Tax Industry Insight:

Junior Minerals Exploration Incentive

13 April 2018

On 27 March 2018 legislation was enacted, which introduces a new Junior Minerals Exploration Incentive (JMEI) to attract and encourage investment in small exploration companies undertaking greenfields mineral exploration in Australia. The race is now on to submit applications to the ATO which will begin allocating credits on a first come first served basis starting on 16 April 2018.

Junior Minerals Exploration Incentive

On 27 March 2018 Treasury Laws Amendment (Junior Minerals Exploration Incentive) Bill 2017 was enacted which introduces a new Junior Minerals Exploration Incentive (JMEI), to replace the Exploration Development Incentive (EDI), which expired last year. The JMEI is designed to attract and encourage investment in small exploration companies undertaking greenfields mineral exploration in Australia at a time when global competition for capital remains fierce. The JMEI allows eligible companies to ‘give up’ their exploration tax losses to investors in the form of a refundable tax offset and will attach to newly issued shares. A greenfield mineral explorer is eligible if they are undertaking a new capital raising and have not carried on any mining operations during the income year or over the immediately preceding income year; and no mining operations have been carried out during the period by another entity that is ‘connected with’ or an ‘affiliate’ of the greenfield mineral explorer. Refer to this BDO Tax Technical Update from 2017 when the legislation was introduced for more detail on how the JEMI operates, eligibility for explorers and issuing credits to explorers and commentary on whether the JMEI will encourage investment.

Changes to the legislation

Since the Bill was introduced into Parliament on 19 October 2017, amendments have been made that revise the period when minerals exploration companies can make an application to the Australian Taxation Office (ATO) for an exploration credits allocation for the 2017-18 income year. This was because the Bill was not passed by Parliament in 2017 and the original 1 February 2018 start date provided in the Bill for making applications passed. The amendments alter the application period for the 2017-18 year so that it starts on the later of the commencement of the Bill, or the eleventh business day after the Bill receives the Royal Assent. Amendments have also been made to clarify the definition of ‘unused allocation of exploration credits’ to ensure the scheme operates as intended by adding a new subsection s418-82 ITAA 1997, which defines the ‘total credits issue for investment’ as the amount that may be issued by the minerals explorer in compliance with the restriction on how many credits may be issued to an investor.


A transitional rule will apply for the 2017-18 income year for those eligible that made an application. For all other eligible exploration companies, the ATO will allocate exploration credits on a first come, first serve basis until the annual exploration credit cap for each income year is exhausted. The application period for the first round of JMEI will open at 00:00 AEST on 16 April and close at 23:59 AEST 15 May 2018. For detailed information ATO website at The JMEI is voluntary and companies seeking to participate will need to electronically lodge a JMEI participation form through the Business Portal or Tax Agent Portal.

Lodgment application dates

Income Year Application period opens Application period closes
2017–18 00:00 AEST on 16 April 2018 23:59 AEST on 15 May 2018
2018–19 09:00 AEST on 1 June 2018 23:59 AEST on 30 June 2018
2019–20 09:00 AEST on 1 June 2019 23:59 AEST on 30 June 2019
2020–21 09:00 AEST on 1 June 2020 23:59 AEST on 30 June 2020

The JMEI applies from the 2017-18 income year with exploration credits capped at a total of $100 million over a four-year period:

  • $15 million in the 2017-18 income year
  • $25 million in the 2018-19 income year
  • $30 million in the 2019-20 income year
  • $30 million in the 2020-21 income year.

A company level cap of 5% of the annual credit allocation applies e.g. $15m in year one and one cap represents $750,000 of exploration credits. Australian resident shareholders who are issued an exploration credit will be entitled to a refundable tax offset or, if the shareholder is a corporate tax entity, additional franking credits. The exploration company’s carry forward losses will be reduced proportionately to reflect the amount of exploration credits issued to its shareholders.

Reduced Cost Base Adjustments

An investor is entitled to claim the tax offset in the income year before the exploration credit is issued, that is the claim is made in the year in which the exploration expenditure is incurred. The new rules also require the reduced cost base of new shares acquired by an investor for capital gains tax purposes to be reduced by the value of the potential exploration credits that could be issued to the investor. The reduction is calculated by multiplying the corporate tax rate that applied to the company in the income year in which the share was issued by the amount of paid up capital contributed by the investor. Section 130-110 ITAA 1997 will apply to reduce the reduced cost base immediately before disposal of the shares in the hands of the investor where the ATO has made a determination under 418-101 ITAA 1997. The Government is currently reviewing the operation of the JMEI to assess its efficacy in attracting investment and BDO has been involved and continues to be involved in consultation on the issue of reduced cost base.

BDO Comment

Exploration companies who are interested in applying for the JMEI should contact BDO for assistance with:

  • Applying to the ATO as soon as possible after 16 April 2018 to provide investors with increased certainty in relation to the likely tax offset available when raising capital and undertaking greenfields exploration
  • Ensuring applications include an estimate of the greenfields minerals expenditure, tax loss and corporate tax rate for the income year
  • Working through the implication of the JMEI including performing cost base adjustment calculations
  • Preparing for the next round of applications for FY 2019, which open on 1 June 2018, if time has run out to submit an application for FY 2018.