House debates

Thursday, 19 October 2017

Bills

Treasury Laws Amendment (Junior Minerals Exploration Incentive) Bill 2017; Second Reading

10:10 am

Photo of Michael SukkarMichael Sukkar (Deakin, Liberal Party, Assistant Minister to the Treasurer) Share this | | Hansard source

I move:

That this bill be now read a second time.

The Treasury Laws Amendment (Junior Minerals Exploration Incentive) Bill 2017 will amend the tax law to replace the former exploration development incentive with the junior minerals exploration incentive.

The government is focused on promoting investment and driving economic activity. Ongoing exploration and the discovery of new mineral resources are vital to the longer term future of Australia's resources sector. This tax incentive will encourage junior explorers to take risks and to have a go at discovering the next large-scale mineral deposit. We want to back these small businesses.

This government is working to get the economic fundamentals right to build a strong prosperous Australia, improve the business climate and unleash our economic potential. We are doing so to create a stable platform for investor confidence and growth.

This new incentive entitles Australian resident investors in small minerals exploration companies to a refundable tax offset (or where the investor is a corporate tax entity, additional franking credits) if the company in which they have invested issues them an exploration credit.

The ability of an exploration company to give up their tax losses to distribute credits to investors as a tax offset will make investing in a junior explorer much more attractive.

Despite good prospects, Australia has not had a world-class minerals discovery in more than 20 years. Expenditure on greenfields exploration declined by almost 70 per cent over the five years to 2015-16. This incentive will make it more financially attractive for our mineral explorers to find resources in untapped regions, continuing discovery of quality resources. It builds on the EDI which ceased in 2016-17, and aims to improve on the timeliness of the offset and target new investors that participate in new capital raisings. This will help maximise the incentive for additional investment in minerals exploration.

Not only does the extraction and sale of minerals resources make a significant contribution to the Australian economy; it also creates jobs and supports local businesses in regional communities across Australia.

Greenfield minerals exploration is essential to ensuring an investment pipeline to support the future strength of the Australian resources sector. However, these exploration companies often find it difficult to raise the capital they need to explore. A $100 million tax incentive over four years, starting in 2017-18, will make this easier.

Companies can obtain an allocation of credits by applying electronically to the Commissioner of Taxation. Credits will be allocated on a first come, first served basis, until the annual cap is reached, with any unallocated credits carried forward to the next year of the scheme.

The new process will be faster than the EDI as small exploration companies will know with certainty upfront how many credits they have been allocated before they undertake their capital raising to fund additional exploration activities.

To ensure that the benefits of the incentive are widely distributed, there is a cap on the amount of credits that may be allocated to an entity of five per cent of the total amount available for each year.

As part of introducing the new incentive, the excess exploration credit tax will apply to ensure minerals explorers seek to create and issue exploration credits only in circumstances in which they are entitled to.

Full details of the measure are contained in the explanatory memorandum.

Debate adjourned.