Petroleum Resource Rent Tax Assessment Amendment Act 2012 (18 of 2012)

Schedule 4 Starting base for onshore petroleum projects and the North West Shelf project

Part 1 Main amendments

Petroleum Resource Rent Tax Assessment Act 1987

16 At the end of the Act

Add:

Schedule 2 - Starting base for onshore petroleum projects and the North West Shelf project

Note: See sections 35D and 35E.

Part 1 - Preliminary

1 Object of this Schedule

The object of this Schedule is to recognise the value, when resource tax reforms were announced on 2 May 2010, of:

(a) onshore petroleum projects; and

(b) the North West Shelf project;

by allowing certain amounts to be included in the deductible expenditure for the projects.

2 Definitions

In this Schedule:

accounting standard has the same meaning as in the Corporations Act 2001.

arrangement has the meaning given by subsection 995-1(1) of the Income Tax Assessment Act 1997.

auditing standard has the same meaning as in the Corporations Act 2001.

CGT asset has the meaning given by subsection 995-1(1) of the Income Tax Assessment Act 1997.

cost base has the meaning given by subsection 995-1(1) of the Income Tax Assessment Act 1997.

depreciating asset has the meaning given by subsection 995-1(1) of the Income Tax Assessment Act 1997.

entity has the meaning given by subsection 995-1(1) of the Income Tax Assessment Act 1997.

hold , in relation to a starting base asset, has the meaning given by clause 11.

interim expenditure , in relation to a person’s starting base asset relating to a petroleum project, has the meaning given by clause 15.

market value has a meaning affected by Subdivision 960-S of the Income Tax Assessment Act 1997.

mining, quarrying or prospecting information has the meaning given by subsection 995-1(1) of the Income Tax Assessment Act 1997.

project activity : a thing done is a project activity in relation to a petroleum project if it is done in carrying on or providing the operations, facilities and other things (including services and amenities) of a kind referred to in section 37 or 38 in relation to the project.

starting base return means a return of the kind referred to in clause 22, that complies with all the requirements of that clause and section 388-75 in Schedule 1 to the Taxation Administration Act 1953.

Part 2 - Choosing a valuation approach

3 Choosing a valuation approach

(1) A person may choose the valuation approach for:

(a) an interest that, on 30 June 2013, the person holds in an onshore petroleum project or the North West Shelf project; or

(b) an interest that the person may in the future hold in such a project, if the project:

(i) does not exist at the time the person makes the choice; and

(ii) would, if it later came into existence, be derived from an exploration permit or retention lease in which the person held an interest at that time.

(2) The choice is not valid unless the person gives to the Commissioner a valid starting base return.

(3) The choice must specify whether the person has chosen:

(a) the book value approach; or

(b) the market value approach; or

Note 1: The book value approach and the market value approach affect a person’s starting base amount under Part 3, through the valuation of starting base assets under Division 3 of that Part and the way in which interim expenditure is taken into account under Division 4 of that Part.

Note 2: There is no starting base amount if the look-back approach applies, but expenditure incurred before 1 July 2012 may be eligible real expenditure: see subsections 45(2), (4) and (5).

(4) The choice is irrevocable after:

(a) 30 August 2013; or

(b) if, under paragraph 22(2)(c), the Commissioner allows further time for the person to give a starting base return - after that time elapses.

(5) The choice applies to:

(a) the year of tax commencing on 1 July 2012; and

(b) all later years of tax.

Note: Making a choice obliges the person to give to the Commissioner a starting base return under clause 22.

4 Restriction on specifying the book value approach

(1) The choice cannot specify the book value approach unless:

(a) during the 18 months preceding 2 May 2010, a person who held in that period:

(i) the interest in the onshore petroleum project or the North West Shelf project; or

(ii) if that interest did not exist in that period - an interest in the exploration permit or retention lease mentioned in subparagraph 3(1)(b)(ii);

prepared a financial report relating to the interest in accordance with accounting standards; and

(b) the report relates to a financial period that ended in the 18 months preceding 2 May 2010; and

(2) If, during the 18 months preceding 2 May 2010, the person was a part of a consolidated entity (within the meaning of the Corporations Act 2001), for the purposes of paragraph (1)(a), treat any financial report for the consolidated entity, relating to the interest, as a report that the person prepared.

5 The valuation approach for starting base assets

The valuation approach for an interest in an onshore petroleum project or the North West Shelf project is the approach specified in a choice under clause 3 relating to:

(a) the interest; or

(b) an interest in an exploration permit or retention lease from which the interest is derived.

Part 3 - Starting base amounts

Division 1 - Starting base amounts

6 When a person has a starting base amount

A person has a starting base amount in relation to an interest in a petroleum project if:

(a) the project is an onshore petroleum project or is the North West Shelf project; and

(b) the person holds the interest; and

(i) the production licence relating to the project existed at the start of 1 July 2012; or

(ii) there existed at that time an exploration permit, or a retention lease, from which is derived the production licence to which the project relates; and

(d) the look-back approach is not the valuation approach for the interest under Part 2; and

(e) there are one or more starting base assets relating to the interest.

Note: In order for a starting base asset to relate to an interest in a petroleum project, the production licence relating to the project, or the retention lease or exploration permit from which it is derived, must have existed just before 2 May 2010: see clause 10.

7 The amount of the starting base amount

(1) If, under Part 2, the book value approach is the valuation approach for an interest in an onshore petroleum project or the North West Shelf project, the amount of the starting base amount relating to the interest is the sum of:

(a) the book values, worked out under Division 3, of all the starting base assets, relating to the interest, to which subclause (3) applies; and

(b) the adjusted interim expenditure amounts relating to the interest, worked out under clause 16.

(2) If, under Part 2, the market value approach is the valuation approach for an interest in an onshore petroleum project or the North West Shelf project, the amount of the starting base amount relating to the interest is the sum of:

(a) unless clause 8 applies - the market values, worked out under Division 3, of all the starting base assets, relating to the interest, to which subclause (3) applies; and

(b) if clause 8 applies - the amount worked out under subclause 8(2); and

(3) This subclause applies to a starting base asset if, at all times between 2 May 2010 and 30 June 2012, the person holding the asset simultaneously held:

(a) the interest in the project; or

(b) if, for some or all of that period, the project did not exist - an interest in a retention lease, or in an exploration permit, from which the project is derived.

Note: This subsection allows for a transfer of the starting base asset between 2 May 2010 and 30 June 2012, if it matches a transfer of the interest.

8 Alternative valuation method for coal seam gas projects

(1) This clause applies if:

(a) under Part 2, the market value approach is the valuation approach for an interest in an onshore petroleum project; and

(b) the project includes a known reserve of coal seam gas; and

(i) the interest, or another interest in the project, was acquired, by any person, between 1 July 2007 and 2 May 2010; or

(ii) a company that held the interest, or another interest in the project, was acquired, by any person, between 1 July 2007 and 2 May 2010; and

(d) the person who chose the market value approach in relation to the interest (the interest holder ) chooses under subclause (4) of this clause to apply the alternative valuation method for coal seam gas projects.

(2) For the purposes of paragraph 7(2)(b), the amount worked out under this subclause is:

$0.60 x (Estimated reserves - Production since estimate)

where:

estimated reserves is:

(a) if paragraph (b) does not apply - the most recent approved estimate, made before 2 May 2010, of the proved, probable and possible reserves of coal seam gas for the project, expressed in gigajoules; or

(b) if the interest holder does not hold the entire interest in the project - the portion of that estimate, expressed in gigajoules, of those reserves that reflects the interest holder’s interest in the project.

production since estimate is:

(a) if paragraph (b) does not apply - the amount of coal seam gas produced from the project, expressed in gigajoules, between the day on which that approved estimate was made and 2 May 2010; or

(b) if the interest holder does not hold the entire interest in the project - the portion of that production, expressed in gigajoules, that reflects the interest holder’s interest in the project.

(3) To be an approved estimate for the purposes of subclause (2), an estimate of the proved, probable and possible reserves of coal seam gas for the project must have been:

(a) determined in accordance with the requirements of the document known as the Petroleum Resources Management System, issued by the Society of Petroleum Engineers, as in force at the time the estimate was made; and

(b) independently certified as being determined in accordance with the requirements of that document as so in force.

(4) The interest holder may choose to apply the alternative valuation method for coal seam gas projects.

(5) The choice is not valid unless the interest holder gives it to the Commissioner:

(a) in the approved form; and

(b) on or before 30 August 2013, or within a further time that the Commissioner allows.

(6) The choice is irrevocable, and applies to:

(a) the year of tax commencing on 1 July 2012; and

(b) all later years of tax.

(7) For the purposes of paragraph (1)(c):

(a) a person holding an interest in the project is taken to have acquired the interest if, and when, the person is taken to have acquired that interest for the purposes of clause 18; and

(b) a company holding an interest in the project is taken to have been acquired if, and when, the company is taken to have been acquired for the purposes of that clause.

9 Reducing the starting base amount

(1) Despite clause 7, a starting base amount under that clause is reduced by the sum of all the reductions (if any) required by subclauses (2) and (3) of this clause in relation to any starting base assets to which the starting base amount relates.

Use etc. that is not related to project activities

(2) Reduce the starting base amount to the extent (if any) that the amount relates to a starting base asset that, during the starting base period relating to the asset, was used, or being constructed for use, for a purpose other than carrying on project activities relating to the petroleum project.

Use etc. that equates to excluded expenditure

(3) Reduce the starting base amount (or, if that amount is reduced under subclause (2), that amount as so reduced) to the extent (if any) that the amount:

(a) relates to a starting base asset that, during the starting base period relating to the asset, was used, or being constructed for use, for carrying on project activities relating to the petroleum project; but

(b) would have been excluded expenditure if it had been an amount of expenditure that the person holding the interest in the project incurred.

(4) However, subclause (3) does not apply if:

(a) under Part 2, the market value approach is the valuation approach for the person’s starting base assets relating to the petroleum project; and

(b) the amount would have been excluded expenditure only because of paragraph 44(e), (f) or (g).

Note: Subclause (4) ensures that a starting base amount in relation to an interest in a petroleum project is not reduced under the market value approach.

Starting base period

(5) The starting base period in relation to a starting base asset is a period, between 2 May 2010 and 1 July 2012:

(a) during which a person held both the asset and the interest in the project; and

(b) during which the asset was, for any purpose, used or being constructed for use.

Division 2 - Starting base assets

10 Meaning of starting base asset

(1) Property, or a legal or equitable right that is not property, is a starting base asset relating to an interest in an onshore petroleum project or the North West Shelf project if:

(a) either of the following existed just before 2 May 2010:

(i) the production licence relating to the project, or (if the project is a combined project) a pre-combination project in relation to the project;

(ii) a retention lease, or exploration permit, from which the project (or pre-combination project) is derived; and

(b) on 2 May 2010, the property or right was used, or being constructed for use, in carrying on project activities relating to the project (or pre-combination project); and

(2) Despite subclause (1):

(a) if, under Part 2, the book value approach is the valuation approach for the interest in the petroleum project, the following are not starting base assets :

(i) rights and interests constituting the petroleum project;

(ii) mining, quarrying or prospecting information, or rights to such information;

(iii) goodwill; and

(b) property, or a legal or equitable right, is not, and is taken never to have been, a starting base asset if:

(i) a valid choice has not been made under section 3 specifying the valuation approach for the interest; or

(ii) a valid starting base return that covers the property or right has not been given to the Commissioner.

(3) If, under Part 2, the market value approach is the valuation approach for the person’s starting base assets relating to the interest in the petroleum project, treat:

(a) any mining, quarrying or prospecting information; or

(b) any rights to such information;

as property, or a legal or equitable right, for the purposes of subsection (1).

(4) Despite subsection (1), something that has already become a starting base asset relating to an interest in a petroleum project derived from a particular retention lease or exploration permit cannot become a starting base asset relating to an interest in another petroleum project derived from that lease or permit.

(5) This Schedule applies to any improvement to, or any fixture on, land as if it were an asset separate from the land, whether the improvement or fixture is removable or not.

11 Holding a starting base asset

(1) A person holds a starting base asset relating to an onshore petroleum project or the North West Shelf project if:

(a) the asset is a depreciating asset that the person holds (within the meaning of section 40-40 of the Income Tax Assessment Act 1997); or

(b) the person would hold the asset (within the meaning of that section) if it were a depreciating asset.

(2) However, a person who is entitled to the interest in a petroleum project is taken to hold the rights and interests constituting the interest in the project.

Division 3 - Valuation of starting base assets

12 The book value of a starting base asset

(1) If, under Part 2, the book value approach is the valuation approach for an interest in an onshore petroleum project or the North West Shelf project, the book value of a starting base asset relating to the interest is the book value under subclause (2) or (3).

(2) If:

(a) the value of the asset is recorded in the accounts from which the most recent audited financial report before 2 May 2010 was prepared; and

(b) the financial report relates to a financial period that ended in the 18 months preceding that day;

the book value of the asset is as follows:

Accepted value x (Long term bond rate for the valuation on period + 1.05)n

where:

accepted value is:

(a) the value recorded in those accounts, unless paragraph (b) applies; or

(b) if that value is inconsistent with an auditor’s report on the financial report - a value that is consistent with the auditor’s report.

long term bond rate for the valuation period is the long term bond rate for the valuation period under subclause (4).

n is the number of days in that valuation period, divided by 365.

(3) However, the initial book value of the asset is zero if the value of the asset is not recorded as mentioned in subclause (2).

(4) The valuation period for the asset is the period:

(a) starting:

(i) on the day the financial report mentioned in paragraph (2)(a) was prepared, unless subparagraph (ii) of this paragraph applies; or

(ii) if the value of the asset recorded in the accounts from which the financial report was produced is inconsistent with an auditor’s report on the financial report - on the day of the auditor’s report; and

(b) ending at the end of 30 June 2012.

13 The market value of a starting base asset

(1) If, under Part 2, the market value approach is the valuation approach for an interest in an onshore petroleum project or the North West Shelf project, the market value of a starting base asset relating to the interest is the market value of the asset on 1 May 2010.

(2) However, if the asset is a right or interest constituting the interest in the project, in working out its market value for the purposes of this section, disregard any liability of the person to make any payments, of a kind known as private override royalty payments, relating to:

(a) petroleum recovered from:

(i) the production licence area in relation to the project; or

(ii) an exploration permit area for an exploration permit from which the production licence to which the project relates is derived; or

(iii) a retention lease area for a retention lease from which the production licence to which the project relates is derived; or

(b) marketable petroleum commodities produced from such petroleum.

14 Partial disposal of a starting base asset before 1 July 2012

(1) The book value under clause 12, or the market value under clause 13, of a starting base asset relating to an interest that a person holds in an onshore petroleum project or the North West Shelf project is reduced to the extent (if any) that any of the person’s interest in the asset is disposed of during the period:

(a) starting on the day provided under subclause (2); and

(b) ending at the end of 30 June 2012.

(2) The period starts:

(a) if, under Part 2, the book value approach is the valuation approach for the interest:

(i) on the day of the financial report (if any) mentioned in paragraph 12(2)(a) of this Schedule in relation to the accounts in which the value of the asset is recorded; or

(ii) if subparagraph (i) of this paragraph does not apply - on 2 May 2010; or

(b) if, under Part 2, the market value approach is the valuation approach for the interest - on 2 May 2010.

(3) Treat, for the purposes of this clause, as a disposal of part of the person’s interest in the starting base asset an arrangement that has the effect of transferring to another person part of the benefits or entitlements that the person has in relation to the asset.

Division 4 - Interim expenditure

15 Meaning of interim expenditure

(1) An amount of expenditure that a person incurs relating to an interest in an onshore petroleum project or the North West Shelf project is interim expenditure relating to the interest to the extent that:

(a) the amount:

(i) relates to a depreciating asset that is used, or being constructed for use, on 1 July 2012 in carrying on project activities relating to the project; and

(ii) is included in the cost of the asset under Subdivision 40-C of the Income Tax Assessment Act 1997; and

(iii) was incurred during the period starting on the day provided under subclause (3) or (4) and ending at the end of 30 June 2012; or

(b) the amount:

(i) relates to a CGT asset that is not a depreciating asset and that is used, or being constructed for use, on 1 July 2012 in carrying on project activities relating to the project; and

(ii) is included in the cost base of the asset; and

(iii) was incurred during the period starting on the day provided under subclause (3) or (4) and ending at the end of 30 June 2012; or

(i) is mining capital expenditure (within the meaning of the Income Tax Assessment Act 1997) relating to project activities relating to the project; and

(ii) was incurred between 2 May 2010 and 30 June 2012.

(2) However, if the asset is a CGT asset (but not a depreciating asset), treat the amount of the interim expenditure as not including any part of the amount that consists of the third element of the cost base under subsection 110-25(4) of the Income Tax Assessment Act 1997.

Start of the expenditure period

(3) If, under Part 2, the book value approach is the valuation approach for the interest in the petroleum project, the period starts:

(a) if subclause (5) applies to the asset:

(i) on the day of the financial report (if any) mentioned in paragraph 12(2)(a) of this Schedule in relation to the accounts in which the value of the asset is recorded; or

(ii) if subparagraph (i) of this paragraph does not apply - on 2 May 2010; or

(b) otherwise - on the first day, before the end of 30 June 2012, from which the person held the asset at all times until the end of 30 June 2012.

Example: The person bought an asset on 1 January 2011 and sold it on 1 May 2011. The person bought the asset again on 1 June 2011 and still held it at the end of 30 June 2012.

The expenditure incurred in buying the asset the first time (on 1 January 2011) is not interim expenditure, because the person did not hold the asset until the end of 30 June 2012, as required by paragraph (3)(b).

The expenditure incurred in buying the asset the second time (on 1 June 2011) is interim expenditure (if it is covered by paragraph (1)(a)), because the person held the asset until the end of 30 June 2012.

(4) If, under Part 2, the market value approach is the valuation approach for the interest in the petroleum project, the period starts:

(a) if subclause (5) applies to the asset - on 2 May 2010; or

(b) otherwise - on the first day, before the end of 30 June 2012, from which the person held the asset at all times until the end of 30 June 2012.

(5) This subclause applies to an asset if, at all times between 2 May 2010 and 30 June 2012, the person holding the asset simultaneously held:

(a) the interest in the project; or

(b) if, for some or all of that period, the project did not exist - an interest in a retention lease, or in an exploration permit, from which the project is derived.

(6) For the purposes of subclauses (3) to (5), an amount of expenditure to which paragraph (1)(c) applies is taken to be an asset that the person incurring the expenditure holds from the day the expenditure was incurred until the day on which the person ceases to hold the interest in the project.

Excluded expenditure

(7) Despite subclause (1), the amount is not interim expenditure to the extent (if any) that the amount would have been excluded expenditure if it had been incurred after 1 July 2012.

16 Adjusted interim expenditure amounts

(1) If:

(a) under Part 2, the book value approach is the valuation approach for an interest in an onshore petroleum project or the North West Shelf project; and

(b) a person holding an interest in the project incurred an amount of interim expenditure relating to the interest;

there is an adjusted interim expenditure amount relating to the interest.

(2) The adjusted interim expenditure amount is as follows:

Amount of the interim expenditure x (Long term bond rate for the interim valuation period + 1.05)n

where:

long term bond rate for the interim valuation period is the long term bond rate for the interim valuation period under subclause (3).

n is the number of days in the interim valuation period, divided by 365.

(3) The interim valuation period for an amount of interim expenditure is the period:

(a) starting on the day on which the person holding the interest in the petroleum project incurred the amount; and

(b) ending at the end of 30 June 2012.

17 Partial disposal of an asset before 1 July 2012

(1) If:

(a) a person incurs interim expenditure relating to an interest that a person holds in an onshore petroleum project or the North West Shelf project; and

(b) the interim expenditure relates to a depreciating asset or a CGT asset; and

the amount of the interim expenditure is taken to be reduced to the extent the person’s interest in the asset is disposed of.

(2) Treat, for the purposes of this clause, as a disposal of part of the person’s interest in the asset an arrangement that has the effect of transferring to another person part of the benefits or entitlements that the person has in relation to the asset.

Part 4 - The look-back approach

Note: Section 45 deals generally with when eligible real expenditure may be incurred in relation to onshore petroleum projects and the North West shelf project, including under the look-back approach. This Part deals with some specific issues under the look-back approach, in particular issues relating to the costs of acquiring projects.

18 Expenditure incurred in acquiring interests in petroleum projects

Interests acquired between 1 July 2007 and 2 May 2010

(1) If:

(a) under Part 2, the look-back approach is the valuation approach for an interest in an onshore petroleum project or the North West Shelf project; and

(b) during the period between 1 July 2007 and 2 May 2010, either or both of the following events occurred:

(i) a person acquired the interest;

(ii) if the person holding the interest is a company - the person was acquired by another company;

the starting base expenditure, incurred by the person referred to in paragraph (b) in relation to the last such event to occur in relation to the interest during that period, includes the expenditure ( acquisition expenditure ) referred to in subsection (2).

(2) The acquisition expenditure is whichever of the following is applicable:

(a) the expenditure incurred by the person in acquiring the interest;

(b) the expenditure incurred by the other company in making the acquisition.

(3) Despite subclause (1), the starting base expenditure incurred by the person in relation to the project does not include acquisition expenditure to the extent (if any) that the acquisition expenditure reflects the value of things that are not project activities relating to the project.

(4) Despite subclause (1), the starting base expenditure incurred by the person in relation to the project does not include acquisition expenditure to the extent that the expenditure relates to an acquired exploration expenditure amount.

(5) Acquisition expenditure included under subclause (1) in the starting base expenditure incurred by the person is taken, for the purposes of this Act, to have been incurred on 2 May 2010.

Interests acquired before 30 June 2007

(6) If, under Part 2, the look-back approach is the valuation approach for an interest in an onshore petroleum project or the North West Shelf project, the eligible real expenditure incurred by the person holding the interest does not include:

(a) if the person acquired the interest before 30 June 2007 - expenditure ( acquisition expenditure ) incurred by the person in acquiring the interest; or

(b) if the person is a company that was acquired by another company before 30 June 2007 - expenditure ( acquisition expenditure ) incurred by the other company in making the acquisition.

Acquisitions

(7) For the purposes of this clause and clause 19, the person holding an interest in an onshore petroleum project or the North West Shelf project is taken to have acquired the interest if and only if:

(a) in a case where the project existed on 2 May 2010 - the person purchased the interest; or

(b) in a case where the project did not exist on 2 May 2010 - the person purchased:

(i) the exploration permit or retention lease from which the production licence to which the project relates is derived; or

(ii) an interest in the exploration permit or retention lease.

The acquisition is taken to have occurred when the transaction was first entered into that, when complete, had the effect of transferring the interest, or the permit or lease.

(8) For the purposes of this clause and clause 19:

(a) a company is taken to have been acquired by another company if and only if the company became a subsidiary of the other company; and

(b) the acquisition is taken to have occurred when:

(i) the transaction was first entered into that, when complete, had the effect of the first becoming a subsidiary of the other company; or

(ii) an agreement to enter into that transaction;

was first entered into; and

(c) except for the purposes of subclause (6) of this clause, the acquisition expenditure relating to the acquisition includes any expenditure the company incurred in acquiring any interest in the other company:

(i) during the period between 1 July 2007 and 2 May 2010; or

(ii) under an agreement entered into during the period between 1 July 2007 and 2 May 2010.

Note: Section 2B defines a subsidiary .

(9) However, paragraph (8)(c) does not apply to acquisition expenditure to the extent (if any) that the acquisition expenditure reflects the value of things that are not project activities relating to the petroleum project in which the other company holds an interest.

19 Acquired exploration expenditure amounts

(1) If:

(a) under Part 2, the look-back approach is the valuation approach for an interest in an onshore petroleum project or the North West Shelf project; and

(b) either:

(i) the person holding the interest acquired the interest during the period between 1 July 2007 and 2 May 2010; or

(ii) the person holding the interest is a company that was acquired during the period between 1 July 2007 and 2 May 2010; and

(i) the person holding the interest incurred in acquiring the interest; or

(ii) the person making the acquisition of the company holding the interest incurred in making the acquisition;

would, apart from subclause 18(4), be included under clause 18 in the starting base expenditure incurred by the person holding the interest;

the person holding the interest is taken, for the purposes of this Act, to have an acquired exploration expenditure amount in relation to the project equal to the amount of acquisition expenditure allocated to exploration assets and evaluation assets, as recorded in a financial report that satisfies subclause (2).

(2) The financial report satisfies this subclause if:

(a) it has been audited; and

(b) it was prepared in accordance with the accounting standards (within the meaning of the Corporations Act 2001); and

(3) The acquired exploration expenditure amount is taken, for the purposes of this Act, to be acquired exploration expenditure incurred by the person holding the interest on 2 May 2010.

20 Restriction applying the look-back approach in certain cases

Despite section 45 and clauses 18 and 19, if:

(a) under Part 2, the look-back approach is the valuation approach for an interest in an onshore petroleum project or the North West Shelf project; and

(b) particular expenditure would, apart from this clause, be eligible real expenditure incurred by a person in relation to the project; and

(i) if the expenditure was incurred between 1 July 2010 and 30 June 2012 - the person has not kept and retained records, relating to the expenditure, that would meet the requirements of section 112; or

(ii) if the expenditure was incurred between 1 July 2002 and 30 June 2010 - the person has not kept and retained records that enable the amount and nature of the expenditure to be reasonably substantiated;

the eligible real expenditure incurred by the person in relation to the project does not include that expenditure.

21 Certain receipts taken to be assessable receipts

If:

(a) under Part 2, the look-back approach is the valuation approach for an interest in an onshore petroleum project or the North West Shelf project; and

(b) between the starting base day under subsection 45(5) and 30 June 2012, the person incurred, in relation to particular property, expenditure that would have been eligible real expenditure incurred by the person in relation to the project if the person were to incur it after 30 June 2012; and

(c) between that starting base day and 30 June 2012, circumstances arose relating to the property that would have caused an assessable receipt of one of the following kinds to be derived in relation to the property if those circumstances were to arise after 30 June 2012:

(i) an assessable property receipt;

(ii) an assessable miscellaneous compensation receipt;

(iii) an assessable employee amenities receipt;

an amount equal to what would have been the amount of that assessable receipt is taken, for the purposes of this Act, to be an assessable receipt of that kind derived by the person, in relation to the project, in the financial year in which the circumstances arose.

Part 5 - Starting base returns and assessments

22 Starting base returns

(1) A person must give to the Commissioner a starting base return if the person wishes to choose a valuation approach under clause 3 in relation to a petroleum project.

(2) A starting base return is not valid unless:

(a) it is in the approved form; and

(b) it is signed by or on behalf of the person giving the return; and

(3) Without limiting the information that the approved form may require, the starting base return must provide the following information:

(a) the valuation approach chosen under clause 3 in relation to the petroleum project;

(b) if the book value approach or market value approach was chosen - the amount of the starting base amount relating to the person’s interest in the project;

(c) if the look-back approach was chosen - the amount of eligible real expenditure incurred before 1 July 2012 relating to the person’s interest in the project.

23 Starting base assessments

(1) If a person has given to the Commissioner a valid starting base return relating to a petroleum project, the Commissioner is taken to have made, in accordance with what the person specified in the return, an ascertainment (a starting base assessment ) of:

(a) if the book value approach or market value approach is the valuation approach relating to the person’s interest in the project - the amount of the starting base amount relating to the person’s interest in the project; or

(b) if the look-back approach is the valuation approach relating to the person’s interest in the project - the amount and kind of eligible real expenditure incurred before 1 July 2012 relating to the person’s interest in the project.

(2) The starting base assessment is taken to have been made on the day the starting base return is given to the Commissioner.

(3) On and after the day the Commissioner is taken to have made the starting base assessment, the return is taken to be a notice of the starting base assessment:

(a) under the hand of the Commissioner; and

(b) given to the person on the day the Commissioner is taken to have made the starting base assessment.

(4) The starting base assessment is taken, from the time it is made, to be an assessment for the purposes of:

(a) section 65 (validity of assessments); and

(b) section 66 (objections to assessments); and

(d) section 106 (evidence).

(5) Without limiting subclause (4), from the first time an assessment (a general assessment ) is made of the person’s taxable profit (or that the person has no taxable profit), in relation to the project and a year of tax commencing on or after 1 July 2012:

(a) the starting base assessment is taken, for the purposes of this Act, to form part of the general assessment; and

(b) any objection against the general assessment under section 66 must not relate to matters to which the starting base assessment relates; and

(c) any amendment of the general assessment under Division 3 of Part VI must not relate to matters to which the starting base assessment relates, except to the extent necessary to give effect to the starting base assessment (including the starting base assessment as amended).

(6) Without limiting subsection 67(2), the Commissioner may amend a general assessment at any time to the extent necessary to give effect to the starting base assessment (including the starting base assessment as amended).

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