Explanatory Memorandum
(Circulated by the authority of the Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)General outline and financial impact
Petroleum Resource Rent Tax extension
The Petroleum Resource Rent Tax Assessment Amendment Bill 2011 (Main Bill) amends the Petroleum Resource Rent Tax Assessment Act 1987 to expand its coverage to onshore petroleum projects and the North West Shelf project. From 1 July 2012, the Petroleum Resource Rent Tax (PRRT) will be extended and apply to all oil and gas production in Australia. The PRRT will not apply to the Joint Petroleum Development Area in the Timor Sea.
The PRRT is currently imposed by the Petroleum Resource Rent Tax Act 1987 . That Act will be repealed as part of this Main Bill and replaced by three separate imposition Bills titled, the Petroleum Resource Rent Tax (Imposition - Customs) Bill 2011, the Petroleum Resource Rent Tax (Imposition - Excise) Bill 2011 and the Petroleum Resource Rent Tax (Imposition - General) Bill 2011
Date of effect : The PRRT extension applies from 1 July 2012. The three imposition Bills will apply from 1 July 1986.
Proposal announced : The PRRT extension was announced in the Deputy Prime Minister and Treasurer's, the Prime Minister's and the Minister for Resources and Energy's joint Media Release No. 055 of 2 July 2011.
Financial impact : The revenue impact of the PRRT extension is unquantifiable, but it is unlikely to give rise to significant collections over the forward estimates. A key feature of the Main Bill is that transitioning projects are entitled to a starting base to shield a company's historical investments and prevent the retrospective application of the extended PRRT. These transitional arrangements are the key reason why revenue is not expected to be collected from this measure over the forward estimates.
Compliance cost impact : The measure is expected to impose significant compliance costs on taxpayers in the onshore oil and gas sectors and the North West Shelf Project. Compliance costs will be high during the first year of the extended PRRT's operation, as taxpayers will need to value their starting base, apply for combination certificates and modify their accounting procedures. Compliance costs will be minimised over the medium term once the extended PRRT has been operational.