House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Treasurer, the Hon. P.J. Keating, M.P.)

General Outline and Financial Impact

The Petroleum Resource Rent Legislation Amendment Bill 1991 will make the following changes to the petroleum resource rent tax (PRRT), excise and royalty laws:

Bass Strait PRRT

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Extends from 1 July 1990 PRRT to petroleum recovered from Bass Strait on the basis that:

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existing Bass Strait production licences and the related exploration permit area are a single project; and

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all expenditures incurred prior to 1 July 1990 are taken to have been deducted.

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Terminates the excise and royalty regime currently applying to Bass Strait petroleum production from that date.

Interim collection arrangement

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Provides for the excise and royalty on Bass Strait petroleum production raised since 1 July 1990 paid up to 30 June 1991 to be used as a credit against assessments of PRRT for Bass Strait for the year ended 30 June 1991.

Wider deductibility of exploration expenditure

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Permits undeducted project exploration expenditure of one project after 1 July 1990 to be transferred to other projects with a PRRT liability and for companies within a group such transfers can occur between projects held by companies in the group;

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Also permits exploration expenditure incurred in relation to exploration permits and retention leases to be transferable to PRRT liable projects; and

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Sets the rate of compounding for transferred exploration expenditure according to the project to which the expenditure is being transferred.

Reduction in compounding rate

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Reduces the compounding rate for carried forward undeducted augmented bond rate general expenditure incurred after 1 July 1990 from the long-term bond rate plus 15% to the long-term bond rate plus 5%.

Financial Impact

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The cost will be $305m in 1990-91 and $450m in 1991-92. A revenue positive outcome is expected in 1992-93.

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Proposal announced in the 1990-91 Budget.