Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES

PART 3-45 - RULES FOR PARTICULAR INDUSTRIES AND OCCUPATIONS

Division 418 - Exploration for minerals

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Guide to Division 418

SECTION 418-1 What this Division is about

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Generally, you are entitled to a tax offset for an income year for exploration credits issued to you for the income year.

A greenfields minerals explorer can create exploration credits for an income year. Before creating exploration credits, the explorer must obtain an allocation of exploration credits from the Commissioner for the year. Exploration credits cannot be created for the 2025-26 income year or later income years.

The exploration credits created for an income year cannot exceed an amount based on the explorer ' s greenfields minerals expenditure or tax loss for the year. If the explorer ' s exploration credits allocation for the year is smaller than that amount, the amount of exploration credits that the explorer can create will be reduced to sit within the allocation. However, any unused allocation of exploration credits from the preceding year generally would be carried over and so would increase the amount of exploration credits that the explorer can create.

An exploration credit created by a greenfields minerals explorer can be issued to you if you have invested in the explorer. While the tax offset you receive for the exploration credit issued to you for an income year will apply to that income year, generally the investment that gives rise to that offset may have been made in that or the preceding income year.

There are rules to ensure that exploration credits are not streamed to some investors rather than others. There are also rules to ensure that the total of the exploration credits you receive because of an investment (whether those credits are issued to you for the year in which you invest or the subsequent year) do not exceed the corporate tax that might be paid by the greenfields minerals explorer on that investment.

The explorer is liable to pay excess exploration credit tax if the explorer issues exploration credits in breach of these rules.

There is a cap on total allocations made by the Commissioner for each income year, but if part of the cap from the preceding year is unallocated it generally will be carried over. Allocations are made in the order in which applications for an allocation are made.

If an exploration credit is issued to a corporate tax entity, it will give rise to a franking credit (rather than a tax offset).

Note:

Excess exploration credit tax is imposed by the Excess Exploration Credit Tax Act 2015 , and the amount of the tax is set out in that Act.

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History

S 418-1 amended by No 72 of 2021, s 3 and Sch 2 items 2 - 5, by substituting paragraph " A greenfields minerals explorer can create exploration credits for an income year. Before creating exploration credits, the explorer must obtain an allocation of exploration credits from the Commissioner for the year. Exploration credits cannot be created for the 2025-26 income year or later income years. " for paragraph " A greenfields minerals explorer can create exploration credits for an income year. Before creating exploration credits, the explorer must obtain an allocation of exploration credits from the Commissioner for the year. " , inserting " generally " in paragraph beginning " The exploration credits created for an income year " , inserting " generally " in paragraph beginning " An exploration credit created by a greenfields minerals explorer " and inserting " generally " in paragraph beginning " There is a cap " , effective 1 July 2021 and applicable in relation to exploration credits allocated, or to be allocated, for the 2021-22 income year or a later income year. For transitional provision, see note under s 418-135 .

S 418-1 substituted by No 15 of 2018, s 3 and Sch 1 item 1, effective 1 April 2018. For application and transitional provisions, see note under Subdiv 418-DA heading. S 418-1 formerly read:

SECTION 418-1 What this Division is about

Generally speaking, you are entitled to a tax offset for exploration credits issued to you, but exploration credits issued to corporate tax entities instead give rise to franking credits.

For the 2015-16, 2016-17 or 2017-18 income year, a greenfields minerals explorer can create, and then issue, exploration credits for the explorer ' s greenfields minerals expenditure for the previous income year. However, the total amount of exploration credits for an income year is limited to the explorer ' s maximum exploration credit amount.

The explorer is liable to pay excess exploration credit tax if the explorer issues exploration credits in excess of that maximum exploration credit amount.

Note:

Excess exploration credit tax is imposed by the Excess Exploration Credit Tax Act 2015 , and the amount of the tax is set out in that Act.

S 418-1 inserted by No 21 of 2015, s 3 and Sch 6 item 2, applicable in relation to the 2015-16, 2016-17 and 2017-18 income years, but not in relation to any later income years, but not in relation to any later income years. However, see amendments in Act No 72 of 2021 that extend the operation of Div 418 for the 2021-22 to 2024-25 years of income and note under Div 418 heading.

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