House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)

Chapter 13 Adjustments

Outline of chapter

13.1 This chapter explains the adjustments that are made to:

•

mining revenue, mining expenditure, pre-mining revenue and pre-mining expenditure when, as a result of a change in circumstances, the original amount that was accounted for under the Minerals Resource Rent Tax (MRRT) is no longer appropriate (Division 160); and

•

starting base losses (and, in some cases, to mining revenue) when a starting base asset ceases to be part of a mining project interest's starting base (for example, because the miner disposes of it) (Division 165).

13.2 All legislative references throughout this chapter are to the Minerals Resource Rent Tax Bill 2011 unless otherwise indicated.

Summary of new law

Mining adjustments for changes in circumstances

13.3 If there is a change in the circumstances affecting the amount of a previous item of mining revenue, mining expenditure, pre-mining revenue or pre-mining expenditure, an adjustment is made so that, in net nominal terms, the correct result is achieved.

13.4 In other words, an adjustment applies to the extent that the quantum of the original MRRT amount depended on assumptions or estimates relating to future events or circumstances and those assumptions or estimates turn out to be incorrect.

13.5 The main case in which the rules apply is ensuring that the cost of an asset is only recognised in a mining project interest's net mining expenditure to the extent that the asset is used in the upstream mining operations of the mining project interest. The rules do this by including an amount in mining revenue or mining expenditure to reflect any change in the extent to which the asset is used in the upstream mining operations of the mining project interest.

Starting base adjustments

13.6 Broadly, a starting base adjustment is made when a miner:

•

stops holding a starting base asset; or

•

stops (or never started) using a starting base asset in the upstream mining operations and decides never to so use it in the future.

13.7 In these cases, the termination value of the asset (usually what the miner received to stop holding it) is compared with its adjustable value (which is its base value less its decline in value to that time). If the termination value exceeds the adjustable value, the difference is applied to reduce any starting base losses, with any excess being included in mining revenue. If the termination value is lower than the adjustable value, the difference is included as a starting base loss.

Detailed explanation of new law

Mining adjustments for changes in circumstances

When does a mining adjustment arise?

13.8 A mining adjustment arises when an original amount of mining revenue, mining expenditure, pre-mining revenue or pre-mining expenditure was determined according to some expectation about later circumstances, and those expectations are revised, or the expected circumstances do not eventuate, or they turn out differently. An adjustment is made to reflect any impact that these new circumstances would have had on the original amount so that, in net nominal terms, the correct amount is accounted for under the MRRT overall. The adjustment is made in the MRRT year in which the new circumstances arise. [Subsection 160-10(1)]

13.9 The most common example of this is where the extent to which an item of expenditure relates to the upstream mining operations of a mining project interest changes because a miner so uses an asset to a greater or lesser extent than it initially anticipated. [Subsections 160-10(1) and (3)]

13.10 Under the general mining expenditure rule, both revenue and capital expenditure is immediately deductible to the extent that it is necessarily incurred by a miner in carrying on upstream mining operations for a mining project interest. As discussed in Chapter 5, this is based on the income tax test of deductibility (though the income tax test excludes capital expenditure). Under the MRRT, the extent to which an expense (especially a capital expense) is included in a miner's mining expenditure can depend on the miner's expectations about future circumstances in relation to that expense.

Example 13.141 : Change in extent to which an asset is used in upstream mining operations

Shelby Co. is a miner that has one mining project interest. Shelby purchases an asset on the last day of its 2012-13 MRRT year for $1 million. The whole purchase price is included in mining expenditure as it is necessarily incurred in carrying on the upstream mining operations, since Shelby expects (at the time the expense is incurred) to use the asset entirely within the upstream mining operations of its mining project interest. Even though Shelby does not use the asset in 2012-13, the $1 million is still included in its mining expenditure.

In 2013-14, Shelby acquires a second mining project interest and begins to use the asset equally in both project interests. This is a change in circumstances which leads to adjustments for both of Shelby's mining project interests since the new circumstances (the change in the way the asset is used) would have affected the amount included in mining expenditure for the mining project interests had those circumstances been anticipated when Shelby purchased the asset.

The first mining project interest has an adjustment in relation to the $1 million originally included in its mining expenditure. The second mining project interest has a mining adjustment in relation to the original non-inclusion of any part of the purchase price in its mining expenditure.

Example 13.142 : Change in extent to which an asset relates to excluded expenditure

Dheera Co. is a miner. In its 2012-13 MRRT year, Dheera purchases a building with a view to using it to conduct its administrative and accounting activities. The building is not adjacent to the project area of its mining project interest and so the purchase price is excluded expenditure.

In its 2013-14 MRRT year, Dheera does not use the building for its administrative and accounting activities and instead uses it solely to remotely control the upstream mining operations - expenditure on this activity is not excluded expenditure. Had it anticipated these new circumstances, Dheera would have included an amount in its mining expenditure for its mining project interest. Therefore, a mining adjustment arises in relation to the original non-inclusion of any part of the purchase price in its mining expenditure.

Example 13.143 : Debt being written off as bad

Michelle is a miner. In her 2012-13 MRRT year, she sells taxable resources to Peter who promises to pay her $1 million. Michelle includes an amount in her mining revenue when the $1 million becomes receivable. However, Peter absconds without paying Michelle and, in her 2013-14 MRRT year, Michelle writes off the $1 million as a bad debt.

This is a change in circumstances that gives rise to a mining adjustment for Michelle's mining project interest. Had she anticipated that the debt would be written off as bad, Michelle would not have included an amount in mining revenue, as she would not have seen the $1 million as being receivable.

13.11 A mining adjustment only arises where the extent of the original amount included in revenue or expenditure was dependant on the miner's expectations of future events or circumstances. An adjustment does not arise when the original amount was determined by a set of facts that do not change, even when those facts were themselves were decided or settled according to some expectation of the future.

Example 13.144 : Where the original amount is not subject to a mining adjustment

Penney Co. is a miner and during the 2014-15 MRRT year enters into a three year contract with a customer for the supply of coal for a fixed price of $120 per tonne. The price was determined by Penney Co. based on estimates regarding the future price of coal which indicated that coal prices were likely to fall. The company includes an amount in its mining revenue over the next three MRRT years having regard to the fixed price in the contract.

During the three year contract period, the market price for coal actually increases. Even though Penney Co. took into account expected changes in the price of coal at the time of entering into the contract for the purposes of determining the contract price, the change in the market price of coal does not constitute an event or circumstance that gives rise to an adjustment to mining revenue as it does not change the contracted price agreed between the parties.

What is the amount of the mining adjustment?

13.12 The amount of the mining adjustment is equal to the difference between the original amount and the amount that would have been included had the changed circumstances been taken into account in working out that original amount. [Subsection 160-10(2)]

13.13 For example, if the new circumstances would have reduced the original amount that was included in pre-mining expenditure, then the adjustment is equal to the amount of that reduction.

Example 13.145 : Amount of the mining adjustment

In MRRT year 1, a miner incurs expenditure of $100 million on some machinery that the miner expects to use to the extent of 40 per cent in the upstream mining operations of a mining project interest for each of five years, after which the machinery will be sold. On this basis, $40 million is included in the miner's mining expenditure for the mining project interest for MRRT year 1.

In MRRT year 2, the miner's use of the machinery in those operations increases to 50 per cent, and the miner expects that extent of use to continue for the rest of the five years. As a result, the extent to which the expenditure relates to the interest increases to 48 per cent (that is, (40% + 50% + 50% + 50% + 50%)/5). Had these circumstances been taken into account in MRRT year 1, the miner would have included $48 million in its mining expenditure. The difference between that amount and the $40 million it did include in its mining expenditure ($8 million) is the amount of its mining adjustment.

What is the effect of the mining adjustment?

13.14 The purpose of the mining adjustment is, to the extent possible without revisiting earlier MRRT assessments, to place a mining project interest in the same MRRT position as if the new circumstances had been taken into account in working out the original amount of mining revenue, mining expenditure, pre-mining revenue, or pre-mining expenditure. However, an adjustment does not account for any uplift or for any transfer of allowance components after the MRRT assessment that included the original amount. That is because the adjustment is made in the year the new circumstances exist instead of amending the original assessment.

13.15 The adjustments give effect to this purpose by including amounts in mining revenue, mining expenditure, pre-mining revenue, or pre-mining expenditure so that overall the correct net MRRT amount has been accounted for. Table 13.1 lists the effects of the different mining adjustments that arise in different cases. [Subsection 160-15(1)]

Table 13.2 : Effect of mining adjustments

Example 13.146 : Mining adjustment which increases mining expenditure

Continuing the previous example, had the new circumstances been taken into account in MRRT year 1, the miner would have increased its mining expenditure from $40 million to $48 million for the mining project interest. The $8 million mining adjustment is included in mining expenditure for the mining project interest in MRRT year 2, so that, overall , a total of $48 million has been included in mining expenditure.

13.16 In practice, a miner may account for these kinds of changes in another way that gives an equivalent outcome. For instance, a miner may account for adjustments that reflect a decrease in a previous amount of mining revenue for its mining project interest by reducing another amount of its mining revenue for that mining project interest, rather than including an amount of mining expenditure.

13.17 In some cases, a mining adjustment will arise in relation to a pre-mining project interest that no longer exists because it has been replaced by a mining project interest. This idea of a mining project interest 'originating' from a pre-mining project interest is discussed in detail in Chapters 6 and 10. Broadly speaking, the mining project interest is taken to be a continuation of the pre-mining project interest, so any adjustment that would have arisen for the pre-mining project interest should instead be attributed to the mining project interest. For this reason, where a mining project interest has originated from a pre-mining project interest, a mining adjustment will give rise to an amount of mining revenue or mining expenditure for that mining project interest, rather than pre-mining revenue or pre-mining expenditure for the pre-mining project interest. [Subsection 160-15(2)]

Accounting for previous mining adjustments

13.18 Only one mining adjustment can arise in relation to a particular expense or receipt in any particular MRRT year, but there may be such adjustments in more than one MRRT year. In these cases, the original amount included in mining revenue, mining expenditure, pre-mining revenue, or pre-mining expenditure is taken to itself be adjusted by the amount of the mining adjustment. [Subsection 160-15(3)]

13.19 This adjusted original amount is then taken to be the original amount against which any later adjustment is worked out.

Example 13.147 : Accounting for previous mining adjustments

Continuing the previous example, in MRRT year 3, the miner's use of the machinery on the interest increases to 100 per cent, and the miner expects that extent of use to continue for the rest of the five years. As a result, the extent to which the expenditure relates to the interest increases to 78 per cent (that is, (40% + 50% + 100% + 100% + 100%)/5).

The 'original amount' for MRRT year 2 is taken to be the original amount for MRRT year 1 ($40 million of mining expenditure) increased by the adjustment that was made in MRRT year 2 ($8 million of mining expenditure), which is $48 million of mining expenditure.

The adjustment in MRRT year 3 is the difference between the $48 million of mining expenditure and the $78 million of mining expenditure that would have been recognised in MRRT year 2 if the new circumstances were known at that time. The mining adjustment is the $30 million difference and, since this would have increased the MRRT year 2 amount of mining expenditure, it is included in mining expenditure for MRRT year 3.

Starting base adjustments

13.20 A starting base adjustment is made when a starting base adjustment event happens. The amount of the adjustment reflects the difference between the adjustable value of the asset and its termination value.

Starting base adjustment events

13.21 A starting base adjustment event occurs for a starting base asset when the miner stops holding the asset. This includes the disposal, sale, loss or theft of the asset. [Paragraph 165-5(1)(a)]

13.22 A starting base adjustment event also occurs when a miner stops using a starting base asset in carrying on upstream mining operations relating to the mining project interest and expects never to use it again in this way. [Paragraph 165-5(1)(b)]

13.23 A starting base adjustment event also occurs when a miner has been using a starting base asset for upstream mining operations and stops:

•

having it installed ready for such use; or

•

stops constructing it for such use,

and the miner expects to never again have the asset installed ready for such use, or never to restart constructing it for such use. [Paragraph 165-5(1)(b)]

13.24 A starting base adjustment event also happens where a miner has never used a starting base asset for upstream mining operations and stops:

•

having it installed ready for such use; or

•

stops constructing it for such use,

and the miner decides never to so use it. [Paragraph 165-5(1)(c)]

13.25 However, there is no starting base adjustment in relation to a starting base asset that:

•

is, or includes, a right or an interest that constitutes a mining project interest (for example, the single starting base asset); or

•

is transferred with such a right or interest.

[Subsection 165-5(2)]

13.26 This exception recognises that, when a mining project interest is transferred from one miner to another, the tax history of the interest will be inherited by the other miner. One consequence of this is that, where starting base assets are transferred as part of the transfer of a mining project interest, those assets will retain their character as starting base assets in relation to the mining project interest.

13.27 Chapter 7 discusses how - under the market value approach -mining information, improvements to land, and goodwill are taken to be part of the same starting base asset as the rights and interests that comprise the mining project interest. As a consequence, there will be no starting base adjustment in relation to any of these things. However, where a miner receives an amount that has the effect of recouping the base value of a part of the single starting base asset (such as on the sale of mining information), this will reduce the base value of the asset. This is also discussed in Chapter 7.

Starting base adjustment amounts

13.28 If a starting base adjustment event occurs for a starting base asset, then:

•

if the asset's adjustable value exceeds its termination value - that excess is included in a starting base loss [subsection 165-10(2), section 165-20 and subsections 165-25(1) and (2)] ; or

•

if asset's termination value exceeds its adjustable value - that excess is applied to reduce any available starting base loss (with any remaining excess being included in mining revenue) [subsection 165-10(1), section 165-20 and subsections 165-25(3) and (4) and section 165-30] .

Adjustable value

13.29 The adjustable value of a starting base asset is the difference between:

•

the base value of the asset for the MRRT year in which the event occurred; and

•

the decline in value of the asset for the part of the year before the starting base adjustment event occurred.

[Subsection 165-10(7)]

Termination value

13.30 The termination value of a starting base asset (usually what was received under a starting base adjustment event) is:

•

if the miner has received or is taken to have received an amount - that amount; or

•

if the miner has not received an amount, or has received an amount under a non-arm's length arrangement - the market value of the asset.

[Subsection 165-10(3)]

Amounts a miner has received or is taken to have received

13.31 Generally, termination value includes the amounts that a miner received (or is taken to have received) in relation to the asset because of the starting base adjustment event, including money or non-cash benefits.

13.32 The main case is simply receiving money under a starting base adjustment event, in which case the termination value is that amount. This covers the most common case, where money is received on the sale of an asset.

13.33 Where a miner receives non-cash benefits under a starting base adjustment event, the market value of those benefits at that time will be included in the termination value under the general non-cash benefit rules. Those rules are explained in detail in Chapter 15.

13.34 When a miner's liability to pay an amount to another entity is reduced (or terminated) because of a starting base adjustment event, this economic benefit is included in the asset's termination value for the miner. [Subsection 165-10(5)]

13.35 If a miner receives an amount for several things that include a starting base asset, only a reasonable part of the amount is to be treated as being for the starting base asset. In other words, the amount will be apportioned between the termination value of the asset and those other things. [Subsection 165-10(6)]

Example 13.148 : Apportioning the amount received for several starting base assets

Belluk Resources receives $1 million for the sale of two starting base assets. The $1 million will be apportioned between the termination values of each starting base asset, based on their relative market values.

Where no amount is received or an amount is received under a non-arm's length arrangement

13.36 In some circumstances a miner will continue to hold a starting base asset after a starting base adjustment event. For instance, an adjustment event occurs where a miner stops using an asset in the upstream mining operations of its mining project interest and the miner expects that they will never again use the asset for that purpose. In these cases, the miner will often not receive an amount because of the event and so the termination value will be the market value of the asset at the time of the event.

Example 13.149 : No amount received under a starting base adjustment event

Toni Co. operates a coal mine. Due to falling prices for coal, it stops using a conveyor belt it holds (a starting base asset). It expects that coal prices will never recover sufficiently for it to ever use this asset again. This is a starting base adjustment event. The termination value of the conveyor belt is its market value just before the moment Toni Co. formed the expectation that it would never use the asset again.

13.37 In addition, where a miner receives an amount under an arrangement in which it did not deal at arm's length with one or more of the other parties to that arrangement, the termination value is the market value of the asset at the time of the starting base adjustment event. This is an integrity rule to cover non-arm's-length dealings. [Paragraph 165-10(3)(b)]

13.38 Whether parties are dealing at arm's length is a question of fact. It is necessary to look at the nature of the dealing between them to assess whether the outcome of their dealing is the result of real bargaining.

Where the starting base adjustment event gives rise to mining expenditure that exceeds the amounts received

13.39 Alternatively, the termination value will instead be the total of:

•

an amount included in mining expenditure because of the event; and

•

any amount by which that mining expenditure is reduced because of an amount received by the miner,

where this total exceeds the amount the miner received or is taken to have been received. [Subsection 165-10(4)]

13.40 This rule deals with the case where a miner is entitled to an amount of mining expenditure as a consequence of the starting base adjustment event.

Example 13.150 : Mining expenditure arising because of a starting base adjustment event

Bridie Co. gives a starting base asset to one of its customers. Under the non-cash benefit rules (explained in Chapter 15), the market value of the asset will be included in mining expenditure for Bridie's mining project interest. So, the termination value for the asset will include that amount.

13.41 The second limb of the rule deals with the case where the mining expenditure is reduced because the miner received something of value as a consequence of the starting base adjustment event.

Example 13.151 : Reduced mining expenditure arising because of a starting base adjustment

Continuing the previous example, if Bridie received some cash from its customer for the asset, Bridie's mining expenditure would be reduced by that amount (assuming it was not mining revenue), so the termination value for the asset should include the full value that Bridie received for the asset, being the amount included in mining expenditure as well as the amount by which mining expenditure was reduced.

Reduction for non-mining operations

13.42 The amount of a starting base adjustment is reduced to the extent that the decline in value of the asset has been ignored in working out a starting base loss for the mining project interest for that MRRT year or an earlier year. The reduction is:

[(Sum of reductions) / (Total decline)] x Starting base adjustment amount

[Section 165-15]

13.43 The 'total decline' refers to the sum of all declines in value for the asset up until the time of the starting base adjustment event.

13.44 The 'sum of reductions' is the total of all amounts by which the decline in value of the starting base asset has been ignored in working out a starting base loss. These reductions are explained in Chapter 7. Broadly, the reductions are made to ensure that the starting base loss does not include any part of the asset's decline in value that:

•

is attributable to the miner's use of the asset, or having it installed ready for use, or constructing it for use, for a purpose other than upstream mining operations in relation to the mining project interest [subsection 80-40(3)] ; or

•

would be excluded expenditure if it was an amount that the miner was taken to have incurred on or after 1 July 2012 [subsection 80-40(4)] .

Partial disposals of starting base assets (other than the single starting base asset)

13.45 Further rules deal with partial disposals of starting base assets after the start time. Where a miner stops holding a part of a starting base asset, the general starting base adjustment rules apply to that part in the same way they would apply if that part was a starting base. For this purpose, the adjustable value of the disposed part is taken to be a reasonable proportion of that of the entire starting base asset at the time. [Subsections 165-35(1) and (2)]

Example 13.152 : Partial disposal of a starting base asset

Maher and Paher Co. (MPC) uses a starting base asset to the extent of 10 per cent in the upstream mining operations of its mining project interest. The base value of the asset at the beginning of the MRRT year is $10 million and its remaining effective life is 10 years. Halfway through the year, MPC sells a 75 per cent interest in the underlying asset for $6 million.

The adjustable value of the asset at the time of the sale is $9.5 million.

The adjustable value of the 75 per cent interest is $7.125 million ($9.5m x 75%). The termination value of the 75 per cent interest is $6 million (being the sale price). So, there is a starting base adjustment of $1.125 million that is included in a starting base loss.

The base value for the remaining 25 per cent interest is $2.375 million ($9.5m x 25%).

Assuming MPC used its 25 per cent interest in the asset for the second half of the year to the same extent (10 per cent in the upstream mining operations of its mining project interest), then it would have a starting base loss equal to $62,500, being the sum of the following:

•

For the use of the asset in the first half of the year:

10% x 1/2 x $1m = $50,000

•

For the use of the 25 per cent interest in the second half of the year:

10% x 1/2 x $250,000 = $12,500.

13.46 After a partial disposal occurs, the general rules for starting base assets apply in relation to the remainder of the asset. For the MRRT year in which the part disposal occurs, the decline in value for the remainder of the asset takes into account both:

•

the decline in value for the entire asset (including the disposed part) for the period in the MRRT year before the part disposal; and

•

the decline in value for the remainder of the asset (not including the disposed part) for the period in the MRRT year after the disposal.

[Section 165-40]

13.47 The decline in value for the entire asset (including the disposed part) for the period in the MRRT year before the part disposal, is worked out as if that period was a MRRT year. [Paragraph 165-40(1)(a)]

13.48 Similarly, the decline in value for the remainder of the asset (not including the disposed part) for the period in the MRRT year after the disposal, is worked out as if that period was the next MRRT year. Although the periods are treated as separate MRRT years to work out the decline in value, there is no uplift of the base value at the end of the earlier period (regardless of whether the book value method is used). [Paragraphs 165-40(1)(b) and (2)(a)]

13.49 Also, if the book value method is used, the same write-off rate applies to each period in the MRRT year as would normally apply to the entire MRRT year (and not the next MRRT year). [Subsection 165-40(4)]

13.50 Where more than one partial disposal occurs in relation to the same starting base asset in the same MRRT year, the periods between those disposals are treated as separate MRRT years in working out the declines in value for the remainder of the starting base asset. For example, where a second partial disposal occurs in relation to the same starting base asset in the same MRRT year, then the period in the entire MRRT year before the first disposal is treated as an MRRT year. The period after the first disposal and before the second disposal is treated as another MRRT year. Finally, the period after the second disposal and before the end of the entire MRRT year is treated as another MRRT year. [Subsection 165-40(3)]

13.51 Following a partial disposal of a starting base asset, the amount of a starting base loss for the remainder of the asset is worked out taking into account the use of the remaining asset, but not taking into account any use of the disposed part. [Section 165-45]

Partial disposal rules do not apply where the entire asset is disposed of

13.52 The partial disposal rules do not apply to a partial disposal that occurs at the same time the miner stops holding all other parts of the starting base asset. For example, if a miner sells a 50 per cent interest in its starting base asset to one entity and another 50 per cent interest to another entity at the same time, then the miner will apply the general starting base adjustment rules to the entire asset it stops holding (rather than applying the partial disposal rules separately to each part it stops holding). [Subsection 165-35(3)]

Partial disposal rules do not apply to the single starting base asset

13.53 As discussed above, a starting base adjustment event does not apply in relation to the single starting base asset under the market value approach. So, a 'partial disposal' of that asset (such as through the sale of mining information that is included in that asset) is not subject to the rule about partial disposals of starting base assets. However, as discussed above, this may represent a recoupment of the base value of the single starting base asset, which will result in the base value of the asset being reduced accordingly. [Paragraph 165-5(2)(a)]

Using a starting base asset in other project interests

13.54 As discussed in Chapter 7, a starting base loss is reduced to the extent that a starting base asset is used, installed ready for use, or being constructed for use, for a purpose other than upstream mining operations of the mining project interest. Where that other purpose includes a use in the upstream mining operations of another mining project interest of the same miner, then the miner can include an amount in mining expenditure for that other interest. The amount included in mining expenditure is so much of the reduction in the decline in value for the first mining project interest as is attributable to that use in the other interest, and as would be included in mining expenditure for the other interest had the miner actually incurred the amount. This ensures that the base value of the starting base asset is realised by the miner to the extent it is used in the miner's upstream mining operations, regardless of whether the asset is used in another mining project interest of the miner in relation to which the asset is not a starting base asset. [Subsection 165-55(1), paragraph 165-55(2)(a), subparagraph 165-55(2)(b)(i) and subsection 165-55(5)]

Example 13.153 : Using a starting base asset in a miner's other mining project interest

Crag Co. has two mining project interests, A and B. Crag holds a starting base asset in relation to mining project interest A. In an MRRT year, it uses the asset 50 per cent in the upstream mining operations of mining project interest A and 50 per cent in the upstream mining operations of its other mining project interest B.

The starting base loss for mining project interest A does not include half of the decline in value for the asset for the year, reflecting the use of the asset outside of the upstream mining operations of that interest.

Crag Co. can include that half of the decline in value for the MRRT year in the mining expenditure of mining project interest B for that year.

13.55 Similarly, a miner can include an amount in the pre-mining expenditure of its pre-mining project interest where it uses a starting base asset in the pre-mining operations of that interest. [Subsection 165-55(1), paragraph 165-55(2)(a), subparagraph 165-55(2)(b)(ii) and subsection 165-55(5)]

Using a starting base asset after a starting base adjustment event

13.56 As discussed above, a miner may continue to hold a starting base asset after a starting base adjustment event. This will occur when the starting base adjustment happens because the miner decides never to use an asset in the upstream mining operations of the mining project interest in the future.

13.57 If, after this time, the miner starts to use the asset in the upstream mining operations of another mining project interest (for which the asset is not a starting base asset), then an amount may be included in the mining expenditure of its other mining project interest. The amount included in mining expenditure will be so much of the asset's termination value from the earlier starting base adjustment event as would be included in mining expenditure if the miner had actually incurred that termination value when it starts to use the asset in the other mining project interest. [Subsections 165-55(3) to (5)]

13.58 If, after a starting base adjustment event (other than ceasing to hold the asset), the miner starts to use the asset in the upstream mining operations of the same mining project interest (for which the asset is a starting base asset), then the starting base asset is taken to have a base value equal to its termination value under the earlier starting base adjustment event. This means that the decline in value for the asset will restart from a value that reflects the basis of the earlier starting base adjustment. This ensures that the entire base value of the starting base asset will be recognised by the miner to the extent it is used in the upstream mining operations of the mining project interest, regardless of whether an earlier starting base adjustment event (other than ceasing to hold the asset) has happened. [Section 165-60]