Mining lobby seeks $200m boost in tax breaks for junior explorers
Bigger tax breaks would increase government revenue and replenish ageing mines, according to the Association of Mining and Exploration Companies.
A mining lobby group is calling on the government to double the tax breaks for investors in smaller exploration companies. It argues that this would be a “substantial” contributor to the economy and would increase tax receipts by $391 million.
The Association of Mining and Exploration Companies said the junior minerals exploration incentive (JMEI) should be extended by four years and be increased by $200 million.
The JMEI is currently set to expire in June.
“The junior minerals exploration incentive is a significant stimulus for the exploration sector and a substantial contributor to Australia’s economy and government revenue,” chief executive Warren Pearce said.
Pearce said mineral exploration was a “long-term, high-risk activity”.
“This is a critical investment in Australia’s future and supports mineral exploration,” he said. “We need to replenish end-of-life mines with new greenfield exploration discoveries.”
He said: “every dollar allocated results in more than $2 spent on exploration activity and more than $6 is raised on capital markets by companies”, citing findings from a BDO report commissioned by AMEC.
The report, released this week, analysed the JMEI’s economic impact on the natural resources industry and its effectiveness in increasing mineral exploration investment and activity.
BDO said the study found that the JMEI “supports the government’s economic objectives, enhances job creation, and supports the long-term sustainability of the resource industry”.
The firm’s modelling found doubling the funding to $200 million and extending it for another four years would lead to $1.2 billion in capital raising, $769 million towards GDP, $404 million in exploration expenditure and $391 million in government revenue.
“The JMEI operates by providing tax offsets to exploration companies, effectively reducing the government's immediate tax revenue. However, this initial revenue loss is outweighed by the subsequent increase in company and personal income tax generated from the development and operation of new mines,” BDO said.
Pearce said: “This report identifies that the JMEI is doing exactly what it set out to do … by doubling the investment, you’re doubling the benefits.”
AMEC also recommended other changes to the program, including making the application process merit-based rather than “first in first served” and increasing awareness of the JMEI.
It said successful companies should be required to report impacts to improve transparency.
The JMEI was launched in the 2017–18 financial year and received a four-year extension and a $100 million funding boost in 2021.
According to the ATO, the JMEI encourages investment in small minerals exploration companies by allowing them to generate tax credits by giving up a portion of their losses from greenfields mineral exploration expenditure.
The tax credits could then be distributed to investors who purchase newly issued shares in the eligible entity.
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