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  • Transfers of interests in petroleum titles

    If an entity (transferring entity) transfers its interest in an exploration permit, retention lease or petroleum project (a petroleum interest), wholly or in part, it transfers its entitlement to assessable receipts to the receiving entity.

    Transferring a whole interest

    A transfer of a whole interest in a petroleum title occurs when the transferring entity's whole entitlement to assessable receipts for the petroleum interest is transferred to the receiving entity.

    Following a transfer, the receiving entity is treated as having derived any assessable receipts and incurred any eligible real expenditure that the transferring entity derived or incurred in that year before the transfer.

    The receiving entity effectively 'steps into the shoes' of the transferring entity and inherits its petroleum resource rent tax (PRRT) position. If a transfer takes place in the middle of a year of tax, the receiving entity is taken to have paid any instalments paid by the transferring entity in the year of tax that the transfer occurred.

    The receiving entity is not considered to have incurred any additional eligible real expenditure by transfer of any property held by the transferring entity. The transferring entity is not, by reason of the transfer, taken to have derived any assessable receipts from the property at the time of the transfer.

    Any consideration for a transfer of a petroleum interest is not deductible expenditure for the receiving entity (as it is excluded expenditure) and is not assessable receipts for the transferring entity.

    See also:

    Transferring a part interest

    A transfer of part of a petroleum interest occurs when part of a transferring entity's entitlement to assessable receipts (the transferred percentage) is transferred to a receiving entity.

    The transfer of part of a petroleum interest has the same implications as a transfer of a whole petroleum interest, except that the receiving entity is taken to have both:

    • derived a percentage of any assessable receipts
    • incurred a percentage of any eligible real expenditure the transferring entity derived or incurred.

    Example: transferring a part interest

    Nilon Oil Ltd and Reid Resources Co each have a 50% interest in project Beu. Reid Resources Co transfers 50% of its interest to Cox LPG. Therefore, Cox LPG has a 25% interest in the Beu project following the transfer. Cox LPG inherits 50% of the assessable receipts and deductible expenditure which were derived or incurred by Reid Resources Co in the year of transfer in relation to the Beu project.

    End of example

    As with the transfer of a whole interest, the receiving entity 'steps into the shoes' of the transferring entity and inherits the transferring entity's PRRT position for the part of the petroleum interest transferred.

    Transfers from combined projects

    When an interest or part of an interest in a combined petroleum project is transferred, the amounts of assessable receipts and deductible expenditure inherited by the new owner are ascertained by reference to the transferred petroleum title rights to which the receipts and expenditure relate. In other words, the receipts and expenditure that relate to a particular production licence are transferred with that licence.

    Lodging a transfer of interest notice

    If an entity transfers its interest in a petroleum interest, wholly or in part, it needs to give the receiving entity written notice of the transfer. The receiving entity then needs to give us a copy of the notice.

    See also:

    For transfers of interests in onshore petroleum projects or the North West Shelf project made before 1 July 2012, the transferring entity does not need to provide the receiving entity with a notification of transfer of interest.

    Inherited exploration expenditure

    If an entity transfers a petroleum interest, wholly or in part, the receiving entity is treated as having inherited the relevant percentage of the transferring entity's exploration expenditure incurred before the transfer. This is commonly called 'inherited exploration expenditure'. Undeducted exploration expenditure incurred by an entity in relation to its petroleum interest generally has to be transferred to other PRRT petroleum projects with notional taxable profit (held by the entity or within the entity's related group of entities).

    Before exploration expenditure can be transferred, the petroleum interests need to meet the common ownership rule. To meet the common ownership rule, the entity (or the wholly-owned company group) needs to have held an interest in both the transferring and receiving petroleum interests from the time the transferable exploration expenditure was incurred up until the time of the transfer.

    This means that if a petroleum interest has been transferred, the common ownership rule is not met by the receiving entity for that petroleum interest. Therefore, any undeducted inherited exploration expenditure cannot be transferred to other projects held by the receiving entity or its related entities.

    However, any exploration expenditure incurred after the transfer of the petroleum interest may be transferable to other projects held by the receiving entity or its related entities if the other transfer rules for exploration expenditure have been met.

    See also:

    The effect of consolidation on transfers

    A head company of an income tax consolidated group or multiple entry consolidated (MEC) group or a provisional head company of a MEC group can choose to consolidate the group's interests in onshore petroleum projects for PRRT.

    If a group consolidates for PRRT purposes, all the onshore petroleum project interests of the group’s subsidiary members are treated as having been transferred to the head company of the group. Therefore, the group's subsidiary members need to give the head company a transfer of interest notice for each transferred petroleum project interest. The head company needs to send us copies of the notices.

    If an entity leaves a PRRT consolidated group, the head company:

    • is treated as having transferred to the leaving entity, the onshore petroleum project interests (and any part interests) the leaving entity takes with it
    • needs to give the leaving entity a transfer of interest notice for each onshore petroleum project interest the leaving entity takes with it.

    See also:

    Transferring an interest in a combined project

    Entities that hold interests in, two or more petroleum projects can apply for the projects to be combined and treated as a single project for PRRT purposes if certain criteria are satisfied.

    Where an entity transfers its interest in a combined project either wholly or in part, the receiving entity 'steps into the shoes' of the transferring entity and inherits the PRRT position for the transferred interest in the combined project.

    Where a transfer contains part of an interest in a combined project that includes starting base expenditure, the receiving entity is treated as inheriting the relevant percentage of the transferring entity’s starting base expenditure. The transfer percentage should be calculated on a reasonable basis based upon the transferring entity's facts and circumstances.

    See also:

    Instalment transfer interest charge

    An entity may be liable for an instalment transfer interest charge if both of the following apply:

    • it receives benefits from a transfer of exploration expenditure in an instalment period
    • the exploration expenditure is subsequently made non-transferable due to a transfer of interest in a petroleum interest.

    See also:

      Last modified: 24 Nov 2016QC 36537