Tax Laws Amendment (2009 Measures No. 3) Act 2009 (47 of 2009)

Schedule 3 Petroleum resource rent tax

Part 1 Functional currency

Petroleum Resource Rent Tax Assessment Act 1987

19 At the end of Part V

Add:

Division 7 Functional currency

58A Objects of this Division

The objects of this Division are:

(a) to allow a person whose accounts are kept solely or predominantly in a particular foreign currency (the functional currency ) to calculate:

(i) the person's taxable profits; and

(ii) certain other amounts;

by reference to the functional currency; and

(b) to allow companies that:

(i) are in a designated company group; and

(ii) whose accounts are kept solely or predominantly in a particular foreign currency (the functional currency );

to calculate:

(iii) their taxable profits; and

(iv) certain other amounts;

by reference to the functional currency.

58B Person may elect to be bound by the functional currency rules

(1) A person may elect to be bound by the functional currency rules for the purposes of this Act, with effect from the start of:

(a) if the election was made by the person within 30 days after the day on which the Tax Laws Amendment (2009 Measures No. 3) Act 2009 received the Royal Assent - the year of tax beginning on 1 July 2009; or

(b) in any other case - the year of tax following the one in which the person made the election.

(2) An election under subsection (1) must be in writing.

(3) An election under subsection (1) continues in effect until a withdrawal of the election takes effect (see section 58L).

Designated company group - deemed election etc.

(4) If:

(a) a person has made an election under subsection (1); and

(b) at the time when the person made the election, the person was the head company of a designated company group; and

(d) when the election took effect, the person was the head company of a designated company group; and

(e) immediately before the end of the year of tax, the person is the head company of a designated company group (the current designated company group );

then:

(f) each other company that was in the current designated company group immediately before the end of the year of tax is taken to have made an election under subsection (1); and

(g) an election covered by paragraph (f):

(i) is taken to have been in effect for the year of tax; and

(ii) supersedes any previous election made by the other company that was in effect for the year of tax.

(5) If:

(a) a person has made an election under subsection (1); and

(b) at the time when the person made the election, the person was the head company of a designated company group; and

(d) during the year of tax, the person ceased to be the head company of the designated company group; and

(e) immediately before the end of the year of tax, another company is the head company of the designated company group;

then:

(f) the company covered by paragraph (e) is taken to have made an election under subsection (1); and

(g) an election covered by paragraph (f):

(i) is taken to have been in effect for the year of tax; and

(ii) supersedes any previous election made by the company that was in effect for the year of tax; and

(h) each other company that was in the designated company group immediately before the end of the year of tax is taken to have made an election under subsection (1); and

(i) an election covered by paragraph (h):

(i) is taken to have been in effect for the year of tax; and

(ii) supersedes any previous election made by the other company that was in effect for the year of tax.

(6) If:

(a) immediately before the end of a year of tax, a person is the head company of a designated company group; and

(b) the person is not taken, under subsection (5), to have made an election under subsection (1) that is in effect for the year of tax; and

(i) is in effect for the year of tax; and

(ii) under subsection (4), results in each other company that was in the designated company group immediately before the end of the year of tax being taken to have made an election under subsection (1); and

(d) a company that was in the designated company group immediately before the end of the year of tax has made an election under subsection (1); and

(e) the election covered by paragraph (d) is in effect for the year of tax;

the company covered by paragraph (d) is taken to have withdrawn the election covered by paragraph (d) with effect from the start of the year of tax.

58C Applicable foreign currency

(1) For the purposes of this Act, if:

(a) a person has made an election under section 58B (other than an election taken to have been made as a result of the application of subsection 58B(4) or paragraph 58B(5)(h) to a designated company group); and

(b) the election is in effect for a year of tax;

the person's applicable functional currency for the year of tax is the sole or predominant foreign currency in which:

(c) if the person is the head company of a designated company group - the person kept the person's accounts immediately before the end of the year of tax; or

(d) otherwise - the person kept the person's accounts at the time when the person made the election.

Designated company group

(2) For the purposes of this Act, if:

(a) a person is taken to have made an election under section 58B as a result of the application of subsection 58B(4) or paragraph 58B(5)(h) to a designated company group; and

(b) the election is in effect for a year of tax;

the person's applicable functional currency for the year of tax is the sole or predominant currency in which the head company of the designated company group kept its accounts immediately before the end of the year of tax.

58D Basic translation rules

(1) If:

(a) a person has made an election under section 58B; and

(b) that election is in effect for a year of tax;

the following rules apply:

(c) first, for the purpose of working out the taxable profit of the person of the year of tax in relation to a petroleum project:

(i) an amount that is not in the applicable functional currency is to be translated into the applicable functional currency; and

(ii) the definition of foreign currency in section 2 does not apply; and

(iii) the applicable functional currency is taken not to be a foreign currency; and

(iv) Australian currency and any other currency (except the applicable functional currency) are taken to be foreign currencies;

(d) second, the taxable profit of the person of the year of tax in relation to the petroleum project is to be translated into Australian currency;

(e) third, for the purpose of working out a credit to which the person is entitled under section 46 in relation to the year of tax, an amount of excess closing-down expenditure is to be translated into Australian currency.

Examples of an amount

(2) The following are examples of an amount:

(a) an amount of an expense;

(b) an amount of an obligation;

(d) an amount of a receipt;

(e) an amount of a payment;

(f) an amount of consideration;

(g) a value.

58E Translation rule - assessable receipt

If:

(a) a person derives an assessable receipt in relation to a petroleum project; and

(b) the receipt is not in the applicable functional currency; and

the receipt is to be translated into the applicable functional currency at the exchange rate applicable at the time when the receipt was derived.

58F Translation rule - deductible expenditure

If:

(a) a person incurs deductible expenditure in relation to a petroleum project; and

(b) the expenditure is not in the applicable functional currency; and

the expenditure is to be translated into the applicable functional currency at the exchange rate applicable at the time the expenditure was incurred.

58G Translation rule - transfer of entire entitlement to assessable receipts

If:

(a) section 48 applies in relation to a transaction; and

(b) a person is a purchaser (within the meaning of section 48) in relation to the transaction; and

(d) the transfer time (within the meaning of section 48) occurred when an election made by the person under section 58B was in effect; and

(e) the amount is not in the applicable functional currency;

the amount is to be translated into the applicable functional currency at the exchange rate applicable at the transfer time (within the meaning of section 48).

58H Translation rule - transfer of part of entitlement to assessable receipts

If:

(a) section 48A applies in relation to a transaction; and

(b) a person is a purchaser (within the meaning of section 48A) in relation to the transaction; and

(d) the transfer time (within the meaning of section 48A) occurred when an election made by the person under section 58B was in effect; and

(e) the amount is not in the applicable functional currency;

the amount is to be translated into the applicable functional currency at the exchange rate applicable at the transfer time (within the meaning of section 48A).

58J Translation of taxable profit, or excess closing-down expenditure, into Australian currency

(1) If:

(a) paragraph 58D(1)(d) requires the translation of the taxable profit of a person of a year of tax in relation to a petroleum project; or

(b) paragraph 58D(1)(e) requires the translation of an amount of excess closing-down expenditure for the purpose of working out a credit to which a person is entitled under section 46 in relation to a year of tax;

that taxable profit or excess closing-down expenditure, as the case may be, is to be translated using:

(c) if the person elects to use an exchange rate that is an average of all the exchange rates during the year of tax - that exchange rate; or

(d) if the person elects to use the exchange rate applicable on the last day of the year of tax - that exchange rate.

(2) An election under paragraph (1)(c) or (d):

(a) must be in writing; and

(b) is irrevocable.

Default election

(3) If:

(a) either:

(i) paragraph 58D(1)(d) requires the translation of the taxable profit of a person of a year of tax in relation to a petroleum project; or

(ii) paragraph 58D(1)(e) requires the translation of an amount of excess closing-down expenditure for the purpose of working out a credit to which a person is entitled under section 46 in relation to a year of tax; and

(b) the person does not make an election under paragraph (1)(c) or (d) of this section in relation to the year of tax;

the person is taken to have made an election under paragraph (1)(c) of this section in relation to the year of tax.

Continuity of election

(4) If:

(a) a person has made an election under section 58B; and

(b) that election is in effect for 2 or more consecutive years of tax; and

the person is taken to have made an election under paragraph (1)(c) of this section in relation to each remaining year of tax.

(5) If:

(a) a person has made an election under section 58B; and

(b) that election is in effect for 2 or more consecutive years of tax; and

the person is taken to have made an election under paragraph (1)(d) of this section in relation to each remaining year of tax.

Designated company group - deemed election under paragraph (1)(c) etc.

(6) If:

(a) a person has made an election under paragraph (1)(c) in relation to a year of tax; and

(b) at the time when the person made the election, the person was the head company of a designated company group; and

(c) immediately before the end of the year of tax, the person is the head company of a designated company group (the current designated company group );

then:

(d) each other company that was in the current designated company group immediately before the end of the year of tax is taken to have made an election under paragraph (1)(c) in relation to the year of tax; and

(e) an election covered by paragraph (d):

(i) is taken to have been in effect for the year of tax; and

(ii) supersedes any previous election made by the other company that was in effect for the year of tax.

(7) If:

(a) a person has made an election under paragraph (1)(c); and

(b) at the time when the person made the election, the person was the head company of a designated company group; and

(d) during the year of tax, the person ceased to be the head company of the designated company group; and

(e) immediately before the end of the year of tax, another company is the head company of the designated company group;

then:

(f) the company covered by paragraph (e) of this subsection is taken to have made an election under paragraph (1)(c); and

(g) an election covered by paragraph (f) of this subsection:

(i) is taken to have been in effect for the year of tax; and

(ii) supersedes any previous election made by the company that was in effect for the year of tax; and

(h) each other company that was in the designated company group immediately before the end of the year of tax is taken to have made an election under paragraph (1)(c); and

(i) an election covered by paragraph (h) of this subsection:

(i) is taken to have been in effect for the year of tax; and

(ii) supersedes any previous election made by the other company that was in effect for the year of tax.

(8) If:

(a) immediately before the end of a year of tax, a person is the head company of a designated company group; and

(b) the person is not taken, under subsection (7), to have made an election under paragraph (1)(c) that is in effect for the year of tax; and

(i) relates to the year of tax; and

(ii) under subsection (6), results in each other company that was in the designated company group immediately before the end of the year of tax being taken to have made an election under paragraph (1)(c); and

(d) a company that was in the designated company group immediately before the end of the year of tax has made an election under paragraph (1)(c) in relation to the year of tax;

the election covered by paragraph (c) of this subsection is taken not to have been in effect for the year of tax.

Designated company group - deemed election under paragraph (1)(d) etc.

(9) If:

(a) a person has made an election under paragraph (1)(d) in relation to a year of tax; and

(b) at the time when the person made the election, the person was the head company of a designated company group; and

(c) immediately before the end of the year of tax, the person is the head company of a designated company group (the current designated company group );

then:

(d) each other company that was in the current designated company group immediately before the end of the year of tax is taken to have made an election under paragraph (1)(d) in relation to the year of tax; and

(e) an election covered by paragraph (d):

(i) is taken to have been in effect for the year of tax; and

(ii) supersedes any previous election made by the other company that was in effect for the year of tax.

(10) If:

(a) a person has made an election under paragraph (1)(d); and

(b) at the time when the person made the election, the person was the head company of a designated company group; and

(d) during the year of tax, the person ceased to be the head company of the designated company group; and

(e) immediately before the end of the year of tax, another company is the head company of the designated company group;

then:

(f) the company covered by paragraph (e) of this subsection is taken to have made an election under paragraph (1)(d); and

(g) an election covered by paragraph (f) of this subsection:

(i) is taken to have been in effect for the year of tax; and

(ii) supersedes any previous election made by the company that was in effect for the year of tax; and

(h) each other company that was in the designated company group immediately before the end of the year of tax is taken to have made an election under paragraph (1)(d); and

(i) an election covered by paragraph (h) of this subsection:

(i) is taken to have been in effect for the year of tax; and

(ii) supersedes any previous election made by the other company that was in effect for the year of tax.

(11) If:

(a) immediately before the end of a year of tax, a person is the head company of a designated company group; and

(b) the person is not taken, under subsection (10), to have made an election under paragraph (1)(d) that is in effect for the year of tax; and

(i) relates to the year of tax; and

(ii) under subsection (9), results in each other company that was in the designated company group immediately before the end of the year of tax being taken to have made an election under paragraph (1)(d); and

(d) a company that was in the designated company group immediately before the end of the year of tax has made an election under paragraph (1)(d) in relation to the year of tax;

the election covered by paragraph (c) of this subsection is taken not to have been in effect for the year of tax.

58K Special translation rules - events that happened before the current election took effect

Class 1 augmented bond rate general expenditure, class 1 augmented bond rate exploration expenditure and class 2 augmented bond rate general expenditure

(1) If:

(a) a person has made an election under section 58B (the current election ) with effect from the start of a particular year of tax; and

(b) any of the following subparagraphs applies:

(i) under subsection 33(3), an amount is taken to be class 1 augmented bond rate general expenditure incurred by the person in relation to a petroleum project on the first day of the year of tax;

(ii) under subsection 34(3), an amount is taken to be class 1 augmented bond rate exploration expenditure incurred by the person in relation to a petroleum project on the first day of the year of tax;

(iii) under subsection 34A(4), an amount is taken to be class 2 augmented bond rate general expenditure incurred by the person on the first day of the year of tax; and

(c) as a result of the current election, section 58D requires that the amount be translated into the applicable functional currency;

the amount is to be translated into the applicable functional currency at the exchange rate applicable when the current election took effect.

Class 2 augmented bond rate exploration expenditure, class 2 GDP factor expenditure and transferable exploration expenditure

(2) For the purpose of working out:

(a) the class 2 augmented bond rate exploration expenditure; or

(b) the class 2 GDP factor expenditure; or

that a person is taken to have incurred in a year of tax in relation to a petroleum project, if:

(d) the person has made an election (the current election ) under section 58B; and

(e) the current election is in effect for the year of tax; and

(f) section 58D requires that an amount of expenditure be translated into the applicable functional currency; and

(g) the expenditure was actually incurred before the current election took effect;

the expenditure is to be translated into the applicable functional currency at the exchange rate applicable when the current election took effect.

58L Withdrawal of election

(1) If:

(b) the person's applicable functional currency has ceased to be the sole or predominant currency in which the person keeps the person's accounts;

the person may withdraw the election with effect from immediately after the end of the year of tax in which the person withdraws the election.

(2) A withdrawal must be in writing.

(3) Withdrawing an election does not prevent the person from making a fresh election under section 58B.

Designated company groups - deemed withdrawal of election etc

(4) If:

(a) a person withdraws an election under section 58B with effect from immediately after the end of the year of tax in which the person withdraws the election; and

(b) at the time when the withdrawal is made, the person is the head company of a designated company group;

each other company in the designated company group is taken to have withdrawn the other company's section 58B election with effect from immediately after the end of the year of tax.

58M Special translation rules - events that happened before the withdrawal of an election took effect

Class 1 augmented bond rate general expenditure, class 1 augmented bond rate exploration expenditure and class 2 augmented bond rate general expenditure

(1) If:

(a) a person withdraws an election under section 58B with effect from immediately after the end of a year of tax; and

(b) the person does not make a fresh election under section 58B with effect from the start of the next year of tax; and

(i) under subsection 33(3), an amount is taken to be class 1 augmented bond rate general expenditure incurred by the person in relation to a petroleum project on the first day of the next year of tax;

(iii) under subsection 34A(4), an amount is taken to be class 2 augmented bond rate general expenditure incurred by the person on the first day of the next year of tax; and

(d) section 10 requires that the amount be translated into Australian currency;

the amount is to be translated into Australian currency at the exchange rate applicable at the start of the next year of tax.

Class 2 augmented bond rate exploration expenditure, class 2 GDP factor expenditure and transferable exploration expenditure

(2) For the purpose of working out:

(a) the class 2 augmented bond rate exploration expenditure; or

(b) the class 2 GDP factor expenditure; or

that a person is taken to have incurred in a year of tax in relation to a petroleum project, if:

(d) a person withdraws an election under section 58B with effect from immediately after the end of an earlier year of tax; and

(e) the person has not made an election under section 58B with effect from the start of an intervening year of tax; and

(f) section 10 requires that an amount of expenditure be translated into Australian currency; and

(g) the expenditure was actually incurred before the withdrawal of the election took effect;

the expenditure is to be translated into Australian currency at the exchange rate applicable at the start of the next year of tax after that earlier year of tax.

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