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  • Clarifying the tax treatment of ‘exploration’ and ‘mining, quarrying and prospecting rights’

    In response to the decision of the Full Federal Court in Commissioner of Taxation v Shell Energy Holdings Australia Limited [2022] FCAFC 2, the Government will amend the PRRT to clarify that ‘exploration for petroleum’ is limited to the ‘discovery and identification of the existence, extent and nature of the petroleum resource’ and does not extend to ‘activities and feasibility studies directed at evaluating whether the resource is commercially recoverable’.

    This measure is consistent with the Commissioner of Taxation’s administrative treatment and written binding advice as set out in Taxation Ruling TR 2014/9, which applies from 21 August 2013. The amendments will apply to all expenditure incurred from 21 August 2013.

    This measure will also clarify that mining, quarrying and prospecting rights (MQPRs) cannot be depreciated for income tax purposes until they are used (not merely held) and will limit the circumstances in which the issue of new rights over areas covered by existing rights lead to tax adjustments.

    These amendments will apply in respect of all MQPRs acquired or started to be used after the date of announcement (7:30 PM AEST on 9 May 2023).

      Last modified: 09 May 2023QC 72508