House of Representatives

Second Reading Speech

This Bill substantially removes the immediate deduction for the cost of mining, quarrying and prospecting rights and information first used for exploration in section 40-80 of the Income Tax Assessment Act 1997. The cost of acquiring a mining, quarrying or prospecting right or information first used for exploration will be deductible over 15 years or the effective life of the right or information, whichever is shorter.

The immediate deduction will remain for the cost of rights acquired from a government issuing authority, the cost of geological, geophysical or similar information acquired from government authorities and the cost of data packages acquired from private providers.

An immediate deduction will also be available for farm-out arrangements, and the treatment of interest realignments in joint venture common developments will be clarified. These will be covered in a separate bill but apply from the same time as the measures in this Bill.

This Bill also provides an alternative means for writing down the cost of mining rights or information first used for exploration where that exploration has been 'unsuccessful'. The scope of unsuccessful exploration has been widened to cover the discovery of resource deposits that are not commercially viable to mine.

This Bill is an integrity measure which is designed to ensure that the immediate deduction for rights and information fulfils its original purpose of encouraging genuine exploration. There was evidence that the immediate deduction was being used to obtain a deduction for the value of resources already discovered rather than for the right to search for yet to be discovered 'resources. This is outside the policy intent of supporting genuine exploration.

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

I commend this Bill to the House.