Note: EDI has finalised and is no longer accepting new participation forms, it has been replaced with the Junior Minerals Exploration Incentive.
Do eligible exploration companies have to participate in the EDI?
No. Participation in the EDI is voluntary.
Can a company elect to be included in the EDI in one year and not in the next?
Yes. The decision to create exploration credits is made each year of operation.
Can amounts relating to prior years be included for the purposes of calculating my company's greenfields minerals expenditure?
No. Greenfields minerals expenditure that you estimate and notify to the Commissioner or use to calculate your maximum exploration credit amount refers only to greenfields minerals expenditure you incur during the income year immediately before the income year in which exploration credits are created.
For example, when working out the maximum amount of exploration credits that you can create in the 2017–18 income year, you need to notify your estimated greenfields minerals expenditure to us by 30 September 2017 for amounts incurred in the 2016–17 income year.
If a company is undertaking exploration in Australia and overseas, is the Australian component of the exploration eligible for EDI?
Yes. Exploration credits can be only created in relation to greenfields minerals expenditure incurred in Australia. None of the overseas expenditure is eligible.
Can I include administration costs as part of my company's greenfields minerals expenditure?
Yes, if the administration costs have a direct or close link to your company's eligible exploration or prospecting activities.
For example, XYZ is an Australian listed company undertaking greenfields exploration in an area in Western Australia that does not yet have an inferred mineral resource in the JORC Code. The company has three employees – two directors and one company secretary based in Perth. The directors, who are geologists, spent two months performing rock-chipping and soil-sampling activities on site.
Administration costs that have a direct or close link with the company's exploration or prospecting activities include:
- director salary costs attributed to the rock-chipping and soil-sampling activities on a time basis. The costs related to directors' other corporate activities are excluded
- vehicle hire to get the geologists to the site and on-costs such as fuel
- accommodation costs for the geologists at or near the site and on-costs
- head office expenses such as rent, utilities, depreciation and company secretary support that have a close or direct link to the company's exploration activities. For example, expenses attributed to exploration activities conducted at head office such as planning exploration programs or reviewing seismic data. Other head office expenses such as accounting fees for the preparation of tax returns are excluded.
What if I'm late notifying you of my company's greenfields minerals expenditure?
You need to notify us of your greenfields minerals expenditure by 30 September of each year you wish to participate in the incentive.
We can only accept late notifications if an extension has been granted. This is because we are required to calculate and publish the modulation factor in sufficient time for all companies involved in this incentive to calculate their amounts for distribution and to notify their shareholders.
Can I apply for an extension to notify the ATO of my company's greenfields minerals expenditure?
You may apply for an extension, however, we can only grant extensions in relation to this incentive in extenuating circumstances. This is to avoid disadvantage to all other participants and their shareholders that can arise from delays.
Can I amend my notified greenfields minerals expenditure amounts?
You can notify us of amended estimated greenfields minerals expenditure or amended estimated tax loss for the previous year on an Exploration Development Incentive Participation Form as many times as you need to up until 30 September (in the relevant year) and we will use the last notified amounts.
After 30 September (in the relevant year) unless we have granted you an extension, amended amounts exceeding the original notification amounts cannot be used as the notified amount that will be relevant for the purposes of calculating your maximum exploration credit amount.
What happens if I distribute more than my maximum exploration credit amount?
If you distribute exploration credits in excess of the maximum exploration credit amount, you will be liable to pay tax equal to the excess exploration credits. You may also be liable for interest and penalties.
If this occurs you must lodge an Excess Exploration Credit Tax Return and pay any amount of excess exploration credits tax by 21 July of the financial year corresponding to the income year in which you distributed the excess exploration credits.
Can any unused exploration credits be carried forward and used in future years?
No. Exploration credits that are created but not issued before 30 June in the financial year corresponding to the income year in which they are created will expire.
Will eligible companies be able to choose whether they wish the credit to apply to all shareholders or those that have been issued shares following a new capital raising?
Yes. The legislation provides that the eligible exploration companies can choose for the EDI to be available only for shares issued on or after 1 July 2014. This choice will be irrevocable and must be made before any exploration credits are issued.
If a new capital raising is made it will require a separate listing or trading of pre-EDI and post-EDI interests to distinguish between the shares with a premium and ones without.
When is the relevant cut-off time to determine the number of shares that a shareholder holds as a proportion to the total equity shares in the eligible exploration company?
The amount issued to each shareholder must be in proportion to the equity shares that the shareholder holds as a proportion of the total equity shares. The relevant cut-off time to determine the number of shares that the shareholder holds is 30 days before the exploration credits are issued.
What if the shareholder is a foreign resident?
Although foreign resident shareholders will receive exploration credits, as they are not Australian residents for the whole of the income year, they will not be entitled to claim the exploration credit tax offset.
Can the offset credits that would otherwise be available for non-resident shareholders be transferred to eligible resident shareholders?
When can shareholders use the tax offset?
Shareholders may claim the tax offset in the income year in which they receive the exploration credits.
For example, greenfields minerals expenditure is incurred by a company in the 2015–16 income year. The company notifies us of their participation in the incentive by 30 September 2016. The modulation factor is published by January 2017. Following the modulation process, the exploration credit is created and issued to shareholders during 2016–17 income year. The shareholder is able to claim the tax offset in their 2016–17 income tax return.
Will the shareholder's exploration credits tax offsets be excluded from Pay As You Go (PAYGI) calculations?
What happens to the offset where the recipient does not earn any income, for example retiree’s?
The offset is refundable to taxpayers with no income tax liability.
Do penalties apply to false or misleading statements made on any of the notifications, reports, returns or other documents associated with this incentive?
Yes, false or misleading statement penalties may apply to relevant notifications, reports, returns or other documents associated with this incentive.
Can remission of penalties apply where they have been applied as a result of any notifications, reports, returns or other documents associated with this incentive?
Yes. Remission of penalties may apply where penalties have been applied as a result of any notifications, reports, returns or other documents associated with this incentive.
Can I get further information?
Yes. Contact EDI@ato.gov.au and we will respond to your enquiry as soon as possible.Questions you may have about the Exploration Development Incentive (EDI) and the eligibility conditions.