CAPITAL GAINS TAX — PRACTICAL ISSUES

Abstract

This paper is directed at the capital gains tax implications arising on the day-to-day transactions and events occurring within our industry.

After explaining in very basic terms how CGT can be applied in our industry, I lead the oilman to an examination of more specific transactions, such as splitting tenements, renewals, extensions, subleasing and farm-outs.

Some alarming issues arise that must be recognised by every 'dealsman' today. Parameters for deals are indicated along with thought processes to solve the problems to the extent they are solvable.

As 19 September 1985 fades faster into the past, the CGT legislation is becoming more relevant as old pre- assets are converted into post-assets. The traps are there, and many people have already fallen - to their horror. The conversions are subtle but are there waiting.

In this era of self-assessment and absurd tax penalties, tax audits and guilt until proven innocent, penalty minimisation is the name of the game, not tax avoidance.