Offshore Petroleum (Laminaria and Corallina Decommissioning Cost Recovery Levy) (OP Levy)

The Offshore Petroleum (Laminaria and Corallina Decommissioning Cost Recovery Levy) is a temporary cost recovery levy.

Last updated 4 August 2022

OP Levy overview

On 1 April 2022, legislation was passed by the Australian Government to impose a temporary levy on offshore petroleum production – the Offshore Petroleum (Laminaria and Corallina Decommissioning Cost Recovery Levy) (OP Levy).

This levy:

was imposed to recover costs to the Commonwealth of decommissioning and remediating the Laminaria and Corallina oil fields and associated infrastructure
ensures the public is not left to pay for the decommissioning and remediation of such production facilities
will take effect from 1 July 2021
will apply to registered holders of petroleum production licenses under the Offshore Petroleum and Greenhouse Gas Storage Act 2006
is proposed to apply to each 12-month period from 1 July 2021 to 1 July 2029 (unless terminated earlier by the Resources Minister under a ministerial determination). Once the Commonwealth’s costs have been recovered, the levy may be terminated early to prevent over-collection
is not deductible for the purposes of any other form of taxation.

OP Levy terms and definitions

It's important to understand the following terms and definitions:

Leviable entities
OP Levy liabilities
OP Levy rate
Distributed OP Levy rate
Unrecovered costs
Petroleum amount

Leviable entities

Leviable entities:

are registered holders of a petroleum production licence under the Offshore Petroleum and Greenhouse Gas Storage Act 2006 that hold their licence at any time during the levy year (1 July to 30 June).
must lodge an OP Levy lodgment return by 31 December following a levy year to report the amount of petroleum produced.

OP Levy liabilities

The amount of OP Levy payable is calculated by applying the levy rate to the total amount of petroleum recovered by a leviable entity in relation to all petroleum production licences held in a levy year.

Following 31 December (once all OP Levy lodgments have been received), the Commissioner will assess the total levy payable for each leviable entity and will issue a notice of assessment.

Payment of the OP Levy is due 21 days following service of the notice of assessment.

OP Levy rate

The OP Levy rate is assessed for a levy year once all lodgments have been received. The levy rate:

is the lesser of the following
- $0.48, or
- the distributed levy rate for the levy year (if a determination of the Commonwealth's unrecovered costs for the levy year is in effect).

To prevent over-collection, the levy rate for a year may be reduced if imposing the standard levy rate would result in collecting more than the Commonwealth’s unrecovered costs as determined by the Resources Minister.

It is not anticipated that the Resources Minister will issue a determination in relation to the Commonwealth’s unrecovered costs in respect of the first few levy years.

Instead, it is expected that such a determination would only be made during the tail end of the levy to provide that the amount of levy assessed over the life of the levy approximately equates to the decommissioning costs incurred by the Commonwealth.

OP Levy Rate:
OP Levy Year	OP Levy Rate
1 July 2021 – 30 June 2022	0.48 cents
1 July 2022 - 30 June 2030	TBD

Distributed OP Levy rate

The distributed OP levy rate for a levy year is the amount worked out using the following formula:

Commonwealth's unrecovered costs for the levy year divided by the total petroleum amount for the levy year.

where:

Total petroleum amount for the levy year is the total of petroleum amounts for all leviable entities for the levy year, assuming that the only information relevant to working out that total amount is:

information reported in returns on or before 31 December following the levy year, and
any other relevant information reasonably available to us before we first make an assessment of an amount of levy for the levy year.

Unrecovered costs

The unrecovered costs for the levy year is the specified amount as determined by the Resources Minister of the total amount of levy assessed for the previous levy years that falls short of the total decommissioning and remediation costs. This amount is calculated within 6 months after the end of the levy year that the determination is made.

Petroleum amount

The petroleum amount for the levy year is the total quantity of all petroleum, in barrels of oil equivalent and as measured at the wellhead, recovered by the entity during the levy year under any petroleum production licences held by the entity.

Calculating the OP levy

The amount of OP levy payable by a leviable entity for a levy year is worked out using the following formula:

Petroleum amount for the entity for the levy year multiplied by the levy rate.

Notice of assessment

The OP Levy is a standalone tax liability, separate from all other taxes. The ATO will issue a notice of assessment to entities once the levy rate for a levy year has been determined.

Payment

The levy amount payable is due 21 days after the notice of assessment has been served for the relevant levy year. General interest charges (GIC) apply to late payments.

Time limits on OP Levy assessments

The law sets a time limit of 6 months for an amendment to an OP Levy assessment. The time period for amendment starts the day after we first give you the notice of assessment for the levy year in question.

Objection rights

By law, you can object to an OP Levy assessment.

You must lodge an objection within 60 days of receiving the notice of assessment.

See Decisions you can object to and time limits.

Lodging an OP Levy return

Before you lodge, read the OP Levy return instructions

To lodge an OP Levy return, a leviable entity must:

produce an annual return by 31 December – that is within 6 months of the end of the levy year.
lodge on the approved form.
if there is no determination made by the Resource Minister, the standard rate of $0.48 per barrel of oil equivalent will apply.
if a determination has been made by the Resource Minister, a reduced levy rate may apply, see OP Levy rate.

Termination of the OP Levy

The levy will be imposed for the financial years beginning 1 July 2021 through to 1 July 2029. This period has been chosen to ensure that the levy can be imposed for the duration of the decommissioning of the Laminaria and Corallina oil fields and associated infrastructure.

The levy will end on 30 June 2030 at the latest.

It may end earlier if the Resources Minister:

makes a determination, by legislative instrument, that the Commonwealth's unrecovered costs related to the decommissioning and remediation of the Laminaria and Corallina oil fields and associated infrastructure are nil, and
is satisfied no further recoverable costs are likely to be incurred by the Commonwealth
is satisfied that the decommissioning and remediation costs have been fully recovered.

During the final levy year, the rate may be reduced to prevent over-collection, depending on the remaining unrecovered costs.

OP Levy information

We are committed to helping entities understand and meet any OP Levy obligations. If an entity requires information, guidance, or advice, it can contact us at OPLevy@ato.gov.au.

Related legislative information includes:

QC70113