Record keeping for PRRT
Taxpayers are required to keep records that record and explain all transactions and other acts that are relevant for ascertaining their petroleum resource rent tax (PRRT) liability in relation to each project interest they hold.
Taxpayers who hold interests in exploration permits and retention leases should also keep records to meet future PRRT obligations.
Types of records to be kept
Taxpayers who hold an interest in a petroleum project, exploration permit or retention lease should ensure that they keep records that are in writing in English, or readily accessible and convertible into writing in English, so as to enable their liability under the PRRT legislation to be ascertained.
Examples of the types of records that may assist in explaining transactions include contracts, agreements, lifting schedules, billing statements, invoices and financial statements.
Record retention periods
Records must be retained for a period of seven years from the date of assessment for the year of tax in which the relevant amount is returned as an assessable receipt or claimed as deductible expenditure.
Joint venture record keeping requirements
Taxpayers who hold an interest in a petroleum project, exploration permit or retention lease under a joint venture arrangement are required to maintain records in relation to their individual interest.
Both operators and non-operators in a joint venture arrangement are required to meet the same PRRT record keeping obligations as other taxpayers.
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Record keeping requirements for the starting base approaches
The starting base is designed to recognise the value of investments in petroleum interests that are transitioning into the PRRT regime as a result of the extension of PRRT to onshore petroleum interests and the North West Shelf project.
Taxpayers who hold interests in petroleum projects, exploration permits and retention leases that existed just before 2 May 2010 and which are transitioning into the PRRT regime on 1 July 2012, can choose one of three valuation approaches to determine their starting base.
The record keeping requirements for a starting base of a petroleum project, exploration permit or retention lease will depend on which of the following valuation approaches is chosen by the taxpayer:
- market value approach
- book value approach
- look-back approach
Market value approach
The market value approach takes into consideration the market values of starting base assets as at 1 May 2010 and interim expenditure incurred between 2 May 2010 and 30 June 2012.
Therefore, taxpayers should keep all records in relation to the valuation undertaken in determining the market value of their starting base assets as at 1 May 2010, as well as records of any interim expenditure incurred.
It should be noted that there is an alternative valuation method available under the market value approach for coal seam gas projects. The alternative valuation method uses the value implied by recent transactions involving coal seam gas interests and requires very specific records to be kept in support of this value (including an estimate of the level of coal seam gas reserves) as well as records of any interim expenditure incurred.
Book value approach
The book value approach takes into consideration the book values of starting base assets that were included in the most recent audited financial report that was prepared in the 18 months preceding 2 May 2010 and that relates to a financial period that ended in the 18 months preceding 2 May 2010.
The book value approach also takes into account interim expenditure incurred from the date of the relevant financial report to 30 June 2012.
As such, taxpayers who choose to use the book value approach in determining their starting base amount should keep records in relation to the financial reports they relied on in determining the value of their starting base assets. Additionally, they should keep records in relation to the interim expenditure.
The look-back approach allows certain expenditure (eligible real expenditure) incurred from 1 July 2002 to be taken into account in determining a taxpayer's PRRT liability.
A taxpayer will not be able to treat expenditure incurred during the relevant look-back period as eligible real expenditure unless the relevant substantiation requirements are met.
For expenditure incurred between 1 July 2010 and 30 June 2012 the taxpayer must satisfy the ordinary record keeping requirements for PRRT purposes because it would be expected that following the government's announcement of 2 July 2010 to extend the scope of the PRRT, relevant expenditure records would have been kept that would meet those requirements.
For the period between 1 July 2002 and 30 June 2010, it is recognised that transitioning projects may not have kept such records for PRRT purposes. Therefore, a taxpayer will be able to take account of expenditure under the look-back approach for that period where they have sufficient records to allow the amount and nature of the expenditure to be reasonably substantiated.
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For more information on the look-back approach and what is meant by 'reasonably substantiated', refer to Starting base.
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Who is required to keep records in a consolidated group
Where a group consolidates for PRRT purposes, all the onshore petroleum project interests held by subsidiary members are treated as being transferred to the head company of the group or provisional head company of a MEC group. The head company is then responsible for PRRT obligations for that single project interest including record keeping requirements.
However, when a member of a consolidated group leaves the group, they must retain records that can substantiate the amount and the nature of their share of assessable receipts and deductible expenditure.