Last chance for junior explorers to get greenfield work tax break

Junior Minerals Exploration Incentive JMEI ATO Australian Taxation Office ASX 2020 2021
The ATO will accept applications for the 2020-21 Junior Minerals Exploration Incentive over the month of June.

The fourth, and final round of the Junior Minerals Exploration Incentive (JMEI) scheme will open in less than two weeks from now — and remember, it’s first in, best dressed.

Also, this is the biggest of the four annual pools, this time with $35 million in tax credits available.

Applications will be received by the Australian Taxation Office (ATO) from 1 June 2020 until 30 June 2020 for the 2020-21 financial year.

The federal government allocated $100 million over four financial years, starting with 2017-18, to boost the ability of mineral exploration companies to raise new capital for greenfield projects.

This was by means of tax credits that could be distributed to Australian resident shareholders who participated in capital raisings in that same financial year.

Junior Minerals Exploration Incentive

JMEI came after years of lobbying by the mining industry for Australia to replicate a similar scheme that had proved popular in Canada – the Canadians call it the “flow-through share” system.

The JMEI scheme allows for Australian explorers to carry out exploration in that year, thus booking a tax loss in their accounts and receiving tax credits for that spending.

Rather than holding these losses on their books for years until they begin receiving mining income against which the losses could be offset, these exploration credits can be passed in the same financial year to Australian shareholders (individuals, trusts and superannuation funds) as a refundable tax credit in their tax returns (or a franking credit to corporate shareholders).

The 2020-21 scheme was originally to issue $30 million in such credits, but it has been boosted by the fact that $5 million was left unclaimed from the 2017-18 year.

But best be quick: last year’s tax credit application allowance was oversubscribed, with $30 million in credits being distributed to 43 companies. The 2018-19 allocation was also oversubscribed.

There are conditions: petroleum and oil shale exploration is not included, the raising cannot be for “a discovered resource” or a property with an inferred (or above) JORC resource.

The ATO allocates credits on a first-come, first-served basis until the cap is reached.

Previously approved

Last December the Association of Mining and Exploration Companies (AMEC) sent a submission to the federal government that the JMEI be extended — and enlarged to $50 million a year – and made a permanent initiative in the Commonwealth budget.

It cited several exploration companies that had so far benefitted from the scheme.

Stavely Minerals (ASX: SVY) received a tax credit allocation of $1.35 million and completed a capital raising of $4.3 million for work at a copper-gold prospect in western Victoria, subsequently announcing a “significant” shallow high-grade copper-gold discovery.

Alchemy Resources (ASX: ALY) used a JMEI allocation to raise $1.3 million for two gold projects, Alligator Energy (ASX: AGE) raised $1.75 million for uranium drilling in the Northern Territory, while Black Cat Syndicate (ASX: BC8) was able to raise $7.5 million for its gold projects and copper-gold player Carawine Resources (ASX: CWX) raised $3 million.

For more information on the JMEI scheme, visit the ATO website here.