INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART III - LIABILITY TO TAXATION  

Division 10 - Mining and quarrying  

Subdivision A - General mining  

SECTION 122J   EXPLORATION AND PROSPECTING EXPENDITURE  

122J(1)   [Allowable deduction]  

Subject to this section, expenditure incurred by the taxpayer during the year of income on exploration or prospecting for minerals obtainable by prescribed mining operations shall be an allowable deduction.

122J(1A)   [No operation from 1997/98 year onwards]  

A deduction is not allowable under subsection (1) for the 1997-98 year of income or any later year of income.

Note:

Subdivision 330-A of the Income Tax Assessment Act 1997 gives a taxpayer a deduction for expenditure incurred on exploration or prospecting for minerals obtainable by eligible mining operations in the 1997-98 year of income or a later year of income.

122J(2)   [Conditions for and amount of deduction]  

A deduction is not allowable under this section in any year of income in respect of expenditure incurred on or before 21 August 1984 (including expenditure incurred on or before that date that is deemed, by virtue of subsection (4), to be incurred during the year of income) unless, in the year of income, the taxpayer carried on a mining business or mining businesses (other than a business of mining for petroleum), and the amount of the deduction in respect of that expenditure shall not exceed the amount remaining after deducting from the assessable income derived from the carrying on of that business or those businesses, and from the activities of the taxpayer associated directly or indirectly with the carrying on by the taxpayer of that business or those businesses, all other allowable deductions (other than deductions under this section) that directly relate to any such business or activities.

122J(3)   [Expenditure prior to 1975/76 in excess of deduction]  

Where, in the case of expenditure incurred during the year of income that ended on 30 June 1974 or a preceding year of income, the amount of the expenditure exceeds the amount of the deduction allowable under this section, the excess shall, except for the purposes of section 122DA , be deemed to be allowable capital expenditure incurred by the taxpayer in the first subsequent year of income in which the taxpayer carries on prescribed mining operations.

Note:

Section 330-10 of the Income Tax (Transitional Provisions) Act 1997 converts any excess amount at the end of the 1996-97 year of income into exploration or prospecting expenditure incurred by the taxpayer in the 1997-98 year of income.

122J(3A)   [Income exempt under s 23(pa)]  

Where:

(a) an amount of income derived by the taxpayer in a year of income, being the year of income of the taxpayer in which 27 October 1977 occurred or a subsequent year of income, (in this subsection referred to as the year of sale ) from the sale, transfer or assignment of rights to mine on any mining tenement is or has been exempt from income tax by virtue of paragraph 23(pa); and

(b) in relation to that tenement, there are any excess amounts of expenditure referred to in subsection (3) of this section that have not been, and are not required to be, deemed to be allowable capital expenditure incurred by the taxpayer in the year of sale or a prior year of income,

subsection (3) of this section does not operate so as to require the taxpayer to be deemed to have incurred, as allowable capital expenditure, in any year of income after the year of sale, any part of those excess amounts that does not exceed the amount that remains after deducting from that exempt income the amount, if any, by which, in relation to that tenement, the residual previous capital expenditure of the taxpayer as at the end of the year of sale has been reduced under subsection 122C(3A) .

122J(4)   [Expenditure after 1973/74 and before 22 August 1984]  

Where the amount of the expenditure of the kind referred to in subsection (1) that was incurred during the year of income, being expenditure incurred after the year of income that ended on 30 June 1974 and on or before 21 August 1984 (including any expenditure that is deemed to have been incurred during the first-mentioned year of income by any previous application or applications of this subsection), exceeds the amount of the deduction allowable under this section in respect of that expenditure in respect of the first-mentioned year of income, the excess amount shall, for the purposes of subsection (1), be deemed to have been incurred by the taxpayer during the first subsequent year of income in which the taxpayer carries on prescribed mining operations.

Note:

Section 330-30 of the Income Tax (Transitional Provisions) Act 1997 converts any excess amount at the end of the 1996-97 year of income into exploration or prospecting expenditure incurred by the taxpayer in the 1997-98 year of income.

122J(4A)   [Income exempt under s 23(pa)]  

Where:

(a) an amount of income derived by the taxpayer in a year of income, being the year of income of the taxpayer in which 27 October 1977 occurred or a subsequent year of income, (in this subsection referred to as the year of sale ) from the sale, transfer or assignment of rights to mine on any mining tenement is or has been exempt from income tax by virtue of paragraph 23(pa); and

(b) in relation to that tenement there are any excess amounts of expenditure referred to in subsection (4) that have not been, and are not required to be deemed, for the purposes of subsection (1), to have been incurred by the taxpayer in the year of sale or in a prior year of income,

subsection (4) does not operate so as to require the taxpayer to be deemed to have incurred, in any year of income after the year of sale, any part of those excess amounts that does not exceed so much of the amount of the exempt income as has not been applied:

(c) under subsection 122C(3A) in reduction of the residual previous capital expenditure of the taxpayer as at the end of the year of sale; or

(d) under subsection (3A) of this section in reduction of the amount of expenditure that, but for that subsection, would be deemed to be allowable capital expenditure incurred by the taxpayer in any year of income after the year of sale.

122J(4B)   [Limit on deduction of post-21 August 1984 expenditure]  

Subject to subsection (4BB), the amount of the deduction allowable under this section in respect of expenditure incurred during the year of income, being expenditure incurred after 21 August 1984, shall not exceed an amount equal to so much of the assessable income of the year of income as remains after deducting all allowable deductions, other than deductions allowable under this section, or under section 122JF , in respect of expenditure incurred after that date.

122J(4BA)   [Election as to application of subsec (4B) limit]  

A taxpayer may elect, in relation to a year of income, being the year of income that commenced on 1 July 1985 or a subsequent year of income, that the limit in subsection (4B) shall not apply in relation to actual expenditure in relation to the taxpayer in relation to the year of income.

122J(4BB)   [Effect of election]  

Where:

(a) a taxpayer makes an election under subsection (4BA) in relation to a year of income; and

(b) but for this subsection, subsection (4B) would apply to limit the amount of the deduction otherwise allowable under this section in relation to expenditure incurred by the taxpayer during the year of income,

the following provisions have effect:

(c) subsection (4B) does not apply in relation to expenditure incurred by the taxpayer during the year of income;

(d) the deduction allowable under this section in respect of any deemed expenditure in relation to the taxpayer in relation to the year of income is an amount ascertained in accordance with the formula

AC     A + B

,

where:

A is the number of whole dollars in the amount of the deemed expenditure in relation to the taxpayer in relation to the year of income;

B is the number of whole dollars in the amount of the actual expenditure in relation to the taxpayer in relation to the year of income; and

C is an amount equal to the assessable income of the taxpayer of the year of income reduced by the sum of all deductions allowable from that assessable income, other than deductions allowable under this section in respect of expenditure incurred after 21 August 1984.

122J(4BC)   [Interpretation]  

For the purposes of subsections (4BA) and (4BB):

(a) a reference to actual expenditure in relation to a taxpayer in relation to a year of income is a reference to expenditure of a kind referred to in subsection (1) incurred by the taxpayer during the year of income, other than deemed expenditure in relation to the taxpayer in relation to the year of income; and

(b) a reference to deemed expenditure in relation to a taxpayer in relation to a year of income is a reference to expenditure of a kind referred to in subsection (1) that is deemed by subsection (4C) to have been incurred by the taxpayer during the year of income.

122J(4C)   [Post-21 August 1984 expenditure exceeds deduction allowable]  

Where the amount of the expenditure of the kind referred to in subsection (1) that was incurred during the year of income, being expenditure incurred after 21 August 1984 (including any expenditure incurred after that date that is deemed to have been incurred during the year of income by any previous application or applications of this subsection), exceeds the amount of the deduction allowable under this section in respect of that expenditure in respect of the year of income, the excess amount shall, for the purposes of subsection (1), be deemed to have been incurred by the taxpayer during the first subsequent year of income in which the taxpayer derives assessable income.

Note:

Section 330-40 of the Income Tax (Transitional Provisions) Act 1997 converts any excess amount at the end of the 1996-97 year of income into exploration or prospecting expenditure incurred by the taxpayer in the 1997-98 year of income.

122J(4D)   [No deduction unless Commissioner satisfied]  

A deduction is not allowable under this section in respect of expenditure incurred during the year of income, being expenditure incurred after 21 August 1984, unless:

(a) the Commissioner is satisfied that, during the year of income, the taxpayer carried on, or proposed to carry on, prescribed mining operations; or

(b) the Commissioner is satisfied that:

(i) during the year of income, the taxpayer carried on a business of, or a business that included, exploration or prospecting for minerals obtainable by prescribed mining operations; and

(ii) the expenditure was necessarily incurred in carrying on that business.

122J(4E)   [Income derived after 21 August 1984 exempt under s 23(pa)]  

Where:

(a) an amount of income derived by the taxpayer after 21 August 1984 from the sale, transfer or assignment of rights to mine on any mining tenement is or has been exempt from income tax in a year of income (in this subsection referred to as the year of sale ) by virtue of paragraph 23(pa); and

(b) in relation to that tenement there are any excess amounts of expenditure referred to in subsection (4C) that have not been, and are not required to be, deemed, for the purposes of subsection (1), to have been incurred by the taxpayer in the year of sale or in a prior year of income,

subsection (4C) does not operate so as to require the taxpayer to be deemed to have incurred, in any year of income after the year of sale, any part of those excess amounts that does not exceed so much of the amount of the exempt income as has not been applied:

(c) under subsection 122C(3A) in reduction of the residual previous capital expenditure of the taxpayer as at the end of the year of sale;

(d) under subsection (3A) of this section in reduction of the amount of expenditure that, but for that subsection, would be deemed to be allowable capital expenditure incurred by the taxpayer in any year of income after the year of sale; or

(e) under subsection (4A) of this section in reduction of the amount of expenditure that, but for that subsection, would be deemed to have been incurred by the taxpayer in any year of income after the year of sale.

122J(5)   [Where excess includes amount specified under s 122B notice]  

Where an amount specified in a notice duly given to the Commissioner under section 122B in relation to the acquisition from the taxpayer of a mining or prospecting right or mining or prospecting information is attributable to the whole or a part of an excess amount of expenditure referred to in subsection (3), (4) or (4C), the excess amount or the part of the excess amount, as the case may be:

(a) shall not, under subsection (3), (4) or (4C), be deemed to have been incurred by the vendor in the year of income in which the transaction to which the notice relates occurred or any subsequent year of income; and

(b) shall not be taken into account in calculating the amount to be included in the allowable capital expenditure of a purchaser by virtue of a notice given to the Commissioner under section 122B in respect of a transaction entered into after the first-mentioned transaction.

122J(6)   [``exploration or prospecting'']  

In this section, exploration or prospecting means any one or more of the following:

(a) geological mapping, geophysical surveys, systematic search for areas containing minerals, and search by drilling or other means for minerals within those areas; and

(b) search for ore within or in the vicinity of an ore-body by drives, shafts, cross-cuts, winzes, rises and drilling,

but does not include operations in the course of working a mining property.