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  • What to do when you receive exploration credits

    Note: EDI has finalised and is no longer accepting new participation forms, it has been replaced with the Junior Minerals Exploration Incentive.

    This information will help you determine what you need to do when you receive a statement from an entity advising that you have received exploration credits.

    This information applies if you are:

    • an individual
    • a corporate tax entity
    • a trust or partnership
    • a superannuation entity or self-managed superannuation fund
    • a life insurance company.

    Exploration credits received indirectly from a trust or partnership

    If you have received exploration credits through a trust of partnership, you may be entitled to a tax offset or franking credit equal to your share of the exploration credits issued to the trust of partnership. Your share of exploration credits must be the same as the share that you would be entitled to receive of an equivalent franked distribution to the trust or partnership from the same source.

    You are only able to benefit from your share of exploration credits to the extent that you would have been entitled to a tax offset if the distribution of the exploration credit from the trust or partnership were instead a distribution of a hypothetical franked distribution that:

    • was of the same amount as your share of the exploration credit
    • was made by the same entity that issued the exploration credit, in the same circumstances and in relation to the same interests
    • if you are a corporate tax entity, was made to you as if you were not a corporate tax entity.

    See also:

    • You and your shares 2017 – provides further information on entitlement to tax offsets on franked distributions from a trust or partnership.

    Individual

    If you are an Australian resident for the whole of the income year, you may be entitled to a refundable tax offset equivalent to the amount of exploration credits you have received.

    If you have received exploration credits directly or indirectly from your shareholdings in a greenfields minerals explorer, you can claim your tax offset by completing the supplementary section of the 2017 individual tax return. The EDI would be claimed under item T11.

    You will need to add up all the tax offsets you have received throughout the income year (including the tax offsets for exploration credits) and write the total amount in the section allocated for this. If you are only claiming a tax offset for exploration credits, print E in the claim box. If you are claiming for more than one type of tax offset, print M in the claim box.

    Corporate tax entity

    You are not entitled to refundable tax offsets for exploration credits you receive. If you are an Australian resident taxpayer for the whole of the income year, you can recognise amounts of exploration credits received as a franking credit in your franking account and distribute these to your shareholders

    Trust or partnership

    Trusts and partnerships are generally unable to directly benefit from exploration credits. However, if you are a trust or partnership, you may provide a statement to your partners or beneficiaries advising of the exploration credits received and the partner’s or beneficiary’s share of the exploration credits received during the income year (distribution statement). The member's share of the exploration credits received must be the same as the share that they would be entitled to receive of an equivalent franked distribution to the trust or partnership from the same source.

    You must provide this distribution statement to your eligible members prior to the lodgment of your tax return. However, if you are an investment body, then you must provide the distribution statement to your eligible members before the lodgment of the AIIR.

    The distribution statement must contain the following information for it to be in the approved form:

    • If the trust or partnership were directly issued with exploration credits from the greenfields minerals explorer it must include  
      • the name of the entity (trust or partnership) that is providing the statement
      • the member’s share of the amount of exploration credits that were issued to the trust or partnership by the greenfield minerals explorer under Subdivision 418-E of ITAA 1997 for the income year
      • the name and ABN of the greenfields minerals explorer that issued the exploration credits to the trust or partnership
      • a statement that the trust/partnership would, apart from subparagraphs 418-10(b)(ii) and (iii), have been entitled to a tax offset under Subdivision 418-B of the ITAA 1997 for the income year in relation to the exploration credit issued to it by the greenfields minerals explorer.
       
    • If the trust or partnership were indirectly entitled to exploration credits from another trust or partnership it must include
      • the name of the entity (trust or partnership) that is providing the statement
      • the member’s share of the amount of exploration credits under Subdivision 418-E of ITAA 1997 for the income year
      • the name and ABN of the greenfields minerals explorer that issued the exploration credits that flowed indirectly to the entity through one or more trust/partnership
      • a statement that the entity would, apart from subparagraphs 418-10(b)(ii) and (iii), have been entitled to a tax offset under Subdivision 418-B of the ITAA 1997 for the income year in relation to the exploration credit that is taken to have been issued to it.
       

    In each case, if the trust or partnership is distributing exploration credits from more than one greenfields minerals explorer to a member, the trust or partnership must ensure that the information in the statement it provides to the member (outlined above) are separately itemised for each greenfields minerals explorer.

    If you are a trustee that is liable to tax under subsection 98(1) or (2) or 99(2) or (3) of the ITAA 1997, then you may be entitled to a tax offset for the exploration credits received that are not distributed to your members.

    Superannuation entity or self-managed superannuation fund

    A superannuation entity or self-managed superannuation fund (SMSF) is entitled to a refundable tax offset where it has been an Australian resident for the whole income year and has received exploration credits.

    If you are a superannuation entity or SMSF and have received exploration credits, the amount of the tax offset is the value of the exploration credits that you received during the income year. You should include that amount at item E4 of the relevant tax return.

    Life insurance company

    Life insurance companies are eligible to receive refundable tax offsets for exploration credits received from investments they hold on behalf of their policy-holders. If you are an Australian resident for the whole of the income year and received exploration credits on shares you hold on behalf of your policy holders, you must include the amount at item E Refundable tax offsets in the Calculation Statement part of the company tax return.

    If you are a life insurance company and receives exploration credits from investments you do not hold on behalf of your policy holders, then you may be entitled to include additional franking credits in your franking account for the exploration credits received from these investments.

     

    Last modified: 30 Aug 2017QC 47966