What comprises exploration activity and exploration expenditure is a critical issue for resource companies for both income tax and resource rent tax purposes. While exploration expenditure deductions have been a feature of the tax law for decades, ensuring the exploration deduction provisions operate as intended is as important to the industry now as it has ever been.
This paper examines topical exploration and related issues, including:
- the policy behind exploration deductions
- differences between corporate tax, PRRT and MRRT classification of exploration
- common law vs extended law interpretations of exploration
- the asset “first use” concept for income tax
- recent precedent and ATO views
- where to from here?