Show download pdf controls
  • PRRT deductible expenditure

    An entity's deductible expenditure (or eligible real expenditure) for a petroleum project includes expenditure that has a close or quite direct connection to a petroleum project. It may be of a capital or revenue nature and is deductible in the year the payment is liable to be made.

    If deductible expenditure exceeds the assessable receipts derived during the year, the excess is uplifted and carried forward so it can be deducted against assessable receipts derived in future years.

    Eligible real expenditure

    Before the extension of PRRT from 1 July 2012, there were three categories of eligible real expenditure:

    • exploration expenditure
    • general project expenditure
    • closing-down expenditure.

    From 1 July 2012, the following additional categories of deductible expenditure, for onshore petroleum interests and the North West Shelf project, were introduced:

    • resource tax expenditure
    • acquired exploration expenditure
    • starting base expenditure.

    As a result of the extension of PRRT, amendments were also made to ensure that payments (to the extent they are incurred in relation to a petroleum project) are deductible for:

    • various environmental activities (such as water treatment costs, environmental impact statements and environmental compliance obligations)
    • any native title component of a payment that would generally be classified as a private override royalty payment if it was made before 1 July 2012 (which would therefore have been treated as excluded expenditure).

    Carried forward undeducted expenditure

    Eligible real expenditure (other than closing-down expenditure) that an entity has not deducted against assessable receipts derived in the year the expenditure was incurred can be uplifted and carried forward so it can be deducted against assessable receipts derived in later years.

    The uplift rate for expenditure that remains undeducted at the end of a year is worked out according to its class and when it was actually incurred.

    Depending on the class of expenditure, undeducted expenditure can be uplifted using the gross domestic product (GDP) factor rate for the relevant year or the long-term bond rate (LTBR) for the relevant year, plus either 5 or 15 percentage points.

    Any eligible real expenditure an entity with an interest in an exploration permit or retention lease incurs is generally uplifted and carried forward until it is deducted against assessable receipts derived when commercial production begins.

    Some exploration expenditure may also be transferable between petroleum projects.

      Last modified: 24 Nov 2016QC 26133