Australia's tax authority has finalised its long-awaited guidance on deductions for mining and petroleum exploration expenditure, clarifying what qualifies as "exploration or prospecting" under the country's income tax rules — with the updated ruling applying both retrospectively and going forward.
The Australian Taxation Office (ATO) has published final guidance outlining its position on deductions for mining and petroleum exploration expenditure on 12 March 2026.
Following the release of the draft for consultation in December 2025, the final version of the addendum to TR 2017/1 Income tax: deductions for mining and petroleum exploration expenditure has now been published. This ruling clarifies the Commissioner’s view on the ordinary meaning of “exploration or prospecting” in the context of Division 40 of the ITAA 1997.
Now it’s finalised, this update will apply both before and after its date of issue. Familiarisation with the updated product is encouraged to understand obligations.
For more information, TR 2017/1 can be read on the legal database, and the consultation feedback is available to view.
TR 2017/1
Income tax: deductions for mining and petroleum exploration expenditure
This Ruling deals with deductions under section 8-1 and subsection 40-730(1) of the Income Tax Assessment Act 1997 (ITAA 1997) for expenditure on mining and petroleum exploration, including prospecting, as defined in subsection 40-730(4).
For convenience, the Ruling refers to “exploration expenditure” as expenditure on exploration or prospecting (EorP) within its ordinary meaning in the context of subsection 40-730(4) of the ITAA 1997 or within a statutory extension in paragraphs 40-730(4)(a) to (d) of the ITAA 1997 such as studies to evaluate the economic feasibility of mining minerals or quarry materials after they have been discovered. For convenience, these studies are referred to as “EFS” in the Ruling.
This Ruling also deals with some (but not all) aspects of section 40-80 of the ITAA 1997, which applies where a depreciating asset is first used for EorP (and the other requirements of the section are met) and section 40-25 allows an immediate deduction for its cost.
This Ruling does not deal with what constitutes “use” of a mining, quarrying or prospecting right, nor whether such use is ‘for EorP’. However, some matters considered in this Ruling, such as the practical effect of subsection 40-730(3) of the ITAA 1997, the definition of EorP in subsection 40-730(4) of the ITAA 1997, and the scope of the exclusions in subsection 40-730(2) of the ITAA 1997 for operations in the course of working a mining property or petroleum field, or development drilling for petroleum, will be relevant for the application of section 40-80 of the ITAA 1997.
All further legislative references in this Ruling are to the ITAA 1997, unless otherwise indicated.
