Mining project interests (MPIs) and pre-mining project interests (PMPIs) may be transferred or split. MPIs may also be combined. PMPIs cannot be combined for the purposes of minerals resource rent tax (MRRT).
Combining, transferring and splitting such interests can occur from a time earlier than 1 July 2012. Transitional arrangements also exist to ensure an information transfer can occur for such a transfer or split.
PMPIs are often subject to changes in nature and ownership. As such, the MRRT law contains provisions allowing for:
- a transfer of a PMPI, and
- a split of a PMPI.
A PMPI cannot be combined until it has become an MPI.
Pre-mining project transfers
A pre-mining project transfer will occur if:
- the whole of the PMPI is transferred from one single entity to another, and the project area for that interest is the same before and after the transfer of that interest, or
- a single MPI originates from a single PMPI and covers the whole of the project area of the PMPI.
Pre-mining project splits
A pre-mining project split will occur if:
- the whole of a PMPI is transferred from one single entity to two or more other entities, or
- part of a PMPI is transferred from one single entity to one or more other entities, or
- the exploration right that relates to the PMPI is split into two or more exploration rights under an Australian law, or
- an MPI originates, along with one or more other interests, from a PMPI.
Consequences of a pre-mining project transfer or split
Each of the interests existing after a transfer or split is taken to be a continuation of the PMPI that existed before the transfer or split. This ensures that the taxpayer who holds the interest after a transfer or split (new explorer) inherits the tax history of the original interest including the following amounts and choice:
- pre-mining revenue and pre-mining expenditure for the part of the year before the transfer or split, or an earlier MRRT year
- royalty credits arising in the part of the year before the transfer or split
- an allowance component for an earlier MRRT year, and
- a choice that has been made of the starting base valuation approach for the interest.
The new explorer is liable to pay MRRT for the interest for the part of the year before the transfer or split as well as after.
If the arrangement is a pre-mining project split, each of the above consequences will only happen to the new interests to the extent of their respective split percentage. However, for the purposes of working out a rehabilitation tax offset amount, previous MRRT liabilities are allocated on a reasonable basis, not necessarily the split percentage.
A choice made to apply the simplified MRRT method by the taxpayer who had the interest before the transfer or split (original explorer) for the transfer year does not bind the new explorer unless the original explorer and the new explorer are the same taxpayer. However, any consequences arising from a choice made in a prior MRRT year remain in effect.
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If the entity is transferring their only PMPI, they may also have other obligations.
For more information, refer to 'Taxpayers that no longer have any MPIs or hold any PMPIs' in Lodging, reporting and paying.
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Split percentage
The split percentage is a reasonable approximation of the market value of an interest arising from a pre-mining project split, expressed as a percentage of the total of the market values of all the new interests arising from the split.
Transferring property or rights
A pre-mining project transfer or split may involve the transfer of property, or a legal or equitable right that is not property, that has been used in pre-mining project operations.
If the property or right has given rise to pre-mining expenditure or is or may become a starting base asset:
- any part of the consideration for the transfer that would otherwise be included in the pre-mining revenue of the original explorer is not included in the original explorer's pre-mining revenue
- any part of the consideration for the transfer that would otherwise be included in the pre-mining expenditure of the new explorer is not included in the new explorer's pre-mining expenditure. The consideration is taken to be expenditure for the acquisition of the interest, and therefore excluded expenditure.
Events happening after a pre-mining project transfer or split
Where an event happens to an original explorer after a transfer or split and the event would have affected any of the following amounts if the original explorer still held the interest:
- pre-mining revenue
- pre-mining expenditure
- an allowance component
- a rehabilitation tax offset, then
the event will be taken to have happened to the new explorer and has the same effect as it would have had on the original explorer.
However, the extent to which the event affects the amounts should be reduced to take into account the split percentage(s) for the splits of interest(s) that have occurred since the original explorer held the interest.
Last Modified: Wednesday, 17 April 2013