Explanatory Memorandum
(Circulated by the authority of the Treasurer,the Hon. J. Kerin, M.P.)Chapter 10 General Mining Exploration and Prospecting Expenditure
Overview
The general mining exploration or prospecting provision will be amended to remove the requirement that mineral exploration or prospecting expenditure need be incurred on a mining tenement for such expenditure to qualify for immediate deductibility.
The amendment will put all exploration or prospecting expenditure on the same footing, whether it relates to quarrying, to petroleum operations or to other mining operations.
It will apply to exploration or prospecting expenditure incurred on or after 1 July 1991.
Summary of proposed amendments
10.1. The general mining exploration or prospecting provision will be amended to remove the requirement that mineral exploration or prospecting expenditure need be incurred on a mining tenement to qualify for immediate deductibility.
10.2. This will allow expenditure incurred in exploring broad areas not covered by a mining tenement to be deductible.
10.3. The amendment is to take effect from 1 July 1991.
Background to the legislation
Expenditure on exploration before acquiring a mining tenement
10.4. The "grass roots" stage of exploration programs often involves what may be called regional exploration. In this stage expenditure is incurred on exploration and prospecting on very large areas. This occurs before any mining tenements are acquired and does not require the consent of the holders of any mining tenements within those areas.
10.5. Subsection 122J(1) allows an outright deduction for expenditure on exploration or prospecting for minerals obtainable by prescribed mining operations. Under the present wording, the expenditure is only deductible if the exploration or prospecting is on a mining tenement. Prescribed mining operations do not extent to quarry materials or to petroleum and gas.
10.6. Regional exploration is not deductible under the present wording of subsection 122J(1), because it is not on a mining tenement.
10.7. This contrasts with the position of exploration or prospecting for quarrying materials and petroleum and gas. The provisions which allow an outright deduction for exploration or prospecting for quarry materials or petroleum and gas do not require the expenditure to be incurred on a mining tenement.
10.8. A mining tenement has generally been taken to mean a prospecting licence, exploration licence, mining lease, general purpose lease or a miscellaneous licence granted or acquired under a Commonwealth Act, a State Act or a law of a territory of the Commonwealth and includes the specified piece of land in respect of which the mining tenement is so granted or acquired.
10.9. It has not been essential for a bona fide prospector or mining company to hold or own a tenement for the purpose of exploration or prospecting on that tenement. An authority to enter and explore a tenement has been sufficient. But, if no tenement exists, regional exploration is not deductible.
Explanation of proposed amendments
Deductibility of regional exploration expenditure
10.10. The words "on any mining tenements" will be deleted from subsection 122J(1) and subparagraph 122J(4D)(b)(i). This will allow an immediate deduction for exploration and prospecting expenditure incurred on areas where no tenement has been acquired or where no access has otherwise been given. The amendment will put all exploration and prospecting expenditure on the same footing, whether it relates to quarry materials, to petroleum or to other minerals. [Clause 43]
Commencement date
10.11. The amendment will apply to expenditure incurred on or after 1 July 1991.
Clauses involved in the proposed amendments
Clause 43: Amendment of section 122J.
Clause 85: Date of effect.