PRRT assessable receipts
Commercial recovery of petroleum is the most significant assessable receipts that result from a petroleum project. These are referred to as assessable petroleum receipts. They generally arise when recovered petroleum is sold before it is processed or after some preliminary processing has been undertaken.
Certain other kinds of receipts are also assessable under the petroleum resource rent tax (PRRT). Broadly, these receipts are assessable to ensure there is symmetry in the PRRT as they generally arise from amounts that have been previously claimed as a deduction. For example, the consideration received from the disposal of property used in a petroleum project is assessable as the original purchase is deductible under the PRRT.
There is no revenue or capital distinction in the PRRT. Therefore, receipts of a revenue or capital nature may be assessable under the PRRT.
Derivation of assessable receipts
Assessable receipts derived in relation to a petroleum project need to be taken into account in the financial year in which they are receivable or, in certain cases, when they are deemed to be receivable.
As assessable receipts are derived when they are receivable or deemed to be receivable, they may be derived before the project commences (that is, before a production licence comes into force) or after it has ceased.
Broadly, assessable receipts from the North West Shelf project derived from 1 July 2012 will be assessable.
Types of assessable receipts
There are seven types of assessable receipts:
- assessable petroleum receipts
- assessable tolling receipts
- assessable exploration recovery receipts
- assessable property receipts
- assessable miscellaneous compensation receipts
- assessable employee amenities receipts, and
- assessable incidental production receipts.
Assessable petroleum receipts
Assessable petroleum receipts are derived when consideration becomes receivable from the sale of a marketable petroleum commodity (MPC). Assessable petroleum receipts are the consideration receivable for the sale less any expenses payable in relation to the sale.
An MPC is a product produced from petroleum (for example, stabilised crude oil, sales gas and condensate) that is in its final form for the purpose of either sale, use as feedstock for conversion to another product or direct consumption as energy. However, it does not include a product that was produced from an MPC.
In a situation where the MPC is not sold but it becomes an excluded commodity, the assessable petroleum receipts represent the market value of the MPC before it becomes or became an excluded commodity. Where there is insufficient evidence of the market value, the Commissioner may determine a fair and reasonable amount to be the assessable petroleum receipts.
An excluded commodity is an MPC that has been sold, further processed or treated after being produced, moved from the place of its production other than to an adjacent storage site or moved from a storage site adjacent to the place of production.
Special rules apply in calculating assessable petroleum receipts from sales gas produced in an integrated gas-to-liquid (GTL) operation or an integrated gas-to-electricity (GTE) operation whereby the sales gas is further processed into a liquefied product or consumed in the commercial production of electricity.
These special rules are contained in the Petroleum Resource Rent Tax Assessment Regulation 2015External Link
- TR 2008/10 - Petroleum resource rent tax: application of Petroleum Resource Rent
Tax Assessment Regulations 2005 to an integrated gas-to-liquid operation
Assessable tolling receipts
Assessable tolling receipts are consideration receivable for the processing of internal or external petroleum in relation to a petroleum project.
Internal petroleum is petroleum recovered from a production licence area of the project. For example, a joint venturer who owns the processing facility may process the share of petroleum of one or more other venturers.
External petroleum is petroleum recovered from an area other than the production licence area of the project. For example, petroleum recovered from project A is processed in the processing plant of project B.
Assessable exploration recovery receipts
Assessable exploration recovery receipts are derived in a similar manner as assessable petroleum receipts, except that they are derived from petroleum (or an MPC produced from the petroleum) recovered from the eligible exploration or recovery area (other than a production licence area) in relation to a petroleum project. In other words, they relate to recovery of petroleum from the area of an exploration permit or a retention lease.
Assessable property receipts
Assessable property receipts include certain amounts receivable in respect of the disposal, loss or destruction of property for which a deduction for capital expenditure (being eligible real expenditure) was incurred in relation to the project.
Assessable property receipts include all of the following amounts:
- consideration receivable on disposal of project property
- the market value of property on termination of its use in the project
- insurance payments for loss or damage to project property
- consideration receivable for hiring, leasing out or granting of a right to use project property
- consideration receivable for the provision of information obtained by incurring eligible real expenditure in relation to the project (eg amounts receivable from sale of information obtained from a survey, appraisal or study).
Where property has been purchased for use partly in relation to a project (and accordingly only that proportion of capital expenditure has been claimed as eligible real expenditure of the project), only a corresponding proportion of the receipts from the disposal of that property (or other things referred to above) will be included as assessable property receipts in relation to the project.
Assessable miscellaneous compensation receipts
Assessable miscellaneous compensation receipts include amounts receivable by way of insurance, compensation or indemnity in respect of all of the following:
- the loss or destruction (or in respect of the loss of any profit caused by the loss or destruction) of petroleum before an MPC had been produced from the petroleum
- the loss or destruction (or in respect of the loss of any profit caused by the loss or destruction) of an MPC before it becomes an excluded commodity
- the loss of any amounts that would otherwise have been assessable receipts in relation to a project.
Assessable miscellaneous compensation receipts also include amounts receivable by way of refund, rebate, discount, commission, compensation or indemnity received in relation to eligible real expenditure incurred in relation to a project.
Assessable miscellaneous compensation receipts will include grossed up amounts of refunds of resource tax expenditure for the North West Shelf project
Refunds of resource tax expenditure
The North West Shelf project is subject to certain Commonwealth, state and territory excise and royalties (resource tax expenditure).
From 1 July 2012, resource tax expenditure is creditable against the PRRT liability of the North West Shelf project. This is achieved by grossing up payments of resource taxes by the PRRT rate that is then deductible against assessable receipts of the project.
Entities may be entitled to a refund where there has been an overpayment of a royalty or excise. In these circumstances the refund will be grossed up (by dividing it by the PRRT rate) and will be treated as an assessable miscellaneous compensation receipt in the year it is received.
However, refunds received after 1 July 2012 that relate to petroleum extracted before 1 July 2012, will not be assessable.
Assessable employee amenities receipts
Amounts receivable for or in respect of the provision of employee amenities in respect of which eligible real expenditure was incurred, are assessable employee amenities receipts.
The term 'employee amenities' means provision of non-profit housing, health, education, recreation, welfare or similar facilities and services (including provision of meals) to project employees or their dependents.
Assessable incidental production receipts
Consideration receivable from the sale of incidental products other than petroleum or an MPC which have been recovered, extracted or produced using operations, facilities and other things that are related to the petroleum project and for which eligible real expenditure was incurred, will be treated as assessable incidental production receipts.
Examples include consideration receivable from the sale of all of the following:
- water from a water treatment facility that is an integral part of a petroleum project, and
- excess electricity that is produced as part of a petroleum project.
Assessable incidental production receipts also include consideration receivable from the sale of services relating to carbon capture and storage provided to another entity using operations, facilities and other things of the petroleum project and for which eligible real expenditure was incurred.
Receipts which are not assessable receipts
Some receipts are not assessable for PRRT purposes, particularly those receipts that relate to expenditure which has been categorised as excluded expenditure for PRRT purposes. Examples include all of the following:
- amounts received as loans, or in respect of loans made
- receipts of interest and capital repayments received from borrowers
- share capital received as shareholders' funds
- dividend or bonus shares received from associated companies
- private override royalty income
- proceeds from the sale of interests in an exploration permit, retention lease or production licence.
Certain receipts are assessable under the petroleum resource rent tax (PRRT). The most significant assessable receipts arise from the commercial recovery of petroleum, generally when the petroleum is sold.