Australian oil and gas exploration: the dawn of a new fiscal regime?
Kenneth Wee A and Janelle O’Hare ADeloitte.
The APPEA Journal 54(2) 529-529 https://doi.org/10.1071/AJ13102
Published: 2014
Abstract
The ever-evolving Australian tax landscape has brought particular attention to the scope of exploration activities in the oil and gas industry in recent times. While recent developments have attempted to shed light on the interpretation of exploration expenditure, the narrow view adopted has raised more questions than answers, which may significantly impact the after-tax economics of projects in the oil and gas industry. Examples include:
the recent AAT decision in the ZZGN case and the commissioner’s views set out in the draft taxation ruling TR 2013/D4 on the scope of deductible exploration expenditure in the PRRT context; and,
the then Labor-led federal government’s proposed changes in the 2013–14 federal budget to limit an upfront deduction on genuine exploration activities for income tax purposes, which would have a far-reaching impact.
Broadly, the recent reforms seek to limit the application of the exploration expenditure deductibility rules to the technical analytical work undertaken to evaluate/appraise the resource and expenditure incurred in direct relationship with said technical work. This presents various tax technical, commercial and practical issues that signal a new dawn in the approach to exploration expenditure for participants in the oil and gas industry. This extended abstract analyses the recent reforms and their impact on the oil and gas sector, provides an outlook of the new direction of potential fiscal change and assesses what this might mean for the Australian oil and gas industry.
Kenneth Wee is a partner in the oil and gas practice of Deloitte. He has been involved extensively in consulting on a broad range of domestic and international taxation issues, specialising in providing advice on Australian corporate tax and Petroleum Resource Rent Tax (PRRT) to clients in the oil and gas industry. Kenneth’s experience encompasses advising on corporate and international tax structuring for Australian inbound and outbound investments, performing tax model reviews, advising on technical PRRT issues, assisting with due diligences for major multinational oil and gas companies, and advising on restructuring, mergers/acquisitions and financing. |
Janelle O’Hare is an Account Director in the oil and gas practice of Deloitte. She has over 12 years’ tax consulting experience, specialising in corporate and international tax in Australia and overseas. Janelle specialises in providing advice on Australian corporate tax and Petroleum Resource Rent Tax (PRRT) to clients in the oil and gas industry. Janelle’s experience includes corporate tax advisory and compliance services for multinational oil and gas, and oilfield service, companies in relation to Australian investments and ongoing operations, providing advisory services to various offshore and onshore LNG projects in Australia, performing tax model reviews, advising on technical PRRT issues, and assisting with advising on restructuring and financing. |
References
ZZGN v Commissioner of Taxation [2013] AATA 351 (ZZGN case)Draft Taxation Ruling TR 2013/D4 Petroleum resource rent tax: what does ‘involved in or in connection with exploration for petroleum’ mean? (TR 2013/D4)
Subsection 40–730(4) of the Income Tax Assessment Act 1997 (ITAA 1997)
Taxation Ruling TR 98/23 Income tax: mining exploration and prospecting expenditure (TR 98/23)
Section 40–80 of the ITAA 1997
