In response to the decision of the Full Federal Court in Commissioner of Taxation v Shell Energy Holdings Australia Limited [2022] FCAFC 2, the Government has amended the PRRT to clarify that ‘exploration for petroleum’ is limited to the ‘discovery and identification of the existence, extent and nature of the petroleum resource’ and doesn't extend to ‘activities and feasibility studies directed at evaluating whether the resource is commercially recoverable’.
The amendments contained in the Treasury Laws Amendment (Delivering Better Financial Outcomes and Other Measures) Act 2024External Link received Royal Assent on 9 July 2024. The amendments apply to payments made on or after 21 August 2013. The Commissioner of Taxation’s administrative treatment and written binding advice is set out in Taxation Ruling TR 2014/9.
This measure will also clarify that mining, quarrying and prospecting rights (MQPRs) can't be depreciated for income tax purposes until they are used (not merely held) and will limit the circumstances in which the issue of new rights over areas covered by existing rights lead to tax adjustments.
These amendments will apply in respect of all MQPRs acquired or started to be used after the date of announcement (7:30 pm AEST on 9 May 2023).