The proposal to replace the 50 per cent CGT discount with cost base indexation for shares held by individuals, trusts and partnerships for more than 12 months will be a big hit to the ability of junior explorers of minerals to raise funds for much-needed mineral exploration in Australia.
Small explorers are unable to pay regular dividends. This means the sole benefit for investing shareholders, as with other smaller businesses, often comes in the form of a capital gain when their shareholding interest is sold following a successful exploration campaign.
The current 50 per cent discount on capital gains is aligned with this entrepreneurial stance.
Exploration is the lifeblood that keeps Australia's mining heart pumping.
Without exploration, which represents the research and development phase of our world-class minerals sector, our biggest mining companies would be mere shadows of their current selves.
That would be bad for shareholders, regional communities and our economy, especially given mining is Australia's biggest industry taxpayer.
Small explorers have transformed mineral discovery
Across the western world, junior exploration companies have transformed the way minerals are discovered.
In 1980, junior explorers only made 10 per cent of new western world mineral discoveries, with larger companies and governments making up the rest.
In 2023, junior explorers accounted for 77 per cent of those discoveries - a total turnaround in less than 25 years.
Changes to capital gains tax in the Federal Budget could bring that extraordinary progress to a shuddering halt in Australia.
CGT changes a double whammy following JMEI abolition
This makes up a double whammy for the Australian exploration sector off the back of last year's axing of the Junior Minerals Exploration Incentive.
The Junior Minerals Exploration Incentive (JMEI) expired in June 2025, having successfully facilitated additional capital raising by small, specialised mineral exploration companies undertaking high social value, high-risk greenfield exploration activities in Australia. T
The JMEI has been an important instrument to recognise that junior explorers without an income can't claim deductions.
Mineral explorers take a big risk: only one in every thousand exploration sites ends up as a mine, which means a lot of drills have to turn before mining riches start to flow.
And more than 260 new mines in copper, lithium, nickel and cobalt are needed by 2030 to meet demand for batteries and EVs, in turn requiring the exploration to find these mines.
If Australia is to remain a global mining powerhouse, we can't rest on our laurels or revel in past glories.
We need to keep the exploration drills turning.
Fixing the problem
The solution is twofold and simple: reinstate the JMEI as a permanent annual scheme and remove the annual cap on credit allocations as part of the JMEI program, and retain the 50 per cent CGT discount for small minerals explorers.
The MCA stands ready to work with government to fix this.
We need to make sure our hard-working and risk-taking explorers retain the incentive they need to support Australia's ongoing economic resilience created by mining.
