Today the Treasurer and the Minister for Industry, Tourism and Resources announced that the Australian Government will introduce a number of policy changes to the petroleum resource rent tax (PRRT) and the proposed Gas Transfer Price Regulations.
The changes to the PRRT will reduce compliance costs, improve administration and remove inconsistencies in the PRRT regime.
In particular, the PRRT legislation will be amended to:
- allow the deduction of transferable exploration expenditure when calculating quarterly instalments and of fringe benefits tax for PRRT purposes;
- allow the deduction of closing-down costs when moving from a production to an infrastructure licence;
- include the PRRT in the self-assessment regime;
- provide roll-over relief for internal corporate restructuring;
- introduce a transfer notice requirement for vendors disposing of an interest in a petroleum project; and
- extend the lodgement period for PRRT annual returns from 42 days to 60 days.
These changes will take effect from 1 July 2006.
The Government has also considered policy changes to the treatment of data package costs, indirect costs and feasibility assessment costs under the PRRT regime but has decided that legislative change is not justified. In relation to the treatment of indirect costs and feasibility assessment costs, an administrative solution should be explored before any legislative amendment is considered.
Following extensive consultation with the petroleum industry, the Government has also decided to make adjustments to the proposed Gas Transfer Pricing Regulations. The changes will improve taxpayer certainty and simplify the calculation of a gas transfer price for an integrated gas-to-liquids project.
Specifically, the method used to calculate the capital allowance rate in the proposed Regulations will be changed from a weighted average cost of capital approach to the long-term bond rate plus seven percentage points approach. Technical changes will also be made to the proposed Regulations dealing with the materiality threshold for apportioning costs and the endpoint of the downstream stage of a project.
The implementation of the Regulations will facilitate investment in Australia’s natural gas resources and provide a sound basis for the development of the liquefied natural gas industry.
These changes will take effect once the Regulations are made.