On the back of a significant decline in Australian mineral exploration, the Australian government is hoping the JMETC will promote investment and drive economic activity. The adoption follows a similar scheme in Canada which has operated successfully for 30 years.

At a glance

  • The Junior Mineral Exploration Tax Credit (JMETC) is an incentive for shareholders investing in greenfield exploration companies who undertake new capital raisings.
  • The key benefit is the ability for certain companies who undertake greenfield exploration to renounce their losses and instead pass future tax deductions to Australian resident investors.
  • Alternatively companies can choose to retain their tax losses for utilisation when they make profits from a successful mine.
  • The JMETC was announced by the government on 2 September 2017 and will be operational for four years, with effect from the current income year.
  • The JMETC will be capped at $100m and will be available on a first in first served basis.

The JMETC scheme

Companies undertaking greenfield exploration can elect to give up a portion of their tax losses relating to eligible exploration expenditure in an income year and pass on tax credits to their Australian resident investors.

Assuming the same definition as the current Exploration Development Incentive (EDI), a greenfield explorer is one that has not carried on any mining operations during the previous two income years.  Mining operations carried out by connected or affiliated entities of the explorer are also counted.

The tax credits capable of being passed to investors are expected to be the lessor of the explorer’s tax loss or their greenfield exploration expenditure for the previous income year multiplied by the corporate tax rate for that year.

Similar to the franking system, the credit will flow through to investors and be available for the income year following the one in which the eligible expenditure is incurred by the company.

If successful, the incentive should attract capital investment to junior explorers undertaking greenfield exploration and open up the potential for new discoveries by encouraging explorers to venture into areas they otherwise may not have considered.

Key benefits to Australian resident investors

It appears that access to tax credits will not hinge on the investor having taxable income in the relevant year as excess tax credits are expected to be refundable to certain Australian resident investors.

Further, Australian resident investors will benefit from a number of significant differences to the current EDI):

(i)     the modulation factor for the purpose of working out an entity’s maximum exploration credit for the income year has been dropped.  As a result, under JMETC investors are expected to have more certainty that they will receive 100% of their tax credit until the $100m cap is reached; and

(ii)    the JMETC is limited to new subscriptions of capital. The EDI was typically applied to all shareholders, this diluted the benefit of the scheme.  

Given exploration companies have a choice to use the JMETC, at the time of capital raisings, it is suspected that companies will be required to make a declaration to the market of the company’s intention to retain exploration related losses or to use the JMETC.


The Government’s announcement limits the JMETC scheme to new capital raisings.  The manner in which the final legislation deals with this in practice will be critical to ensure that the benefits of the JMETC are not cost or administratively prohibitive.