Cap aims to ensure returns
Details of new fossil fuel rules have been released.
The Australian government announced measures to ensure a “fairer return” for the community from gas companies' natural resources in the recent federal Budget.
The changes come after a Federal Court's decision last year in a case involving Shell.
Gas companies may now be required to slow down the write-off of exploration costs incurred over the past decade.
The government has also announced a cap on deductions to offset assessable income of LNG producers under the Petroleum Resource Rent Tax (PRRT).
This will bring forward tax receipts from LNG projects, ensuring a greater return to the community from the offshore LNG industry.
The government has also changed the law to clarify that “exploration” means the costs of finding a petroleum resource, and does not extend to activities directed at evaluating if the resource is “commercially recoverable”.
This change applies to all expenditure incurred from August 21, 2013.
In addition, all mining, quarrying, and prospecting rights acquired after budget night cannot be depreciated for income tax purposes until the project is in use.
“These amendments will restore the policy intent of the law,” Budget documents state.
The Budget papers state that; “To date, not a single LNG project has paid any PRRT and many are not expected to pay significant amounts of PRRT until the 2030s”.
The cost of the changes is unquantifiable because it is unclear how many companies applied the law the same way the Tax Office did.
The government hopes that these changes will ensure a “fairer return” for the community from their natural resources.