Petroleum Resource Rent Legislation

Amendment Act 1991

No. 80 of 1991

TABLE OF PROVISIONS

PART 1—PRELIMINARY

Petroleum Resource Rent Legislation

Amendment Act 1991

No. 80 of 1991

An Act to amend the law relating to petroleum to apply the Petroleum Resource Rent Tax to petroleum recovered from the Bass Strait, and to provide for the wider deductibility of exploration expenditure, and for related purposes

[Assented to 26 June 1991]

The Parliament of Australia enacts:

PART 1—PRELIMINARY

Short title

1. This Act may be cited as the Petroleum Resource Rent Legislation Amendment Act 1991.

Commencement

2.  This Act commences on 1 July 1991.

PART 2—AMENDMENTS OF THE PETROLEUM RESOURCE RENT TAX ASSESSMENT ACT 1987

Principal Act

3.  In this Part, “Principal Act” means the Petroleum Resource Rent Tax Assessment Act 1987¹.

Defined terms

4.  Section 2 of the Principal Act is amended:

(a)    by omitting “an excluded exploration permit” from the definition of “eligible production licence” and substituting “one of the North West Shelf exploration permits”;

(b)    by omitting “1 July 1986” from the definition of “year of tax” and substituting “the applicable commencement date”;

(c)     by omitting the definition of “lease derived production licence” and substituting the following definition:

“ ‘lease derived production licence’ means a production licence that is derived from a retention lease;”;

(d)  by omitting the definition of “permit derived production licence” and substituting the following definition:

“ ‘permit derived production licence’ means a production licence that is derived from an exploration permit;”;

(e)     by omitting the definition of “excluded exploration permit”;

(f)      by inserting the following definitions:

“ ‘applicable commencement date’, in relation to a petroleum project, means:

(a)     unless paragraph (b) applies—1 July 1986; or

(b)    if the project is the Bass Strait project, or if the Bass Strait project is a pre-combination project in relation to the project—1 July 1990;

‘Bass Strait exploration permit’ means the exploration permit known as VIC/P1;

‘Bass Strait project’ means the petroleum project referred to in subsection 19 (1a);

‘company’ means a body corporate that has a share capital;

‘GDP factor’, in relation to a financial year, means the GDP factor for the financial year worked out in accordance with section 2a;

‘North West Shelf exploration permits’ means the exploration permits known as WA-1-P and WA-28-P;

‘transferable exploration expenditure’, in relation to a person and a financial year, means expenditure that is, according to the Schedule, transferable by the person in relation to the financial year;

Note: the following provisions of the Schedule provide for expenditure to be transferable:

•   paragraph 7 (b)

•   paragraph 8 (5) (c)

•   paragraph 11 (b)

•   paragraph 12 (4) (c)

•   subclause 18 (1)

•   subclause 18 (2)

•   paragraph 18 (3) (e).”.

5. After section 2 of the Principal Act the following sections are inserted:

GDP factor

“2a. (1) For the purposes of this Act, the GDP factor for a financial year is the number (calculated to 3 decimal places) worked out by dividing the GDP deflator for the financial year by the GDP deflator for the immediately preceding financial year.

“(2) For the purposes of subsection (1), the GDP deflator for a financial year is the Implicit Price Deflator for Expenditure on Gross Domestic Product first published by the Australian Statistician in respect of the financial year.

“(3) If the Australian Statistician changes the reference base for the GDP deflator, then, for the purposes of the application of subsection (1) after the change takes place, regard must be had only to the GDP deflator in terms of the new reference base.

“(4) Where the GDP factor worked out under subsection (1) for a financial year would, if it were calculated to 4 decimal places, end with a number greater than 4, the GDP factor worked out under that subsection for that financial year is taken to be the GDP factor calculated to 3 decimal places under that subsection and increased by 0.001.

Group companies

“2b. (1) For the purposes of this Act, a company is a group company in relation to another company and a period if:

(a)  one of the companies was a subsidiary of the other company; or

(b)  each of the companies was a subsidiary of the same company; during so much of the period during which both companies were in existence.

“(2) For the purposes of this section, a company (in this subsection called the ‘subsidiary company’) is a subsidiary of another company (in this subsection called the ‘holding company’) during a period if:

(a)  at all times during the period, all the shares in the subsidiary company were beneficially owned by:

(i) the holding company; or

(ii) a company that is, or 2 or more companies each of which is, a subsidiary of the holding company; or

(iii) the holding company and a company that is, or 2 or more companies each of which is, a subsidiary of the holding company; and

(b)  there was no agreement, arrangement or understanding in force during any part of the period under which any person was able, or would be able after the period, to affect rights of the holding company or of a subsidiary of the holding company in relation to the subsidiary company.

“(3) For the purposes of this section, where a company is a subsidiary of another company (including a company that is such a subsidiary by virtue of another application or other applications of this subsection), every company that is a subsidiary of the first-mentioned company is also a subsidiary of the other company.

“(4) For the purposes of subsection (2), a person is taken to be able to affect rights of a company in relation to another company if the person has a right, power or option (whether because of any provision in the constituent document of either of those companies or because of any agreement or instrument or otherwise) to acquire those rights or do an act or thing that would prevent the first-mentioned company from exercising those rights for its own benefit or receiving any benefits occurring because of those rights.

“(5) Subject to subsections (6) and (7), for the purposes of this section, a company is taken to be in existence if it has been incorporated and has not been dissolved.

“(6) For the purposes of subsection (1), where:

(a)     at a particular time (in this subsection called the ‘acquisition time’), one or more companies acquired all the shares in another company (in this subsection called the ‘shelf company’) from the shareholders in the shelf company; and

(b)    the shelf company was dormant, within the meaning of section 62 of the Corporations Law, throughout the period (in this subsection called the ‘dormant period’) starting on the day on which the shelf company was incorporated and ending at the acquisition time;

the shelf company is taken not to have been in existence during the dormant period.

“(7) For the purposes of subsection (1), where:

(a) a company (in this subsection called the ‘shelf company’) has

issued shares (in this subsection called the ‘newly issued shares’) to another company or companies; and

(b)     immediately before the issue of the shares, a person or persons held other shares in the shelf company; and

(c)     immediately after the issue of the shares, the shelf company redeemed all the shares in the shelf company other than the newly issued shares; and

(d)     the shelf company was dormant, within the meaning of section 62 of the Corporations Law, throughout the period (in this subsection called the ‘dormant period’) starting on the day on which the shelf company was incorporated and ending immediately before the issue of the shares;

the shelf company is taken not to have been in existence during the dormant period.”.

Relationship between licences, permits and leases etc.

6.  Section 4 of the Principal Act is amended by adding at the end the following subsection:

“(2) For the purposes of this Act:

(a)     a production licence is derived from an exploration permit if the licence is related to the permit because of subparagraph (1) (a) (i); and

(b)    a production licence is derived from a retention lease if the licence is related to the lease.”.

Petroleum project

7.  Section 19 of the Principal Act is amended:

(a)    by omitting from subsection (1) “For” and substituting “Subject to subsection (1a), for”;

(b)    by inserting after subsection (1) the following subsection:

“(1a) For the purposes of this Act, there is taken to be a single petroleum project in relation to all production licences that are related to the Bass Strait exploration permit and that are in force from time to time, unless those licences are specified in a project combination certificate that is in force.”;

(c)  by inserting after subsection (2) the following subsection:

“(2a) If:

(a)     the production licences that are related to the Bass Strait exploration permit are specified in a project combination certificate; and

(b)    another production licence that is related to the Bass Strait exploration permit comes into force at a time when the project combination certificate is in force;

the certificate has effect after that time as if the production licence referred to in paragraph (b) were specified in the certificate.”.

8.  Section 22 of the Principal Act is repealed and the following section is substituted:

Taxable profit

“22. Where, in relation to a petroleum project and a year of tax, the assessable receipts derived by a person exceed the sum of:

(a)     the deductible expenditure incurred by the person; and

(b)    the total of the amounts (if any) transferred by the person to the project in relation to the year of tax under section 45a; and

(c)     the total of the amounts (if any) transferred by another person to the person in relation to the project and the year of tax under section 45b;

the person is taken for the purposes of this Act to have a taxable profit in relation to the project and the year of tax of an amount equal to the excess.

Note: because of subsection 45d (2), some transfers of expenditure are taken to be transfers of amounts compounded in accordance with Part 7 of the Schedule.”.

Time of derivation of receipts

9.  Section 31 of the Principal Act is amended by omitting paragraphs (f) and (g) and substituting the following paragraphs:

“(f) except in the case of the Bass Strait project—at any time, including a time:

(i) before the project commenced or after the project has ceased; or

(ii) before the commencement of this Act; or

(g) in the case of the Bass Strait project—at any time on or after 1 July 1990, including a time after the project has ceased.”.

10.  After section 31 of the Principal Act the following section is inserted in Division 2 of Part V:

Eligible real expenditure and the Bass Strait project

“31a. Despite section 45, this Division applies in relation to the Bass Strait project, or a project in relation to which the Bass Strait project is a pre-combination project, as if eligible real expenditure could be incurred in relation to the Bass Strait project at any time, including a time before 1 July 1990.”.

Deductible expenditure

11.  Section 32 of the Principal Act is amended by omitting paragraphs (a), (b), (c) and (d) and substituting the following paragraphs:

“(a) class 1 augmented bond rate general expenditure;

(b)    class 1 augmented bond rate exploration expenditure;

(c)     class 2 augmented bond rate general expenditure;

(d)    class 1 GDP factor expenditure;

(e)     class 2 augmented bond rate exploration expenditure;

(f)     class 2 GDP factor expenditure;

(g)     closing-down expenditure.”.

Class 1 augmented bond rate general expenditure

12.  Section 33 of the Principal Act is amended:

(a)    by inserting “class 1” before “augmented” (wherever occurring);

(b)    by inserting in subsection (1) “or the Bass Strait project” after “combined project”;

(c)     by inserting in subsections (1) and (2) “class 1” after “any amount of” (wherever occurring);

(d)    by adding at the end the following subsection:

“(4) In this section:

‘class 1 general project expenditure’ means general project expenditure actually incurred before 1 July 1990.”.

Class 1 augmented bond rate exploration expenditure

13.  Section 34 of the Principal Act is amended:

(a)    by inserting “class 1” before “augmented” (wherever occurring);

(b)    by inserting in subsection (1) “or the Bass Strait project” after “combined project”;

(c)     by inserting in subsections (1) and (2) “class 1” after “any amount of (wherever occurring);

(d)    by adding at the end the following subsection:

“(4) In this section:

‘class 1 exploration expenditure’ means exploration expenditure actually incurred before 1 July 1990.”.

14.  After section 34 of the Principal Act the following section is inserted:

Class 2 augmented bond rate general expenditure

“34a. (1) For the purposes of this Act, a reference to the class 2 augmented bond rate general expenditure incurred by a person in a financial year in relation to a petroleum project (not being a combined project or the Bass Strait project) is a reference to the sum of:

(a)     any amount of class 2 general project expenditure actually incurred by the person in relation to the project in the financial year, not being expenditure incurred more than 5 years before the production licence in relation to the project came into force; and

(b)    any amount that is taken by subsection (4) or section 48 to be class 2 augmented bond rate general expenditure incurred by the person in relation to the project in the financial year.

“(2) For the purposes of this Act, a reference to the class 2 augmented bond rate general expenditure incurred by a person in a financial year in relation to a combined project is a reference to the sum of:

(a)     any amount of class 2 general project expenditure actually incurred by the person in relation to the project in the financial year (not being expenditure incurred before the project combination certificate in relation to the project came into force); and

(b)    any amount that is taken by subsection (4) or section 48 to be class 2 augmented bond rate general expenditure incurred by the person in relation to the project in the financial year; and

(c)     if the financial year is the year in which the project combination certificate in relation to the project came into force—any amount of class 2 general project expenditure, or any amount that is taken by subsection (4) or section 48 to be class 2 augmented bond rate general expenditure, incurred by the person in relation to the pre-combination projects in the financial year.

“(3) For the purposes of this Act, a reference to the class 2 augmented bond rate general expenditure incurred by a person in a financial year in relation to the Bass Strait project is a reference to the sum of:

(a)     any amount of class 2 general project expenditure actually incurred by the person in relation to the project in the financial year; and

(b)    any amount that is taken by subsection (4) or section 48 to be class 2 augmented bond rate general expenditure incurred by the person in relation to the project in the financial year.

“(4) For the purposes of subsection (1), (2) or (3), if the sum of:

(a)     the class 1 augmented bond rate general expenditure; and

(b)    the class 1 augmented bond rate exploration expenditure; and

(c)     the class 2 augmented bond rate general expenditure;

incurred by a person in a financial year (in this subsection called the ‘assessable year’) in relation to a petroleum project exceeds the assessable receipts derived by the person in the assessable year in relation to the

project, the person is taken to incur, in relation to the project and on the first day of the next financial year, an amount of class 2 augmented bond rate general expenditure worked out in accordance with the formula:

where:

‘Available excess’ means so much of the excess as does not exceed the class 2 augmented bond rate general expenditure incurred in the assessable year;

‘Augmented bond rate’ means the long term bond rate in relation to the assessable year plus 1.05.

“(5) In this section:

‘class 2 general project expenditure’ means general project expenditure actually incurred on or after 1 July 1990.”.

Class 1 GDP factor expenditure

15. Section 35 of the Principal Act is amended:

(a)    by inserting in subsections (1) and (2) “class 1” before “GDP” (wherever occurring);

(b)    by inserting in subsection (1) “or the Bass Strait project” after “combined project”;

(c)     by omitting from paragraph (1) (a) “exploration expenditure or general project expenditure” and substituting “class 1 GDP factor expenditure”;

(d)    by omitting from subsection (3) all the words from and including “For” to and including “GDP factor expenditure” (first occurring) and substituting the following:

“For the purposes of subsection (1) or (2), if the sum of:

(a)     the class 1 augmented bond rate general expenditure; and

(b)     the class 1 augmented bond rate exploration expenditure; and

(c)     the class 2 augmented bond rate general expenditure; and

(d)     the class 1 GDP factor expenditure;”;

(e)     by inserting in subsection (3) “class 1” before “GDP factor expenditure” (last and second last occurring);

(f)      by omitting subsections (4), (5), (6) and (7) and substituting the following subsection:

“(4) In this section:

‘class 1 GDP factor expenditure’ means general project expenditure incurred in any financial year, or exploration expenditure incurred before 1 July 1990.”.

16. After section 35 of the Principal Act the following sections are inserted:

Class 2 augmented bond rate exploration expenditure

“35a. (1) For the purposes of this Act, the amount of class 2 augmented bond rate exploration expenditure that a person is taken to have incurred in a financial year in relation to a petroleum project is to be determined in accordance with Part 2 of the Schedule.

Note: the following provisions of Part 2 of the Schedule provide for a person to be taken to have incurred an amount of class 2 augmented bond rate exploration expenditure:

•  paragraph 8 (4) (a)

•  paragraph 8 (5) (a).

“(2) The expenditure to which an amount of class 2 augmented bond rate exploration expenditure is, according to Part 2 of the Schedule, attributable, must not be counted again as expenditure incurred, or taken to be incurred, by a person:

(a)     when working out the liability of the person to tax in relation to a later financial year; or

(b)    when working out, in accordance with Part 2, 3 or 4 of the Schedule, whether there is expenditure that is transferable by the person in relation to a later financial year.

Note: the following provisions of Part 2 of the Schedule deal with the expenditure to which an amount of class 2 augmented bond rate exploration expenditure is attributable:

•  paragraph 8 (4) (b)

•  paragraph 8 (5) (b) and subclauses 8 (6) and (7).

Class 2 GDP factor expenditure

“35b. (1) For the purposes of this Act, the amount of class 2 GDP factor expenditure that a person is taken to have incurred in a financial year in relation to a petroleum project is to be determined in accordance with Part 3 of the Schedule.

Note: the following provisions of Part 3 of the Schedule provide for a person to be taken to have incurred an amount of class 2 GDP factor expenditure:

•  paragraph 12 (3) (a)

•  paragraph 12 (4) (a).

“(2) The expenditure to which an amount of class 2 GDP factor expenditure is, according to Part 3 of the Schedule, attributable, must not be counted again as expenditure incurred, or taken to be incurred, by a person:

(a)     when working out the liability of the person to tax in relation to a later financial year; or

(b)    when working out, in accordance with Part 2, 3 or 4 of the Schedule, whether there is expenditure that is transferable by the person in relation to a later financial year.

Note: the following provisions of Part 3 of the Schedule deal with the expenditure to which an amount of class 2 GDP factor expenditure is attributable:

•  paragraph 12 (3) (b)

•  paragraph 12 (4) (b) and subclauses 12 (5) and (6).”.

Class 1 augmented bond rate exploration and class 1 GDP factor expenditures in relation to project groups

17.  Section 36 of the Principal Act is amended:

(a)     by inserting in subsections (1) and (4) “class 1” before “augmented” (wherever occurring);

(b)     by inserting in subsections (1) and (4) “class 1” before “GDP” (wherever occurring).

18.  Section 45 of the Principal Act is repealed and the following section is substituted:

Time of incurring of expenditure

“45. For the purposes of this Act, eligible real expenditure may be incurred by a person in relation to a petroleum project:

(a)   except in the case of the Bass Strait project—at any time, including a time:

(i) before the project commenced or after the project has ceased; or

(ii) before the commencement of this Act; or

(b)  in the case of the Bass Strait project—at any time on or after 1 July 1990, including a time after the project has ceased.”.

19.  After section 45 of the Principal Act the following Division is inserted:

“Division 3A—Transfer of exploration expenditure incurred on or after 1 July 1990

Transfer of expenditure—general

“45a. (1) This section applies to a person in respect of a financial year in relation to which the person has transferable exploration expenditure.

“(2) In relation to the financial year, the person must transfer to petroleum projects as much of the transferable exploration expenditure as can be transferred in accordance with the rules set out in Part 5 of the Schedule.

“(3) A transfer of expenditure under this section in relation to a financial year:

(a) must be made by completing a transfer notice and giving it to the Commissioner not later than 21 days after the end of the financial year or such later day as the Commissioner allows; and

(b) subject to subsection (4), takes effect when the notice is given to the Commissioner.

“(4) A purported transfer of expenditure under this section has no effect if the transfer is not in accordance with the rules set out in Part 5 of the Schedule.

“(5) A person who, without reasonable excuse, contravenes this section is guilty of an offence punishable, on conviction, by a fine not exceeding $2,000.

“(6) In this section:

‘transfer notice’ means a written notice in the form approved by the Commissioner for the purposes of this section.

Transfer of expenditure—group companies

“45b. (1) This section applies where:

(a)     a number of companies are group companies in relation to each other and a financial year; and

(b)    there is unused transferable exploration expenditure in relation to some of the companies (each of which is in this section called a ‘loss company’) and the financial year.

“(2) In relation to the financial year, each loss company must transfer, to such of the other companies as are not loss companies and in relation to specified petroleum projects, as much of the loss company’s unused transferable exploration expenditure as can be transferred in accordance with the rules set out in Part 6 of the Schedule.

“(3) A transfer of expenditure under this section in relation to a financial year:

(a)     must be made by completing a transfer notice and giving it to the Commissioner not later than 21 days after the end of the financial year or such later day as the Commissioner allows; and

(b)    subject to subsection (4), takes effect when the notice is given to the Commissioner.

“(4) A purported transfer of expenditure under this section has no effect if the transfer is not in accordance with the rules set out in Part 6 of the Schedule.

“(5) A person who, without reasonable excuse, contravenes this section is guilty of an offence punishable, on conviction, by a fine not exceeding $2,000.

“(6) In this section:

‘transfer notice’ means a written notice in the form approved by the Commissioner for the purposes of this section;

‘unused transferable exploration expenditure’, in relation to a company and a financial year, means so much of the transferable exploration expenditure in relation to the company and the financial year as is not transferred, or to be transferred, under section 45a.

Commissioner’s power to make transfers of expenditure

“45c. (1) This section applies if a person contravenes section 45a or 45b by failing to transfer expenditure as required by that section in relation to a financial year.

“(2) Subject to subsection (3), the Commissioner may transfer the expenditure that the person failed to transfer.

“(3) The transfer must:

(a)     be in writing; and

(b)     be such that, if it had been made by the person, it would have been a transfer of expenditure in relation to the financial year under section 45a or 45b, as the case requires.

“(4) For the purposes of this Act (other than this section), the transfer is taken to be a transfer by the person under section 45a or 45b, as the case requires.

“(5) The transfer may not be revoked or varied except:

(a)     under subsection (6); or

(b)    pursuant to a decision of the Tribunal or an order of a court; or

(c)     to correct an error.

“(6) If:

(a)     after the transfer, information becomes available to the Commissioner that was not available at the time of the transfer; and

(b)    the Commissioner would not have transferred the expenditure in the same way, or at all, if he or she had been aware of the information at the time of transferring the expenditure;

the Commissioner may, in writing, revoke the transfer and, if appropriate, make another transfer of expenditure under this section.

“(7) If the Commissioner revokes the transfer, then, for the purposes of this Act, the transfer is taken never to have been made.

“(8) The Commissioner must, within 30 days after transferring the expenditure, or revoking the transfer of the expenditure, cause written notice setting out particulars of the transfer or revocation to be given to:

(a) if the transfer has or had effect as a transfer under section 45a—the person who is taken to have transferred the expenditure; or

(b) if the transfer has or had effect as a transfer under section 45b—the person who is taken to have transferred the expenditure and the company to which the expenditure is or was transferred.

“(9) If a person to whom a notice under subsection (8) is given is dissatisfied with the Commissioner’s decision to transfer the expenditure, or revoke the transfer, as the case may be, the person may, within 60 days of being given the notice, lodge with the Commissioner a written objection against the decision setting out fully and in detail the grounds on which the person relies.

“(10) The provisions of Part VII, other than subsection 71 (1), apply in relation to an objection under subsection (9) in the same way as they apply in relation to an objection against an assessment.

Effect of transfer of expenditure

“45d. (1) This section applies if a person transfers an amount of expenditure:

(a)     to a petroleum project in relation to a financial year under section 45a; or

(b)    to a company in relation to a petroleum project and a financial year under section 45b.

“(2) If the expenditure was incurred in an earlier financial year, then, for the purposes of this Act other than subsection (3), the transfer is taken to be a transfer of the amount worked out in accordance with Part 7 of the Schedule.

“(3) The expenditure transferred (disregarding the effect of subsection (2)):

(a)     must not be transferred again in relation to the financial year; and

(b)    must not be counted again as expenditure incurred, or taken to be incurred, by a person:

(i) when working out the liability of the person to tax in relation to a later financial year; or

(ii) when working out, in accordance with Part 2, 3 or 4 of the Schedule, whether there is expenditure that is transferable by the person in relation to a later financial year.”.

Amendment of assessments

20. Section 64 of the Principal Act is amended by omitting from paragraph (7) (c) “or 20” and substituting “, 20, 45a, 45b or 45c”.

Notional tax amount

21.  Section 97 of the Principal Act is amended by omitting subsection (1) and substituting the following subsections:

“(1) Subject to subsection (2), the notional tax amount of a person, in relation to a petroleum project and an instalment period in a year of tax, is the amount worked out in accordance with the formula:

where:

‘Current period liability’ means the amount worked out under subsection (1a);

‘Previous period liability’ means the amount worked out under subsection (1b).

“(1a) For the purposes of subsection (1), the current period liability is an amount equal to the tax that would be payable by the person in relation to the petroleum project if:

(a)     the instalment period were the year of tax; and

(b)     the amounts that were taken by subsections 33 (3), 34 (3), 34a (4), 35 (3) and 36 (1) (including because of section 48) to be incurred by the person in relation to the project on the first day of the year of tax were instead only the instalment percentages of those amounts; and

(c)     the amounts that would, for the purposes of the Schedule, be the incurred exploration expenditure amounts in relation to financial years before the year of tax were instead only the instalment percentages of those amounts.

“(1b) For the purposes of subsection (1), the previous period liability is an amount equal to the sum of the notional tax amounts (if any) worked out under subsection (1) in relation to the person, the petroleum project and any earlier instalment periods in the year of tax.

“(1c) If the petroleum project is a combined project, the references in paragraph (1a) (b) and subsection (1b) to the project are to be read as including references to the pre-combination projects in relation to the project.”.

Addition of Schedule

22.  The Principal Act is amended by adding at the end the following Schedule:

“SCHEDULE                                      Sections 2, 35a, 35b,

45a, 45b and 45d

PROVISIONS RELATING TO INCURRING AND TRANSFER OF EXPLORATION EXPENDITURE ON OR AFTER 1 JULY 1990

TABLE OF CONTENTS

PART 1—INTERPRETATION

TABLE OF CONTENTS—continued

SCHEDULE—continued

PART 1—INTERPRETATION

Defined terms

1. In this Schedule:

‘ABR expenditure year’, in relation to a petroleum project, means the financial year in which the relevant pre-commencement day occurred or a later financial year;

‘augmented bond rate’, in relation to a financial year, means the long-term bond rate in relation to the financial year plus 1.15;

‘exploration right’ means an exploration permit or a retention lease;

‘financial year’ means the financial year starting on 1 July 1990 or a later financial year;

‘GDP expenditure year’, in relation to a petroleum project, means a financial year that ended before the first ABR expenditure year in relation to the project;

‘incurred exploration expenditure amount’, in relation to a petroleum project and a financial year, means:

(a)  if the petroleum project is not a combined project—the sum of:

(i) the amounts of exploration expenditure actually incurred by the person in the financial year in relation to the project; and

(ii) any amount of exploration expenditure that the person is taken by section 48 to have incurred in the financial year in relation to the project; or

(b)  if the petroleum project is a combined project—the sum of:

(i) the amounts of exploration expenditure actually incurred by the person in relation to the project in the financial year (not being amounts incurred before the project combination certificate in relation to the project came into force); and

(ii) any amount of exploration expenditure that the person is taken by section 48 to have incurred in the financial year in relation to the project; and

(iii) if the project combination certificate came into force during the financial year—the amounts of exploration expenditure actually incurred by the person in the financial year in relation to the pre-combination projects and the amounts (if any) of exploration expenditure that the person is taken by section 48 to have incurred in the financial year in relation to the pre-combination projects;

Note: the effect of subsections 35a (2), 35b (2) and 45d (3) must be taken into account when working out an incurred exploration expenditure amount.

SCHEDULE—continued

‘pre-licence area’, in relation to a production licence, means:

(a)     if the production licence was derived from an exploration permit—the exploration permit area of the exploration permit; or

(b)    if the production licence was derived from a retention lease— either:

(i) the retention lease area of the retention lease; or

(ii) the exploration permit area of the exploration permit to which the retention lease is related;

‘relevant pre-commencement day’, in relation to a petroleum project, means:

(a)     if the petroleum project is not a combined project or the Bass Strait project—the day occurring 5 years before the issue of the production licence in relation to the project; or

(b)    if the petroleum project is a combined project or the Bass Strait project—the day occurring 5 years before the issue of the oldest production licence to which the project relates;

‘starting day’ means:

(a)     in relation to a petroleum project other than a combined project or the Bass Strait project—the day on which the exploration permit to which the production licence comprising the project is related was granted; or

(b)    in relation to a combined project—the earliest of the days that, but for the issue of the project combination certificate, would have been starting days in relation to such of the pre-combination projects as were not combined projects; or

(c)     in relation to the Bass Strait project—the day on which the Bass Strait exploration permit was granted; or

(d)    in relation to an exploration right that is an exploration permit— the day on which the exploration permit was granted; or

(e)     in relation to an exploration right that is a retention lease—the day on which the exploration permit to which the retention lease is related was granted.

Holding an interest—petroleum project

2. For the purposes of this Schedule, a person is taken to have held an interest in relation to a petroleum project at a particular time if:

(a) where:

(i) the project is not a combined project or the Bass Strait project; and

(ii) the time is a time after the production licence in relation to the project came into force;

SCHEDULE—continued

the person was, at that time, entitled to receive receipts from the sale of petroleum, or marketable petroleum commodities produced from petroleum, recovered from the production licence area in relation to the project; or

(b)  where:

(i) the project is not a combined project or the Bass Strait project; and

(ii) the time is a time before the production licence in relation to the project came into force;

the person was, at that time, entitled to receive receipts from the sale of petroleum, or marketable petroleum commodities produced from petroleum, recovered from a pre-licence area in relation to the production licence; or

(c)  where:

(i) the project is a combined project; and

(ii) the time is a time after the project combination certificate came into force;

the person was, at that time, entitled to receive receipts from the sale of petroleum, or marketable petroleum commodities produced from petroleum, recovered from the production licence areas in relation to the project; or

(d)  where:

(i) the project is a combined project; and

(ii) the time is a time:

(a) before the project combination certificate came into force; and

(b) after the earliest of the production licences in relation to the pre-combination projects came into force;

the person was, at that time, entitled to receive receipts from the sale of petroleum, or marketable petroleum commodities produced from petroleum, recovered from one or more of the production licence areas in relation to the pre-combination projects; or

(e)  where:

(i) the project is a combined project; and

(ii) the time is a time before the earliest of the production licences in relation to the pre-combination projects came into force;

the person was, at that time, entitled to receive receipts from the sale of petroleum, or marketable petroleum commodities produced from petroleum, recovered from a pre-licence area in relation to that earliest production licence; or

SCHEDULE—continued

(f) if the project is the Bass Strait project—the person was, at that time, entitled to receive receipts from the sale of petroleum, or marketable petroleum commodities produced from petroleum, recovered from the production licence areas in relation to the project.

Holding an interest—exploration right

3.  For the purposes of this Schedule, a person is taken to have held an interest in relation to an exploration right at a particular time if:

(a)     where the right is an exploration permit—the person was, at that time, entitled to receive receipts from the sale of petroleum, or marketable petroleum commodities produced from petroleum, recovered from the exploration permit area; or

(b)    where:

(i) the right is a retention lease; and

(ii) the time is a time after the retention lease was granted;

the person was, at that time, entitled to receive receipts from the sale of petroleum, or marketable petroleum commodities produced from petroleum, recovered from the retention lease area; or

(c)  where:

(i) the right is a retention lease; and

(ii) the time is a time before the retention lease was granted;

the person was, at that time, entitled to receive receipts from the sale of petroleum, or marketable petroleum commodities produced from petroleum, recovered from the exploration permit area of the exploration permit to which the retention lease is related.

Amounts to be worked out to nearest dollar

4.  Amounts worked out under this Schedule are to be worked out to the nearest dollar.

PART 2—CLASS 2 AUGMENTED BOND RATE EXPLORATION EXPENDITURE AND TRANSFERABLE EXPLORATION EXPENDITURE

Interpretation

5. In this Part:

‘notional taxable profit’, in relation to a person, a petroleum project and a financial year, means the amount (if any) that would be the taxable profit in relation to the person, the project and the financial year if:

SCHEDULE—continued

(a)     the person had not incurred any class 2 augmented bond rate exploration expenditure, class 2 GDP factor expenditure or closing-down expenditure in relation to the project and the financial year; and

(b)    any expenditure transferred:

(i) to the project in relation to the financial year under section 45a; or

(ii) to the person in relation to the project and the financial year under section 45b;

had not been transferred.

Matters dealt with in this Part

6.  This Part deals with:

(a)     the calculation of the amount of class 2 augmented bond rate exploration expenditure that a person is taken to have incurred in a financial year in relation to a petroleum project; and

(b)    the calculation of the amount of expenditure incurred by the person in relation to the project in ABR expenditure years that is transferable from the project in relation to the financial year.

In this Part, the financial year is called the ‘assessable year’.

What happens if there is no notional taxable profit

7.  If there is no notional taxable profit in relation to the person, the petroleum project and the assessable year:

(a)     the person is taken not to have incurred any class 2 augmented bond rate exploration expenditure in relation to the project and the assessable year; and

(b)    all the expenditure included in the incurred exploration expenditure amounts for the ABR expenditure years is transferable by the person in relation to the assessable year.

What happens if there is a notional taxable profit

8.  (1) This clause applies if there is a notional taxable profit in relation to the person, the petroleum project and the assessable year.

(2)    For the purposes of this clause, the available exploration expenditure amount for the assessable year equals the incurred exploration expenditure amount in relation to the assessable year.

(3)    For the purposes of this clause, the available exploration expenditure amount for an ABR expenditure year before the assessable year is worked out as follows:

SCHEDULE—continued

(a)    if the ABR expenditure year is the financial year immediately before the assessable year—multiply the incurred exploration expenditure amount in relation to the ABR expenditure year by the augmented bond rate for the ABR expenditure year;

(b)    if the ABR expenditure year is an earlier financial year—work out, in relation to the ABR expenditure year and each later financial year ending before the assessable year, an amount in accordance with the formula:

Exploration expenditure amount × Augmented bond rate

where:

‘Exploration expenditure amount’ means:

(i) in making the calculation in relation to the ABR expenditure year—the incurred exploration expenditure amount in relation to the ABR expenditure year; or

(ii) in making the calculation in relation to one of the later financial years—the amount calculated under this paragraph in relation to the immediately preceding financial year for the purpose of working out the available exploration expenditure amount for the ABR expenditure year;

‘Augmented bond rate’ means the augmented bond rate in relation to the financial year in relation to which the calculation is being made;

(c)    if paragraph (a) applies—the available exploration expenditure amount for the ABR expenditure year is the amount worked out under that paragraph;

(d)    if paragraph (b) applies—the available exploration expenditure amount for the ABR expenditure year is the amount worked out under that paragraph in relation to the most recent of the later financial years referred to in paragraph (b).

(4) If the total of the available exploration expenditure amounts for the assessable year and the previous ABR expenditure years is less than or equal to the notional taxable profit:

(a)     the person is taken to have incurred an amount of class 2 augmented bond rate exploration expenditure in the assessable year in relation to the project equal to the total of those available exploration expenditure amounts; and

(b)    that class 2 augmented bond rate exploration expenditure is attributable to all the expenditure included in the incurred exploration expenditure amounts for the assessable year and the previous ABR expenditure years; and

SCHEDULE—continued

(c) none of the expenditure included in the incurred exploration expenditure amounts for the assessable year and the previous ABR expenditure years is transferable by the person in relation to the assessable year.

(5)  If the total of the available exploration expenditure amounts for the assessable year and the previous ABR expenditure years exceeds the notional taxable profit:

(a)    the person is taken to have incurred an amount of class 2 augmented bond rate exploration expenditure in the assessable year in relation to the project equal to the notional taxable profit; and

(b)    the expenditure to which that class 2 augmented bond rate exploration expenditure is attributable is to be worked out in accordance with whichever of subclauses (6) and (7) is applicable; and

(c)  the expenditure included in the incurred exploration expenditure amounts for the assessable year and the previous ABR expenditure years that is not expenditure to which that class 2 augmented bond rate exploration expenditure is attributable is transferable by the person in relation to the assessable year.

(6)  If:

(a)     class 2 augmented bond rate exploration expenditure is taken to be incurred by subclause (5); and

(b)    the available exploration expenditure amount for the earliest of the ABR expenditure years for which there is such an amount equals or exceeds the notional taxable profit;

the class 2 augmented bond rate exploration expenditure is attributable to so much of the expenditure included in the incurred exploration expenditure amount for that ABR expenditure year as, if it had been the only expenditure included in that amount, would have made the available exploration expenditure amount for that ABR expenditure year equal the notional taxable profit.

(7)  If:

(a)     class 2 augmented bond rate exploration expenditure is taken to be incurred by subclause (5); and

(b)    the notional taxable profit exceeds the available exploration expenditure amount for the earliest of the ABR expenditure years for which there is such an amount;

the following provisions have effect:

(c)  add amounts in accordance with the following rules:

SCHEDULE—continued

(i) start with the available exploration expenditure amount for the earliest of the ABR expenditure years for which there is such an amount and add to that, in order starting with the next earliest ABR expenditure year, the available exploration expenditure amounts for the later ABR expenditure years;

(ii) if adding the available exploration expenditure amount for an ABR expenditure year would make the total exceed the notional taxable profit, add only so much of that amount as makes the total equal the notional taxable profit and do not add the available exploration expenditure amount for any later ABR expenditure year;

(d) the class 2 augmented bond rate expenditure is attributable to:

(i) all the expenditure included in the incurred exploration expenditure amounts for each ABR expenditure year in relation to which the whole available exploration expenditure amount was added in accordance with subparagraphs (c) (i) and (ii); and

(ii) if, under those subparagraphs, part only of the available exploration expenditure amount for an ABR expenditure year was added—so much of the expenditure included in the incurred exploration expenditure amount for that ABR expenditure year as, if it had been the only expenditure included in that amount, would have made the available exploration expenditure amount for that ABR expenditure year equal the added part.

PART 3—CLASS 2 GDP FACTOR EXPENDITURE AND TRANSFERABLE EXPLORATION EXPENDITURE

Interpretation

9. In this Part:

‘notional taxable profit’, in relation to a person, a petroleum project and a financial year, means the amount (if any) that would be the taxable profit in relation to the person, the project and the financial year if:

(a)     the person had not incurred any class 2 GDP factor expenditure or closing-down expenditure in relation to the project and the financial year; and

(b)    any expenditure transferred:

(i) to the project in relation to the financial year under section 45a; or

SCHEDULE—continued

(ii) to the person in relation to the project and the financial year under section 45b;

had not been transferred.

Matters dealt with in this Part

10.  This Part deals with:

(a)     the calculation of the amount of class 2 GDP factor expenditure that a person is taken to have incurred in a financial year in relation to a petroleum project; and

(b)    the calculation of the amount of expenditure incurred by the person in relation to the project in GDP expenditure years that is transferable from the project in relation to the financial year.

In this Part, the financial year is called the ‘assessable year’.

What happens if there is no notional taxable profit

11.  If there is no notional taxable profit in relation to the person, the petroleum project and the assessable year:

(a)     the person is taken not to have incurred any class 2 GDP factor expenditure in relation to the assessable year and the project; and

(b)    all the expenditure included in the incurred exploration expenditure amounts for the GDP expenditure years is transferable by the person in relation to the assessable year.

What happens if there is a notional taxable profit

12. (1) This clause applies if there is a notional taxable profit in relation to the person, the petroleum project and the assessable year.

(2) For the purposes of this clause, the available exploration expenditure amount for a GDP expenditure year is worked out as follows:

(a) work out, in relation to the GDP expenditure year and each later financial year ending before the assessable year, an amount in accordance with the formula:

Exploration expenditure amount × GDP factor

where:

‘Exploration expenditure amount’ means:

(i) in making the calculation in relation to the GDP expenditure year—the incurred exploration expenditure amount in relation to the GDP expenditure year; or

SCHEDULE—continued

(ii) in making the calculation in relation to one of the later financial years—the amount calculated under this paragraph in relation to the immediately preceding financial year for the purpose of working out the available exploration expenditure amount for the GDP expenditure year;

‘GDP factor’ means the GDP factor in relation to the financial year in relation to which the calculation is being made;

(b) the available exploration expenditure amount for the GDP expenditure year is the amount worked out under paragraph (a) in relation to the most recent of the later financial years referred to in that paragraph.

(3)  If the total of the available exploration expenditure amounts for the GDP expenditure years is less than or equal to the notional taxable profit:

(a)     the person is taken to have incurred an amount of class 2 GDP factor expenditure in the assessable year in relation to the project equal to the total of those available exploration expenditure amounts; and

(b)    that class 2 GDP factor expenditure is attributable to all the expenditure included in the incurred exploration expenditure amounts for the GDP expenditure years; and

(c)     none of the expenditure included in the incurred exploration expenditure amounts for the GDP expenditure years is transferable by the person in relation to the assessable year.

(4)  If the total of the available exploration expenditure amounts for the GDP expenditure years exceeds the notional taxable profit:

(a)     the person is taken to have incurred an amount of class 2 GDP factor expenditure in the assessable year in relation to the project equal to the notional taxable profit; and

(b)    the expenditure to which that class 2 GDP factor expenditure is attributable is to be worked out in accordance with whichever of subclauses (5) and (6) is applicable; and

(c)     the expenditure included in the incurred exploration expenditure amounts for the GDP expenditure years that is not expenditure to which that class 2 GDP factor expenditure is attributable is transferable by the person in relation to the assessable year.

(5)  If:

(a)     class 2 GDP factor expenditure is taken to be incurred by subclause (4); and

(b)    the available exploration expenditure amount for the earliest of the GDP expenditure years for which there is such an amount equals or exceeds the notional taxable profit;

SCHEDULE—continued

the class 2 GDP factor expenditure is attributable to so much of the expenditure included in the incurred exploration expenditure amount for that GDP expenditure year as, if it had been the only expenditure included in that amount, would have made the available exploration expenditure amount for that GDP expenditure year equal the notional taxable profit.

(6) If:

(a)     class 2 GDP factor expenditure is taken to be incurred by subclause (4); and

(b)    the notional taxable profit exceeds the available exploration expenditure amount for the earliest of the GDP expenditure years for which there is such an amount;

the following provisions have effect:

(c)  add amounts in accordance with the following rules:

(i) start with the available exploration expenditure amount for the earliest of the GDP expenditure years for which there is such an amount and add to that, in order starting with the next earliest GDP expenditure year, the available exploration expenditure amounts for the later GDP expenditure years;

(ii) if adding the available exploration expenditure amount for a GDP expenditure year would make the total exceed the notional taxable profit, add only so much of that amount as makes the total equal the notional taxable profit and do not add the available exploration expenditure amount for any later GDP expenditure year;

(d)  the class 2 GDP factor expenditure is attributable to:

(i) all the expenditure included in the incurred exploration expenditure amounts for each GDP expenditure year for which the whole available exploration expenditure amount was added in accordance with subparagraphs (c) (i) and (ii); and

(ii) if, under those subparagraphs, part only of the available exploration expenditure amount for a GDP expenditure year was added—so much of the expenditure included in the incurred exploration expenditure amount for that GDP expenditure year as, if it had been the only expenditure included in that amount, would have made the available exploration expenditure amount for that GDP expenditure year equal the added part.

SCHEDULE—continued

PART 4—TRANSFERABLE EXPLORATION EXPENDITURE NOT INCURRED IN RELATION TO A PROJECT

Matters dealt with in this Part

13.  (1) Subject to subclauses (2) and (3), this Part deals with the calculation of the amount of expenditure incurred by a person in relation to an exploration permit or retention lease that is transferable from the permit or lease in relation to a financial year. In this Part, the financial year is called the ‘assessable year’.

(2)    This Part does not apply to an exploration permit or retention lease in relation to a financial year if a production licence derived from the permit or lease was actually in force at any time during the financial year.

(3)    This Part does not apply to an exploration permit or retention lease if it is, or is related to, one of the North West Shelf exploration permits.

Assumptions on which amounts to be worked out

14.  Amounts worked out under this Part in relation to the exploration permit or retention lease and a period (including a financial year) are to be worked out on the assumptions that:

(a)     a production licence derived from the permit or lease was in force at all times during the period; and

(b)    the petroleum project to which that production licence was related consisted only of that production licence.

In this Part, the petroleum project referred to in paragraph (b) is called the ‘notional project’.

Non-transferable expenditure

15.  (1) For the purposes of this Part, if:

(a)     the person incurred exploration expenditure in relation to the notional project in a financial year; and

(b)    the total amount of assessable receipts derived by the person in relation to the notional project in the financial year equals or exceeds the total amount of deductible expenditure actually incurred by the person in relation to the notional project in the financial year;

all of the exploration expenditure is non-transferable expenditure incurred by the person in relation to the notional project.

(2) For the purposes of this Part, if:

(a) the total amount of deductible expenditure actually incurred by the person in relation to the notional project in a financial year exceeds the total amount of assessable receipts derived by the person in relation to the notional project and the financial year; and

SCHEDULE—continued

(b) the total amount of exploration expenditure actually incurred by the person in relation to the notional project in the financial year exceeds the excess referred to in paragraph (a) by an amount (in this clause called the ‘non-transferable amount’);

so much of the exploration expenditure as equals the non-transferable amount is non-transferable expenditure incurred by the person in relation to the notional project.

(3)  If:

(a)     subclause (2) applies; and

(b)    the oldest amount of the exploration expenditure incurred by the person in the financial year equals or exceeds the non-transferable amount;

the non-transferable expenditure consists of so much of that oldest amount as equals the non-transferable amount.

(4)  If:

(a)     subclause (2) applies; but

(b)    subclause (3) does not apply;

the following provisions have effect:

(c)  add amounts in accordance with the following rules:

(i) start with the oldest amount of the exploration expenditure incurred by the person in the financial year and add to that, in order starting with the next oldest amount, each of the other amounts of the exploration expenditure incurred by the person in the financial year;

(ii) if adding an amount of expenditure would make the total exceed the non-transferable amount, add only so much of the amount as makes the total equal the nontransferable amount and do not add any later incurred amount of expenditure;

(d) the non-transferable expenditure consists of the amounts of expenditure added together in accordance with subparagraphs (c) (i) and (ii).

Amounts to be worked out

16. Work out, in relation to the person, the exploration permit or retention lease and the assessable year, the following amounts:

(a)     the total of the assessable receipts derived by the person in relation to the notional project during the period starting on 1 July 1990 and ending at the end of the assessable year;

(b)    the total of the deductible expenditure actually incurred by the person in relation to the notional project during the period starting on 1 July 1990 and ending at the end of the assessable year;

SCHEDULE—continued

(c)     the total of the exploration expenditure actually incurred by the person in relation to the notional project during the period starting on 1 July 1990 and ending at the end of the assessable year;

(d)    the amount worked out under paragraph (c), less the total of the amounts of non-transferable expenditure incurred by the person in relation to the notional project during the period starting on 1 July 1990 and ending at the end of the assessable year.

In this Part, the amount worked out under paragraph (a) is called the ‘notional assessable receipts’, the amount worked out under paragraph (b) is called the ‘notional deductible expenditure’, the amount worked out under paragraph (c) is called the ‘notional exploration expenditure’ and the amount worked out under paragraph (d) is called the ‘reduced notional exploration expenditure’.

Note: the effect of subsection 45d (3) must be taken into account when working out the notional deductible expenditure and the notional exploration expenditure.

What happens if the notional assessable receipts equal or exceed the notional deductible expenditure

17.  If, in relation to the person, the exploration permit or retention lease and the assessable year, the notional assessable receipts equal or exceed the notional deductible expenditure, none of the expenditure included in the notional exploration expenditure is transferable by the person in relation to the assessable year.

What happens if the notional deductible expenditure exceeds the notional assessable receipts

18.  (1) If, in relation to the person, the exploration permit or retention lease and the assessable year:

(a)     the notional deductible expenditure exceeds the notional assessable receipts; and

(b)    the excess equals or exceeds the notional exploration expenditure;

all the expenditure included in the reduced notional exploration expenditure is transferable by the person in relation to the assessable year.

(2) If, in relation to the person, the exploration permit or retention lease and the assessable year:

(a)     the notional deductible expenditure exceeds the notional assessable receipts; and

(b)    the excess (in this subclause called the ‘notional loss’) is less than the notional exploration expenditure; and

SCHEDULE—continued

(c) the oldest amount of expenditure included in the reduced notional exploration expenditure equals or exceeds the notional loss;

so much of that oldest amount as equals the notional loss is transferable by the person in relation to the assessable year.

(3) If, in relation to the person, the exploration permit or retention lease and the assessable year:

(a)    the notional deductible expenditure exceeds the notional assessable receipts; and

(b)   the excess (in this subclause called the ‘notional loss’) is less than the notional exploration expenditure; and

(c)    the notional loss exceeds the oldest amount of expenditure included in the reduced notional exploration expenditure;

the following provisions have effect:

(d)  add amounts in accordance with the following rules:

(i) start with the oldest amount of expenditure included in the reduced notional exploration expenditure and add to that, in order starting with the next oldest amount, each of the other amounts included in the reduced notional exploration expenditure;

(ii) if adding an amount of expenditure would make the total exceed the notional loss, add only so much of the amount as makes the total equal the notional loss and do not add any later incurred amount of expenditure;

(e)  the expenditure added in accordance with subparagraphs (d) (i) and (ii) is transferable by the person in relation to the assessable year.

PART 5—GENERAL RULES RELATING TO TRANSFER OF EXPLORATION EXPENDITURE

Interpretation

19. In this Part:

‘notional taxable profit’, in relation to a person, a petroleum project and a financial year, means the amount (if any) that would be the taxable profit in relation to the person, the project and the financial year if:

(a)     all deductible expenditure in relation to the person, the project and the financial year were taken into account; and

(b)    any expenditure transferred:

(i) to the project in relation to the financial year under section 45a; or

SCHEDULE—continued

(ii) to the person in relation to the project and the financial year under section 45b;

had not been transferred.

Matters dealt with in this Part

20.  This Part sets out the rules relating to the transfer by a person of transferable exploration expenditure from a petroleum project or an exploration right to another petroleum project in relation to a financial year. In this Part, the project or right from which the expenditure is transferred is called the ‘transferring entity’, the project to which the expenditure is transferred is called the ‘receiving project’ and the financial year is called the ‘transfer year’.

Rule—must be a notional taxable profit in relation to receiving project

21.  The person may only transfer the expenditure to the receiving project in relation to the transfer year if there is a notional taxable profit in relation to the person, the receiving project and the transfer year.

Rule—person must have held interests in relation to transferring entity and receiving project

22.  (1) Subject to subclauses (2), (3) and (4), the person may only transfer the expenditure to the receiving project in relation to the transfer year if:

(a)     the person held an interest in relation to the transferring entity at all times from the beginning of the financial year in which the expenditure was incurred to the end of the transfer year; and

(b)    the person held an interest in relation to the receiving project at all times from the beginning of the financial year in which the expenditure was incurred to the end of the transfer year.

(2)     Subclause (1) does not require the person to have held an interest in relation to the transferring entity at a time before the starting day in relation to the transferring entity.

(3)     If the starting days in relation to the transferring entity and the receiving project occurred in the same financial year, subclause (1) does not require the person to have held an interest in relation to the receiving project at a time before the starting day in relation to the receiving project.

(4)     If the starting day in relation to the receiving project occurred in a later financial year than the financial year in which the starting day in relation to the transferring entity occurred:

(a) paragraph (1) (b) does not apply in relation to the transfer of the expenditure; and

SCHEDULE—continued

(b) the person may only transfer the expenditure if (in addition to the requirement in paragraph (1) (a)):

(i) the exploration permit by reference to which the starting day in relation to the receiving project is determined was granted to the person; and

(ii) the person held an interest in relation to the receiving project at all times from the starting day in relation to the receiving project to the end of the transfer year.

Rule—transfer to project with most recent production licence

23.  If the expenditure was incurred before the transfer year, the person may not transfer the expenditure to the receiving project in relation to the transfer year if:

(a)     there is another petroleum project to which the expenditure could be transferred in relation to the transfer year under section 45a; and

(b)    the other project includes a production licence that was granted more recently than the production licence or licences included in the receiving project.

Rule—restriction on transfer of ABR expenditure

24.  The person may not transfer the expenditure to the receiving project in relation to the transfer year if:

(a)     the expenditure was incurred in an ABR expenditure year in relation to the receiving project; and

(b)    there is other expenditure that the person could transfer to the receiving project in relation to the transfer year under section 45a; and

(c)     that other expenditure was incurred in an earlier ABR expenditure year in relation to the receiving project.

Rule—restriction on transfer of GDP expenditure

25.  The person may not transfer the expenditure to the receiving project in relation to the transfer year if:

(a)     the expenditure was incurred in a GDP expenditure year in relation to the receiving project; and

(b)    there is other expenditure that the person could transfer to the receiving project in relation to the transfer year under section 45a; and

(c)     that other expenditure was incurred in:

(i) an ABR expenditure year in relation to the receiving project; or

(ii) an earlier GDP expenditure year in relation to the receiving project.

SCHEDULE—continued

Rule—total transferred not to exceed notional taxable profit

26.  The total amount of expenditure transferred by the person under section 45a to the receiving project in relation to the transfer year must not exceed the notional taxable profit in relation to the person, the receiving project and the transfer year.

Note: because of subsection 45d (2), some transfers of expenditure are taken to be transfers of amounts compounded in accordance with Part 7 of this Schedule.

PART 6—RULES RELATING TO TRANSFER OF EXPLORATION EXPENDITURE BETWEEN GROUP COMPANIES

Interpretation

27.  In this Part:

‘notional taxable profit’, in relation to a company, a petroleum project and a financial year, means the amount (if any) that would be the taxable profit in relation to the company, the project and the financial year if:

(a)     all deductible expenditure in relation to the company, the project and the financial year were taken into account; and

(b)    all expenditure to be transferred by the company to the project in relation to the financial year under section 45a had been transferred; and

(c)     any expenditure transferred to the company in relation to the project and the financial year under section 45b had not been transferred.

Situations to which this Part applies

28.  This Part applies if:

(a)     a number of companies are group companies in relation to each other and a financial year; and

(b)    there is unused transferable exploration expenditure, within the meaning of section 45b, in relation to some of the companies and the financial year.

In this Part, each of the companies in relation to which there is unused transferable exploration expenditure is called a ‘loss company’, each of the other companies is called a ‘profit company’ and the financial year is called the ‘transfer year’.

Matters dealt with in this Part

29.  This Part sets out the rules relating to the transfer by a loss company of transferable exploration expenditure from a petroleum project or an exploration right to a profit company in relation to a petroleum project and the transfer year. In this Part, the project or

SCHEDULE—continued

right from which the expenditure is transferred is called the ‘transferring entity’ and the project in relation to which the expenditure is transferred is called the ‘receiving project’.

Rule—must be a notional taxable profit in relation to profit company and receiving project

30.  The loss company may only transfer the expenditure to the profit company in relation to the receiving project and the transfer year if there is a notional taxable profit in relation to the profit company, the receiving project and the transfer year.

Rule—loss company and profit company to have held interests and been group companies

31.  (1) Subject to subclauses (2), (3) and (4), the loss company may only transfer the expenditure to the profit company in relation to the receiving project and the transfer year if:

(a)     the loss company held an interest in relation to the transferring entity at all times from the beginning of the financial year in which the expenditure was incurred to the end of the transfer year; and

(b)    the profit company held an interest in relation to the receiving project at all times from the beginning of the financial year in which the expenditure was incurred to the end of the transfer year; and

(c)     the profit company was a group company in relation to the loss company and the period starting at the beginning of the financial year in which the expenditure was incurred and ending at the end of the transfer year.

(2)    Subclause (1) does not require the loss company to have held an interest in relation to the transferring entity at a time before the starting day in relation to the transferring entity.

(3)    If the starting days in relation to the transferring entity and the receiving project occurred in the same financial year, subclause (1) does not require the profit company to have held an interest in relation to the receiving project at a time before the starting day in relation to the receiving project.

(4)    If the starting day in relation to the receiving project occurred in a later financial year than the financial year in which the starting day in relation to the transferring entity occurred:

(a)     paragraph (1) (b) does not apply in relation to the transfer of the expenditure; and

(b)    the loss company may only transfer the expenditure if (in addition to the requirements in paragraphs (1) (a) and (c)):

SCHEDULE—continued

(i) the exploration permit by reference to which the starting day in relation to the receiving project is determined was granted to the profit company; and

(ii) the profit company held an interest in relation to the receiving project at all times from the starting day in relation to the receiving project to the end of the transfer year.

Rule—transfer to project with most recent production licence

32.  If the expenditure was incurred before the transfer year, the loss company may not transfer the expenditure to the profit company in relation to the receiving project and the transfer year if:

(a)  the expenditure could be transferred in relation to the transfer year under section 45b to:

(i) the profit company in relation to another petroleum project; or

(ii) another profit company in relation to another petroleum project; and

(b)  the other project includes a production licence that was granted more recently than the production licence or licences included in the receiving project.

Rule—restriction on transfer of ABR expenditure

33.  The loss company may not transfer the expenditure to the profit company in relation to the receiving project and the transfer year if:

(a)     the expenditure was incurred in an ABR expenditure year in relation to the receiving project; and

(b)    there is other expenditure that the loss company, or another loss company, could transfer to the profit company in relation to the receiving project and the transfer year under section 45b; and

(c)     the other expenditure was incurred in an earlier ABR expenditure year in relation to the receiving project.

Rule—restriction on transfer of GDP expenditure

34.  The loss company may not transfer the expenditure to the profit company in relation to the receiving project and the transfer year if:

(a)     the expenditure was incurred in a GDP expenditure year in relation to the receiving project; and

(b)     there is other expenditure that the loss company, or another loss company, could transfer to the profit company in relation to the receiving project and the transfer year under section 45b; and

SCHEDULE—continued

(c) the other expenditure was incurred in:

(i) an ABR expenditure year in relation to the receiving project; or

(ii) an earlier GDP expenditure year in relation to the receiving project.

Rule—total transferred not to exceed notional taxable profit

35.  The total amount of transferable expenditure transferred under section 45b to the profit company in relation to the receiving project and the transfer year must not exceed the notional taxable profit in relation to the profit company, the receiving project and the transfer year.

Note: because of subsection 45d (2), some transfers of expenditure are taken to be transfers of amounts compounded in accordance with Part 7 of this Schedule.

PART 7—COMPOUNDING OF TRANSFERRED AMOUNTS

Matters dealt with in this Part

36.  This Part applies if:

(a)  a person transfers an amount of expenditure:

(i) to a petroleum project in relation to a financial year under section 45a; or

(ii) to a company in relation to a petroleum project and a financial year under section 45b; and

(b)  the expenditure was incurred in an earlier financial year;

and provides for the compounding of the amount transferred. In this Part, the financial year in relation to which the amount is transferred is called the ‘transfer year’.

What happens if expenditure was incurred in an ABR expenditure year

37.  (1) If the financial year in which the expenditure was incurred:

(a)  is an ABR expenditure year in relation to the petroleum project; and

(b)  is the financial year immediately before the transfer year;

then, for the purposes of subsection 45d (2), the transfer is taken to be of the amount worked out by multiplying the amount actually transferred by the augmented bond rate for the ABR expenditure year.

(2) If the financial year in which the expenditure was incurred:

(a)     is an ABR expenditure year in relation to the project; but

(b)     is not the financial year immediately before the transfer year; the following provisions apply:

SCHEDULE—continued

(c)  work out, in relation to the ABR expenditure year and each later financial year ending before the transfer year, an amount in accordance with the formula:

where:

‘Transferred amount’ means:

(i) in making the calculation in relation to the ABR expenditure year—the amount of expenditure actually transferred; and

(ii) in making the calculation in relation to a later financial year—the amount calculated under this paragraph in relation to the expenditure and the immediately preceding financial year;

‘Augmented bond rate’ means the augmented bond rate in relation to the financial year in relation to which the calculation is being made;

(d)  for the purposes of subsection 45d (2), the transfer is taken to be of the amount worked out under paragraph (c) in relation to the expenditure and the financial year immediately before the transfer year.

What happens if expenditure was incurred in a GDP expenditure year

38. If the financial year in which the expenditure was incurred is a GDP expenditure year the following provisions apply:

(a)   work out, in relation to the GDP expenditure year and each later financial year ending before the transfer year, an amount in accordance with the formula:

where:

‘Transferred amount’ means:

(i) in making the calculation in relation to the GDP expenditure year—the amount of expenditure actually transferred; and

(ii) in making the calculation in relation to a later financial year—the amount calculated under this paragraph in relation to the expenditure and the immediately preceding financial year;

‘GDP factor’ means the GDP factor in relation to the financial year in relation to which the calculation is being made;

(b)  for the purposes of subsection 45d (2), the transfer is taken to be of the amount worked out under paragraph (a) in relation to the expenditure and the financial year immediately before the transfer year.”.

PART 3—AMENDMENTS OF THE EXCISE ACT 1901

Principal Act

23.  In this Part, “Principal Act” means the Excise Act 1901².

Entry for home consumption etc.

24.  Section 58 of the Principal Act is amended by omitting from subsection (3) all the words from and including “produced” to and including “1967” and substituting “produced from a Resource Rent Tax area as defined in the Excise Tariff Act 1921”.

Repeal of section 78b

25.  Section 78b of the Principal Act is repealed.

PART 4—AMENDMENTS OF THE EXCISE TARIFF ACT 1921

Principal Act

26.  In this Part, “Principal Act” means the Excise Tariff Act 1921³.

Interpretation

27.  Section 3 of the Principal Act is amended:

(a)    by omitting from subsection (1) the definition of “excepted area”;

(b)    by inserting in subsection (1) the following definition:

“ ‘Resource Rent Tax area’ means an area that, for the purposes of the Petroleum Resource Rent Tax Assessment Act 1987, is:

(a)     the exploration permit area of an exploration permit other than one of the North West Shelf exploration permits; or

(b)    the retention lease area of a retention lease that is related to an exploration permit other than one of the North West Shelf exploration permits; or

(c)     the production licence area of a production licence that is related to an exploration permit other than one of the North West Shelf exploration permits;”.

Petroleum

28.  Section 5b of the Principal Act is amended by omitting from subsection (4a) “an excepted area” and substituting “a Resource Rent Tax area”.

Schedule

29.  The Schedule to the Principal Act is amended by omitting from sub-items 17 (a), (b) and (c) “an excepted area” (wherever occurring) and substituting “a Resource Rent Tax area”.

PART 5—AMENDMENT OF THE PETROLEUM (SUBMERGED LANDS) (ROYALTY) ACT 1967

Principal Act

30.    In this Part, “Principal Act” means the Petroleum (Submerged Lands) (Royalty) Act 1967⁴.

31.    Section 4a of the Principal Act is repealed and the following section is substituted:

Application of Act

“4a. (1) This Act only applies to:

(a)     the North West Shelf exploration permits; and

(b)    leases that are related to the North West Shelf exploration permits; and

(c)     licences that are related to the North West Shelf exploration permits.

“(2) For the purposes of subsection (1):

(a)     ‘North West Shelf exploration permits’ has the same meaning as in the Petroleum Resource Rent Tax Assessment Act 1987; and

(b)    a lease or licence is related to a permit if the lease or licence is related to the permit for the purposes of the Petroleum Resource Rent Tax Assessment Act 1987.”.

PART 6—TRANSITIONAL AND APPLICATION PROVISIONS

Interpretation

32.  (1) In this Part:

“Bass Strait area” means an area that, for the purposes of the Petroleum Resource Rent Tax Assessment Act 1987 as amended by this Act, is:

(a)     the exploration permit area of the Bass Strait exploration permit; or

(b)    the retention lease area of a retention lease that is related to the Bass Strait exploration permit; or

(c)     the production licence area of a production licence that is related to the Bass Strait exploration permit;

“Bass Strait excise payment” means an amount paid by a person by way of excise duty under the Excise Act 1901 in respect of goods of a kind referred to in sub-item 17 (a), (b) or (c) of the Schedule to the Excise Tariff Act 1921 obtained from petroleum recovered from a Bass Strait area;

“Bass Strait royalty payment” means an amount paid by a person by way of royalty under the Petroleum (Submerged Lands) (Royalty) Act 1967 in respect of petroleum recovered from a Bass Strait area;

“creditable amount” means a Bass Strait excise payment or a Bass Strait royalty payment in respect of petroleum, or goods obtained from petroleum, recovered during the transitional year;

“transitional year” means the financial year starting on 1 July 1990.

(2)  If:

(a)     a person has paid a Bass Strait excise payment in respect of goods obtained from petroleum recovered during the transitional year; and

(b)    a refund has been paid to the person under the Excise Act 1901, or regulations under that Act, in relation to the Bass Strait excise payment;

then, for the purposes of the definition of “creditable amount” in subsection (1), the amount of the Bass Strait excise payment is taken to be the actual amount of that payment reduced by the refund.

(3)  If:

(a)     a person has paid a Bass Strait royalty payment in respect of petroleum recovered during the transitional year; and

(b)    the amount of a later payment of royalty under the Petroleum (Submerged Lands) (Royalty) Act 1967 has been reduced because the amount of the Bass Strait royalty payment exceeded the amount of royalty the person was liable to pay;

then, for the purposes of the definition of “creditable amount” in subsection (1), the amount of the Bass Strait royalty payment is taken to be the actual amount of that payment reduced by the reduction referred to in paragraph (b).

(4)  Other expressions used in this Part that are defined in the Petroleum Resource Rent Tax Assessment Act 1987 as amended by this Act have the same meaning in this Part as they have in that Act as so amended.

PRRT Act—application of amendments

33. (1) Subject to this section, the amendments of the Petroleum Resource Rent Tax Assessment Act 1987 made by this Act apply to assessments under that Act in relation to the transitional year and to all later financial years.

(2) The amendment of section 97 of the Petroleum Resource Rent Tax Assessment Act 1987 applies in relation to the financial year starting on 1 July 1991 and to all later financial years.

(3)    For the purposes of the application of the Petroleum Resource Rent Tax Assessment Act 1987 as amended by this Act to the Bass Strait project, a reference in the Petroleum Resource Rent Tax Assessment Act 1987 to petroleum recovered is a reference to petroleum recovered on or after 1 July 1990.

(4)    For the purposes of the application of the Petroleum Resource Rent Tax Assessment Act 1987 as amended by this Act to the Bass Strait project, any consideration received by a person before 1 July 1990 in respect of petroleum recovered on or after that day is taken to be received in the financial year in which the petroleum is recovered.

PRRT Act—treatment of Bass Strait excise and royalty payments

34.  (1) A Bass Strait excise payment or a Bass Strait royalty payment is not deductible expenditure for the purposes of the Petroleum Resource Rent Tax Assessment Act 1987 as amended by this Act.

(2) If a person has paid a Bass Strait excise payment or a Bass Strait royalty payment and:

(a)     in the case of an excise payment—a refund is paid to the person under the Excise Act 1901, or regulations under that Act, in relation to the excise payment; or

(b)    in the case of a royalty payment—a refund is paid to the person under section 39 of this Act in relation to the royalty payment;

the amount paid to the person is not an assessable receipt for the purposes of the Petroleum Resource Rent Tax Assessment Act 1987 as amended by this Act.

PRRT Act—collection by instalments does not apply to the Bass Strait project and the financial year starting on 1 July 1990

35.  Division 2 of Part VIII of the Petroleum Resource Rent Tax Assessment Act 1987 does not apply in relation to the Bass Strait project and the transitional year.

PRRT Act—instalments paid or payable before commencement not to be recalculated

36.  If, before 1 July 1991, an instalment of tax was paid or became payable by a person in respect of the transitional year, nothing in this Act requires the amount of the instalment to be recalculated.

Excise Acts—amendments apply to petroleum recovered after the commencement

37.  The amendments of the Excise Act 1901 and the Excise Tariff Act 1921 made by this Act apply to goods obtained from petroleum recovered on or after 1 July 1991.

Royalty Act—amendments apply to petroleum recovered after the commencement

38.  The amendments of the Petroleum (Submerged Lands) (Royalty) Act 1967 made by this Act apply to petroleum recovered on or after 1 July 1991.

Royalty Act—refund of overpayments of royalty on Bass Strait petroleum recovered before 1 July 1990

39.  If:

(a)     a person has paid a Bass Strait royalty payment in respect of petroleum recovered before 1 July 1990; and

(b)    the amount paid exceeds the amount of royalty that was actually payable in respect of that petroleum; and

(c)     no adjustment has been made in which the amount of a later payment of royalty under the Petroleum (Submerged Lands) (Royalty) Act 1967 has been reduced by the excess;

the Commonwealth must refund the excess to the person.

Petroleum (Submerged Lands) Act—Victoria to refund overpayments in respect of Bass Strait petroleum

40.  (1) If:

(a)    the Commonwealth has paid Victoria an amount by way of royalty share in respect of petroleum recovered during a month ending before 1 July 1991; and

(b)   the amount paid exceeds the amount of royalty share that was actually payable to Victoria in respect of that month; and

(c)    no adjustment has been made in which the amount of a later payment to Victoria by way of royalty share has been reduced by the excess;

Victoria must refund the excess to the Commonwealth.

(2) In this section:

“royalty share” means an amount calculated in accordance with paragraph 129 (1) (b) of the Petroleum (Submerged Lands) Act 1967 and paid by the Commonwealth under section 129 of that Act.

Application of creditable amounts against tax liabilities

41.  (1) This section applies where:

(a)     a person has paid a creditable amount; and

(b)    an assessment has been made of the amount of tax payable by the person in relation to the Bass Strait project and the transitional year.

(2) A soon as practicable after making the assessment, the Commissioner must credit the creditable amount in payment successively of:

(a)     any tax payable by the person in relation to the Bass Strait project and the transitional year, whether or not the tax is due for payment; and

(b)    any other liability of the person to the Commonwealth arising under or because of this Act or any other Act of which the Commissioner has the general administration.

(3) The Commonwealth must refund to the person so much (if any) of the creditable amount as is not credited under subsection (2).

Effect of allowing credit or refund on liability to pay royalty or excise etc.

42.  If, under section 41:

(a)  the Commissioner credits a creditable amount in payment of tax that a person is liable to pay; or

(b)  an amount is refunded to a person;

the following provisions have effect:

(c)    any amount payable by the person that would, when paid, be a creditable amount stops being payable by the person;

(d)    no refund is payable by the Commonwealth under the Excise Act 1901, or regulations under that Act, in relation to any creditable amount paid by the person;

(e)    no adjustment is to be made under which the amount of a later amount of royalty under the Petroleum (Submerged Lands) (Royalty) Act 1967 payable by the person is reduced by reference to the creditable amount.

Reduction of Income Tax deductions for PRRT payments

43.  (1) If:

(a)     a person is liable to pay tax in relation to the Bass Strait project and the transitional year; and

(b)    the total amount of tax the person is liable to pay in relation to the project and the transitional year equals or is less than the total of the creditable amounts paid by the person;

no deduction under the Income Tax Assessment Act 1936 is allowable in respect of any payment of the tax referred to in paragraph (b).

(2) If:

(a)     a person is liable to pay tax in relation to the Bass Strait project and the transitional year; and

(b)     the total amount of tax the person is liable to pay in relation to the project and the transitional year exceeds the total of the creditable amounts paid by the person;

the total deductions allowed under the Income Tax Assessment Act 1936 in respect of payments of the tax referred to in paragraph (b) must not exceed the excess referred to in that paragraph.

PART 7—REPORT ON OPERATION OF PRRT ACT

Report on the operation of Act

44. (1) The Minister, by 30 November 1992, is to cause to be laid before each House of the Parliament a report on the operation of the Act.

(2)  The report prepared by the Minister shall include:

(a)     whether the Act has been effective in achieving its objectives;

(b)    the impact on prices and on industry; and

(c)     the impact on the development of new off-shore petroleum projects.

(3)    For the purposes of the report the Minister shall seek submissions on the operation of the Act from persons in all States and Territories, and any such submissions shall be made available to each House of Parliament.

(4)    In this section:

“Minister” means the Minister who administers the Petroleum (Submerged Lands) Act 1967;

“the Act” means the Petroleum Resource Rent Tax Assessment Act 1987.

NOTES

1. No. 142, 1987, as amended. For previous amendments, see No. 97, 1988; and No. 60, 1990.

2. No. 9, 1901, as amended. For previous amendments, see No. 26, 1918; No. 8, 1923; No. 44, 1934; No. 16, 1942; No. 88, 1947; No. 46, 1949; No. 55, 1952; No. 10, 1957; No. 49, 1958; No. 37, 1962; No. 49, 1963; No. 139, 1965; No. 93, 1966; Nos. 15 and 105, 1968; No. 23, 1972; Nos. 24 and 145, 1973; No. 216, 1973 (as amended by No. 20, 1974); No. 29, 1974; No. 91, 1976; No. 110, 1978; Nos. 11 and 50, 1979; No. 42, 1980; Nos. 61 and 65, 1981; Nos. 51, 80 and 108, 1982; No. 81, 1982 (as amended by No. 39, 1983); Nos. 39 and 101, 1983; Nos. 72 and 165, 1984; Nos. 39 and 175, 1985; No. 40, 1985 (as amended by No. 34, 1986); Nos. 10, 34 and 149, 1986; Nos. 81 and 104, 1987; No. 99, 1988; Nos. 23, 24 and 78 of 1989; and Nos. 5 and 111, 1990.

3. No. 26, 1921, as amended. For previous amendments, see No. 28, 1924; No. 28, 1926; No. 4, 1928; Nos. 20 and 21, 1933; No. 17, 1936; Nos. 24 and 70, 1938; Nos. 29, 54 and 65, 1939; Nos. 3, 4, 14 and 93, 1948; Nos. 77 and 82, 1949; Nos. 61, 62 and 80, 1950; No. 83, 1952; No. 78, 1953; Nos. 16, 59 and 87, 1956; No. 82, 1957; No. 19, 1958; Nos. 26, 65 and 66, 1959; Nos. 26 and 57, 1960; Nos. 21 and 55, 1961; No. 73, 1962; Nos. 41 and 91, 1963; No. 125, 1964; Nos. 83 and 140, 1965; Nos. 18 and 82, 1967; Nos. 74 and 75, 1968; Nos. 5 and 33, 1969; No. 81, 1970; No. 108, 1971; Nos. 22, 64 and 119, 1972; Nos. 20, 23, 146 and 216, 1973; No. 121, 1974; No. 104, 1975; Nos. 104 and 136, 1977; Nos. 48 and 184, 1978; Nos. 81, 83 and 164, 1979; Nos. 43 44, 45 and 122, 1980; No. 50, 1981; Nos. 45, 54 and 80, 1982; Nos. 27 and 99, 1983; Nos. 53, 72 and 131, 1984; Nos. 39, 41 and 189, 1985; Nos. 20 and 160, 1986; Nos. 53, 76, 104, 145 and 150, 1987; Nos. 29 and 149, 1988; Nos. 77 and 177, 1989; and No. 112, 1990.

NOTES—continued

4.    No. 119, 1967, as amended. For previous amendments, see No. 37, 1976; No. 81, 1980; No. 81, 1985; and No. 145, 1987.

[Minister’s second reading speech made in—

House of Representatives on 9 May 1991

Senate on 16 May 1991]