HOW COMPETITIVE IS THE AUSTRALIAN INCOME TAX REGIME FOR EXPLORATION AND PRODUCTION?

Abstract

‘Australia must have a taxation system which equips it for the coming decades, not for those that have passed. If we do not achieve this, Australians will not enjoy the standard of living this nation has the potential to deliver’ (Ralph et al, 1999).

One of the outcomes of the increasingly global nature of the resource industry is countries, especially those in close proximity to each other, are now competing for investment in resource projects. A key factor for investors assessing competing resource projects is the host country’s fiscal regime, including income tax, as this can significantly affect a project’s profitability and cash flow.

The purpose of this paper is to give an overview of the income tax regime and issues currently facing the upstream Australian oil and gas industry (Sarich, 20001 ). In particular, this paper will:

examine the Federal Government’s Review of Business Taxation and identify how the announcements impact on exploration and production activities;

compare the Australian income tax regime on exploration and production to other countries in the region with whom Australia competes for investment and capital; and

comment on income tax issues facing Australian resource companies when conducting foreign activities.