Petroleum Resource Rent Tax Assessment Act 1987

SCHEDULE 1 - PROVISIONS RELATING TO INCURRING AND TRANSFER OF EXPLORATION EXPENDITURE ON OR AFTER 1 JULY 1990  

Sections 2 , 35A , 35B , 45A , 45B and 45D

PART 2 - CLASS 2 UPLIFTED EXPLORATION EXPENDITURE AND TRANSFERABLE EXPLORATION EXPENDITURE  

8   WHAT HAPPENS IF THERE IS A NOTIONAL TAXABLE PROFIT  

8(1)    
This clause applies if there is a notional taxable profit in relation to the person, the petroleum project and the assessable year.

8(2)    
For the purposes of this clause, the available exploration expenditure amount for the assessable year equals the incurred exploration expenditure amount in relation to the assessable year.

8(3)    

For the purposes of this clause, the available exploration expenditure amount for a standard uplift expenditure year before the assessable year is worked out as follows:

(a) if the standard uplift expenditure year is the financial year immediately before the assessable year - multiply the incurred exploration expenditure amount in relation to the standard uplift expenditure year by:

(i) if the standard uplift expenditure year starts before 1 July 2019 - the long-term bond rate in relation to the standard uplift expenditure year plus 1.15; or

(ii) otherwise - the long-term bond rate in relation to the standard uplift expenditure year plus 1.05;

(b) if the standard uplift expenditure year is an earlier financial year - work out, in relation to the standard uplift expenditure year and each later financial year ending before the assessable year, an amount in accordance with the formula:

Exploration expenditure amount × Uplift rate

where:

exploration expenditure amount
means:

(i) in making the calculation in relation to the standard uplift expenditure year - the incurred exploration expenditure amount in relation to the standard uplift expenditure year; or

(ii) in making the calculation in relation to one of the later financial years - the amount calculated under this paragraph in relation to the immediately preceding financial year for the purpose of working out the available exploration expenditure amount for the standard uplift expenditure year.

uplift rate
, for the financial year in relation to which the calculation is being made (the calculation year ), means:

(i) if both the standard uplift expenditure year and the calculation year start before 1 July 2019 - the long-term bond rate in relation to the calculation year plus 1.15; or

(ii) if the standard uplift expenditure year starts before 1 July 2019 and the calculation year starts on or after 1 July 2019 - the long-term bond rate in relation to the calculation year plus 1.05; or

(iii) if the standard uplift expenditure year starts on or after 1 July 2019 and the calculation year is 10 or more years after the standard uplift expenditure year - the GDP factor for the calculation year; or

(iv) in any other case - the long-term bond rate in relation to the calculation year plus 1.05;

(c) if paragraph (a) applies - the available exploration expenditure amount for the standard uplift expenditure year is the amount worked out under that paragraph;

(d) if paragraph (b) applies - the available exploration expenditure amount for the standard uplift expenditure year is the amount worked out under that paragraph in relation to the most recent of the later financial years referred to in paragraph (b).

8(4)    

If the total of the available exploration expenditure amounts for the assessable year and the previous standard uplift expenditure years is less than or equal to the notional taxable profit:

(a) the person is taken to have incurred an amount of class 2 uplifted exploration expenditure in the assessable year in relation to the project equal to the total of those available exploration expenditure amounts; and

(b) that class 2 uplifted exploration expenditure is attributable to all the expenditure included in the incurred exploration expenditure amounts for the assessable year and the previous standard uplift expenditure years; and

(c) none of the expenditure included in the incurred exploration expenditure amounts for the assessable year and the previous standard uplift expenditure years is transferable by the person in relation to the assessable year.

8(5)    

If the total of the available exploration expenditure amounts for the assessable year and the previous standard uplift expenditure years exceeds the notional taxable profit:

(a) the person is taken to have incurred an amount of class 2 uplifted exploration expenditure in the assessable year in relation to the project equal to the notional taxable profit; and

(b) the expenditure to which that class 2 uplifted exploration expenditure is attributable is to be worked out in accordance with whichever of subclauses (6) and (7) is applicable; and

(c) the expenditure included in the incurred exploration expenditure amounts for the assessable year and the previous standard uplift expenditure years that is not expenditure to which that class 2 uplifted exploration expenditure is attributable is transferable by the person in relation to the assessable year.

8(6)    

If:

(a) class 2 uplifted exploration expenditure is taken to be incurred by subclause (5); and

(b) the available exploration expenditure amount for the earliest of the standard uplift expenditure years for which there is such an amount equals or exceeds the notional taxable profit;
the class 2 uplifted exploration expenditure is attributable to so much of the expenditure included in the incurred exploration expenditure amount for that standard uplift expenditure year as, if it had been the only expenditure included in that amount, would have made the available exploration expenditure amount for that standard uplift expenditure year equal the notional taxable profit.

8(7)    
If:

(a) class 2 uplifted exploration expenditure is taken to be incurred by subclause (5); and

(b) the notional taxable profit exceeds the available exploration expenditure amount for the earliest of the standard uplift expenditure years for which there is such an amount;
the following provisions have effect:

(c) add amounts in accordance with the following rules:

(i) start with the available exploration expenditure amount for the earliest of the standard uplift expenditure years for which there is such an amount and add to that, in order starting with the next earliest standard uplift expenditure year, the available exploration expenditure amounts for the later standard uplift expenditure years;

(ii) if adding the available exploration expenditure amount for a standard uplift expenditure would make the total exceed the notional taxable profit, add only so much of that amount as makes the total equal the notional taxable profit and do not add the available exploration expenditure amount for any later standard uplift expenditure year;

(d) the class 2 uplifted expenditure is attributable to:

(i) all the expenditure included in the incurred exploration expenditure amounts for each standard uplift expenditure year in relation to which the whole available exploration expenditure amount was added in accordance with subparagraphs (c)(i) and (ii); and

(ii) if, under those subparagraphs, part only of the available exploration expenditure amount for a standard uplift expenditure year was added - so much of the expenditure included in the incurred exploration expenditure amount for that standard uplift expenditure year as, if it had been the only expenditure included in that amount, would have made the available exploration expenditure amount for that standard uplift expenditure year equal the added part.