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This article appeared in the April 2009 Listed @ ASX email newsletter.
ASX supports Flow-Through Shares
ASX has once again partnered with industry groups, including the Minerals Council of Australia (MCA), The Australasian Institute of Mining and Metallurgy (AusIMM), the Queensland Resources Council (QRC) and the Association of Mining and Exploration companies (AMEC) and many more in a submission to the Federal Government arguing the case for the introduction of Flow-Through Shares (FTS) in Australia. This submission followed three previous ASX submissions made to the Federal Government since 2006.
A FTS scheme aims to address a current anomaly in the Australian tax system that inhibits junior resources companies from raising capital to undertake exploration activities vital to the future of the Australian economy.
Mineral exploration expenditure generally creates a tax deduction entitlement at the company level, but junior exploration companies are unable to claim this tax deduction because generally speaking they do not have any assessable income. A FTS scheme would rectify this anomaly by allowing junior explorers who do not have any assessable income to pass that deduction through to their shareholders.
The introduction of a FTS scheme would significantly improve the ability of junior companies to raise finance in the capital market and increase exploration activity in Australia. Increased exploration is vital to the future of the Australian economy because it increases the chances of the major discoveries that are necessary to maintain Australian productive capacity.
The introduction of a FTS scheme in Canada has had a sustained positive impact on the capital raising environment for Canadian junior companies, which has in turn led to significantly higher levels of exploration activity in Canada.
ASX and the industry group are now focusing on demonstrating to the Federal Government that a FTS scheme is not only necessary for the long term sustainability of the resources industry, but would also provide a much needed immediate economic stimulus in the current economic environment.
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