THE QUEENSLAND Resources Council (QRC) claims a substantial decline in mineral exploration in the first half of 2009 has reinforced the need for federal government incentives.
QRC Chief Executive Michael Roche says the government should consider incentives such as a flow through share (FTS) scheme.
Australian Bureau of Statistics data reports mineral exploration activity in Queensland fell by 38% in the 12 months to June quarter 2009. New deposit (greenfield) exploration over the same period collapsed 61% to a statewide investment of just $16.5 million — the lowest quarterly total since March quarter 2007.
Roche claims exploration is wearing the consequences of the global downturn and the ongoing squeeze on capital. He says analysts agree that the supply of new investment capital is not going to improve quickly, there’s new urgency for a minerals dependent economy like Australia to stimulate exploration through the tax system.
Under existing taxation arrangements, junior exploration companies with little or no taxable income are unable to deduct exploration expenses immediately. As the vast majority of junior explorers do not have an alternative income stream, the unavailability of immediate tax deductions for exploration push costs higher, resulting in lower levels of activity and fewer substantive new discoveries and new projects.
A flow through share (FTS) scheme does is accommodate the transfer of unusable corporate tax deductions through to a junior company’s Australian shareholders. Eligible shareholders would then be entitled to use ‘exploration tax credits’ to offset their tax liabilities, thereby maintaining investment momentum, as demonstrated successfully by Canada for more than a decade.
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