The Government will extend for one year the incentive for businesses to undertake offshore petroleum exploration.
The incentive provides a 150 per cent upfront deduction for exploration expenditure in prescribed remote locations, known as designated offshore frontier areas (DFAs).
The incentive reduces the cost of petroleum exploration in Australia's remote offshore areas, stimulating exploration activity and increasing the likelihood of discovering a new oil province.
DFAs are identified each year as part of the Government's annual release of offshore petroleum exploration areas to the petroleum industry. The incentive has applied to each annual release of these areas since 2004. The one-year extension will enable this incentive to apply to the 2009 annual offshore acreage release, which will be announced in June.
The tax incentive will be assessed in light of the final report of the Australia's Future Tax System Review and the Energy White Paper, which are both scheduled to be completed by the end of 2009.
The revenue impact is nil in the first two years and a small unquantifiable cost in the third and fourth years of the forward estimates period. There will be an ongoing small cost to revenue, as an exploration permit has a maximum life of 16 years.