Tax and Superannuation Laws Amendment (2015 Measures No. 2) Act 2015 (130 of 2015)

Schedule 1   Tax relief for certain mining arrangements

Part 1   Interest realignment arrangements

Income Tax Assessment Act 1997

1   After section 40-362

Insert:

40-363 Roll-over relief for interest realignment arrangements

Circumstances giving rise to roll-over relief

(1) There is roll-over relief if:

(a) there is a *balancing adjustment event under section 40-295 because, in an income year, you dispose of a *depreciating asset to another entity; and

(b) the asset is a *mining, quarrying or prospecting right; and

(c) the disposal occurs under an *interest realignment arrangement; and

(d) you choose to apply roll-over relief in relation to the asset.

Choosing to apply roll-over relief

(2) The choice must:

(a) be in writing; and

(b) be made at or before the time you lodge your *income tax return for the income year in which the *balancing adjustment event occurs, or within a longer period allowed by the Commissioner.

The effect of roll-over relief

(3) If there is roll-over relief under this section:

(a) section 40-285 does not apply to the *balancing adjustment event in relation to the asset; and

(b) an amount is included in your assessable income if such an amount (the non-realignment amount ) would have been included under subsection 40-285(1) if:

(i) paragraph (a) of this subsection did not apply; and

(ii) the *adjustable value of the *mining, quarrying or prospecting rights that you disposed of under the arrangement were taken to be the market value of the mining, quarrying or prospecting rights that you received under the arrangement; and

(c) in working out the *cost of a mining, quarrying or prospecting right that you receive under the arrangement, if:

(i) some or all of the cost consists of a *non-cash benefit that you provide; and

(ii) that benefit is a mining, quarrying or prospecting right that you disposed of under the arrangement;

the market value of the benefit is taken to be the adjustable value of the benefit.

(4) The amount included in your assessable income under paragraph (3)(b) is the non-realignment amount, and it is included for the income year in which the balancing adjustment event occurred.

Meaning of interest realignment arrangement etc.

(5) An interest realignment arrangement is an *arrangement:

(a) that is entered into between entities:

(i) that are undertaking jointly, or propose to undertake jointly, a project for carrying out *mining and quarrying operations; and

(ii) that each *holds one or more *mining, quarrying or prospecting rights relating to the project; and

(b) under which those entities exchange (or agree to exchange), with the effect set out in subsection (6), parts of those rights; and

(c) that does not provide for any transfer, of a mining, quarrying or prospecting right, that does not give rise to the effect referred to in subsection (6).

Note: The parts referred to in paragraph (b) are themselves mining, quarrying or prospecting rights (see paragraph (c) of the definition of mining, quarrying or prospecting right in subsection 995-1(1)), and are therefore not referred to elsewhere in this Act as parts of such rights.

(6) The effect referred to in paragraphs (5)(b) and (c) must be that, for each of those entities, the following are equal:

(a) the entity's percentage interest in the project;

(b) the reserves and resources represented by the *mining, quarrying or prospecting rights that the entity *holds relating to the project, expressed as a percentage of the reserves and resources represented by all mining, quarrying or prospecting rights that any of the entities hold relating to the project.

(7) For the purposes of subsection (6):

(a) the reserves represented by a *mining, quarrying or prospecting right are taken to be the reserves, reasonably estimated using an appropriate accepted industry practice, that are expected to be extracted from the mine, *petroleum field or quarry to which the right relates; and

(b) the resources represented by a mining, quarrying or prospecting right are taken to be the resources, reasonably estimated using an appropriate accepted industry practice, that are expected to be situated in the area to which the right relates (other than those resources that are reserves referred to in paragraph (a)).

40-364 Interest realignment adjustments

Effect of receiving interest realignment adjustment on assessable income

(1) If you receive an *interest realignment adjustment in an income year, include in your assessable income for the year an amount (the adjustment amount ) equal to:

(a) the amount of the adjustment; or

(b) if the adjustment is not an amount - the *market value of the adjustment.

Effect of providing interest realignment adjustment on cost, or cost base and reduced cost base

(2) If an *interest realignment adjustment is provided by you or on your behalf:

(a) include the adjustment amount in the second element of the *cost of a *mining, quarrying or prospecting right that you acquired under the *interest realignment arrangement to which the adjustment amount relates; or

(b) if this Division does not apply to that right - include the adjustment amount in the *cost base and *reduced cost base of that right.

However, if you acquired more than one such right under the arrangement, apportion the adjustment amount between the costs, or cost bases and reduced cost bases, of those rights on a reasonable basis.

Note: Subsections 40-77(1D) and (1E) of the Income Tax (Transitional Provisions) Act 1997 set out when this Division does not apply to the right.

Tax effects of the right to an interest realignment adjustment

(3) In calculating the *termination value of a *mining, quarrying or prospecting right that you provide under an *interest realignment arrangement, assume to be zero the *market value of any contractual right conferred by the arrangement to an *interest realignment adjustment to be received by you.

(4) In calculating the *cost of a *mining, quarrying or prospecting right that you receive under an *interest realignment arrangement, assume to be zero the *market value of any contractual right conferred by the arrangement to an *interest realignment adjustment to be provided by you.

(5) The creation of a right to an *interest realignment adjustment does not cause *CGT event D1 or CGT event D3 to happen.

(6) Your receipt of an *interest realignment adjustment does not cause *CGT event C2 to happen in relation to the right to receive the adjustment.

Meaning of interest realignment adjustment

(7) An interest realignment adjustment is an amount, or an asset (other than a *mining, quarrying or prospecting right), that:

(a) is provided under an *interest realignment arrangement to a party to the arrangement by or on behalf of another party to the arrangement; and

(b) is provided as an adjustment, to the parties' contributions of value to the project to which the arrangement relates, that arises because information that has become available since the time the arrangement took effect indicates that the other party did not make an appropriate contribution at that time.