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  • Tax and report data

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    Taxable income

    Variations between an entity's tax expense as recorded in its statutory accounts and tax payable as recorded in a tax return can arise for a number of reasons, including the following:

    • Timing in the depreciation of capital assets will cause differences in the accounting and tax position of an entity; tax is generally more concessional to provide business with incentives to invest.
    • An entity registered as a joint venture will generally distribute its profit and loss amounts to each participant meaning taxes are borne by them and not at the joint venture entity level.
    • Deductions for exploration expenditure are allowed as they are incurred under tax law and may result in deductions in years before a mine or well becomes operational and produces income.
    • Receipt of foreign dividend income is often exempt from Australian tax but is included in total income.
    • The franking credit attributed to the receipt of a franked dividend is added to accounting profit, with a corresponding tax offset given which affects tax payable.
    • In the Joint Petroleum Development Area, a straight comparison of revenue or reported profit and tax paid does not align with reported revenues due to the existence of a revenue share agreement between Timor Leste and Australia.

    Tax losses can generally be carried forward and offset against taxable income in future income years. Losses carried forward are subject to integrity rules that restrict the use of those losses where there is a substantial change in company ownership (the continuity of ownership test) and the type of activity undertaken by the business (the same business test). Losses generated by one member of a tax consolidated group can generally be used against profits earned by other members of the same group.

    Tax payable

    The tax system provides for a range of deductions and offsets affecting final tax payable figures such as:

    • franking credits attaching to dividends received by companies
    • tax offsets for foreign tax paid on foreign sourced income.

    With R&D tax offsets, the majority of offsets claimed by companies are allowed under the R&D incentive. In some cases the high investment in R&D may result in the offset exceeding the tax otherwise payable.

    Economic performance

    Different factors affect the economic performance of particular sectors of the economy at different points in the economic cycle (for example, commodity prices, policy changes and impacts of financial crises).

    Different sectors of the economy are subject in some cases to different tax issues.

    Tax losses and economic losses

    A tax loss generally occurs where the total deductions claimed for an income year exceed the total of assessable and net exempt income for that year. Accounting profit/loss rarely equates to tax profit/loss.

    On average, accounting losses are reported by 20–30% of the ASX top 500 companies in any one year. This may not reflect the underlying economic performance of an entity in a particular year.

    Economic losses (or those reported for financial statement purposes) generally reflect the position of a company for the particular year and can include losses that are recorded for asset impairments or write downs.

    Petroleum resource rent tax

    Unlike income tax where many capital costs are deductible over a defined life, all deductible expenditure for petroleum resource rent tax (PRRT) purposes, whether capital or revenue, is immediately deductible.

    A number of factors may affect the reported PRRT payable by individual companies in relation to their interests in a petroleum project, including the following.

    PRRT is a profits-based tax that only taxes profits above a specified rate of return. Tax liability will be dependent on a range of factors, including commodity prices, foreign exchange rates and project development and operating costs.

    The long lead time associated with PRRT projects means that a PRRT liability is unlikely to arise until a number of years after production commences.

    PRRT is a project-based tax. Deductible expenditure (which is made up of exploration expenditure, general project expenditure and closing down expenditure) of a petroleum project that exceeds assessable receipts of that project in a year of tax is uplifted and carried forward to be deducted against assessable receipts of that project derived in future years. The uplift rate varies based on the type of expenditure and year in which it was incurred.

    Eligible exploration expenditure incurred in relation to exploration permits and other petroleum projects is deductible against assessable receipts of a petroleum project that a taxpayer holds, subject to the transferability rules. The transferring of exploration expenditure to a petroleum project in a year of tax has the effect of reducing the PRRT that would have otherwise been payable for that year of tax for that project.

    For the North West Shelf project and onshore projects, other resource taxes and charges from a project (such as state and federal royalties and production excise) are grossed up and deducted, together with starting base expenditure, against assessable receipts of the petroleum project to which they relate.

    The amount of PRRT payable is likely to vary across joint venture participants in a particular project due to differences in each participant's circumstances.

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      Last modified: 11 Dec 2020QC 44476