to their exploration expenditure in an income year. EDI allows companies who choose to participate in the scheme to convert tax losses into EDI credits, which may be passed through to Australian resident shareholders either as a refundable tax offset or franking credit depending on the investor profile.
The incentive applies from the 2014–15 income year. It is capped at a total of $100 million for Greenfields minerals expenditure incurred over the three-year period. The total value of the tax incentives available to taxpayers in respect of expenditure in an income year is restricted to $25 million for 2014-15, $35 million for 2015-16 and $40 million for 2016-17. Companies with no taxable income in an income year will be eligible to participate in the Incentive. Participation in the incentive will be voluntary, eligible companies do not need to participate. Whether the expenditure qualifies as Greenfields minerals expenditure should also be considered, for example the EDI does not apply to expenditure on areas where a mineral resource has already been identified. Participation is optional and the decision to claim the EDI is made each year. Importantly, taxpayers who did not register last year can still register this year.


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