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Energy and Resources Working Group minutes 27 April 2021

Information about the key topics discussed at the Energy and Resources Working Group meeting 27 April 2021.

Last updated 28 July 2021

Welcome and Reportable tax position (RTP) schedule findings report

General updates

Jonathan Chamarette is backfilling Faith Harako’s position of Assistant Commissioner, PG&I Operations during Faith’s transfer to Client Assurance and Advisor Strategy.

Staff involved in the COVID-19 deployment to assist with the Government’s economic responses to the pandemic have returned to their substantive roles.

Progress on the current programs

Top 100 (income tax) program – the proportion of taxpayers with an overall high assurance rating is expected reach 50% by the end of income year ending 30 June 2021.

Top 1,000 combined assurance program – there are 177 cases, at different stages of review.

Top 100 GST integration – currently parallel process of looking at goods and services tax (GST) and income tax.

RTP schedule findings report

The ATO published the Findings report Reportable tax position schedule Category C disclosures on 28 January 2021.

This report provides aggregated data on the 2018–19 income year under Category C of the schedule.

The data shows that high-risk arrangements or arrangements of concern are not prevalent among large public and multinational businesses. These findings are consistent with our view that most large businesses do the right thing and are paying the right amount of tax. It is also reflected in our estimate of the large corporate groups’ income tax gap.

The findings report is an important tool that enables taxpayers to compare their tax positions with their peers in areas such as related party finance and marketing hubs.

Industry updates and COVID-19 impact

Minerals Council of Australia (MCA)

In 2020, the main priorities included:

  • health and safety of industry’s workforce
  • working and supporting Indigenous communities to keep remote and very remote communities safe
  • guidance and communication on how to approach the virus
  • how to deal with the pandemic internationally.

In 2021, health and safety continue to be key priority. The MCA has identified sub-groups and roles which will be given priority COVID-19 vaccinations. Priority vaccinations for work-force subgroups include:

  • employees at high risk of severe illness due to COVID-19
  • indigenous workers
  • people aged over 50
  • immune compromised people
  • specialists travelling to remote areas
  • site-based medical services
  • fly-in, fly-out
  • essential delivery and safety workers
  • employees with specific roles with a high risk of transmission.

Major impact on the industry performance and investment decisions is caused by uncertainties in respect of international travel, inability of specialist resources to travel internationally and vaccination requirements, which if different will present major challenges to the industry.

Australian Petroleum Production and Exploration (APPEA)

COVID-19 impact:

  • The COVID-19 pandemic has negatively impacted 2020 supply-demand fundamentals, exacerbating market oversupply and weak prices.
  • Australian liquified natural gas (LNG) production still positive at just under 80 Mtpa.

Oil prices:

  • Presently USD$60–70 per barrel Brent; returning to pre-COVID-19 levels.
  • Short term price spikes in gas prices – due to colder than expected weather in import markets and Panama Canal issues.

LNG Demand Rebound (per Shell LNG Outlook 2021External Link publication):

  • China and India led the recovery in demand for LNG following the outbreak of the pandemic.
  • Future doubling of LNG demand by 2040 (according to estimates, more than half of future LNG demand will come from countries with net-zero emissions targets for example, China, Japan and South Korea).


  • Wave of global and Australian projects reaching front end engineering design stage.
  • Backfilling existing projects will be a focus.
  • Australia will be competing with oil and gas projects under construction in Qatar, US, Russia and East Africa.


  • Future decommissioning activities will impose a significant liability on the industry – in order of US$40 billion.
  • Anniversary of Deepwater Horizon incident serves as poignant reminder of importance of decommissioning and scale of task at hand.
  • Decommissioning will be a key issue for industry, number of policy agencies are being engaged by industry.
  • Tax related questions are emerging. Will be important for early discussions to provide certainty given significant level of costs likely to running through the system.
  • Level of uncertainty already affects merger and acquisition activity, given indemnity relationships between counterparties.

Action item



Energy and Resources strategy team

Action item details

The Energy & Resources (E&R) strategy team to reach out to the members to discuss their specific concerns and determine whether and if so, what guidance is needed

The members are encouraged to contact the E&R strategy team in respect of decommissioning tax related issues. Possible topics could include Rehabilitation treatment under Division 40 of the Income Tax Assessment Act 1997 (ITAA 1997), Merger and Acquisition approaches and section 8-1 of the ITAA 1997 treatment.

Temporary full expensing and Loss carry back measures

Temporary full expensing (TFE)

The TFE measure builds on the Instant Asset Write-Off and Backing Business Investment measure.

A comprehensive Tax Law Companion Ruling (LCR) outlining the Commissioner’s view on the various elements of the TFE measures will be published imminently.

The LCR will outline the operation of the TFE provisions, providing the Commissioner’s view on, but not limited to:

  • eligible entities and assets
  • exclusions for entities with an aggregated turnover of $50 million or more such as pre-existing commitments entered before Budget time and second-hand assets
  • specific issues for consolidated groups under TFE company.

Loss carry back (LCB)

The ATO are developing guidance on issues relating to LCB including aggregated turnover.

Aggregated turnover test

The ATO are developing guidance to provide guidance on specific aggregated turnover issues targeted at the large business market.

The ATO expects the guidance to issue in mid-2021 and that issues will be progressively added throughout 2021.

The advice under development program webpage will be updated accordingly.

Action item



Working group members

Action item details

Working group members to be consulted on further guidance

Subsequent to the meeting, the working group alerted of the release of:

Guidance on hybrid mismatch rules, imported hybrid mismatch rule

The Draft Practical Compliance Guideline PCG 2021/D3 Imported hybrid mismatch rule – ATO's compliance approach sets out the Commissioner's assessment of risk in connection with the imported hybrid mismatch rules, including the Commissioner's approach to reviewing whether a taxpayer has undertaken reasonable enquiries in relation to the rules for non-structured arrangements.

This includes the level of supporting information the Commissioner requires in order to demonstrate compliance in connection with non-structured arrangements.

The ATO recommended approach to demonstrating that reasonable enquiries have been undertaken for non-structured arrangements involves the taxpayer making and documenting formal requests for information and the responses. This could be achieved by reviewing:

  • Division 832 of the Income Tax Assessment Act 1997 control group to identify whether the group has any mismatch outcomes and determining whether any identified mismatch outcomes are offshore hybrid mismatches, and that they are being imported into Australia (top-down approach) or
  • Cross-border payments made by the taxpayer to the members of the Division 832 of the Income Tax Assessment Act 1997 control group to determine if these payments are directly or indirectly importing any offshore hybrid mismatches (bottom-up approach).

The ATO’s imported hybrid mismatch risk framework is made up of eight risk zones, including three different red zones to determine the type of risk.

Public consultation finishes on 21 May 2021.

Policy development and ATO’s involvement

The ATO – Treasury protocol provides a framework for the working arrangements between the Treasury and the ATO. These working arrangements apply in designing new policies and laws and the administration of that law once enacted. Tax policy, legislation and administration are integrated and interdependent.

The distinctive roles of the Treasury and the ATO include:

  • Treasury has the accountability for providing advice to government on policy and law design issues
  • The ATO’s administration of enacted laws includes forming views about the interpretation of those laws, recognising that the courts are the final arbiter on matters of statutory interpretation.

In forming its view on the interpretation of law, the ATO sometimes consults Treasury to provide an understanding of the underlying policy. The ATO will engage the Treasury on policy and law design issues that are identified in the administration of the law where the ATO identifies that enacted law is not operating consistently with what is understood to be the policy intent of the law. The ATO also provides advice to the Treasury recommending law change from time to time.

Within the ATO structure, the Policy Analysis and Legislation area is separate from the Tax Counsel Network and client engagement business lines, albeit these areas work closely together.

Joint venture subcommittee meeting update

The joint venture subcommittee held meetings in November 2020 and March 2021 to discuss issues raised by industry members and the Commissioner in dealing with information gathering from joint venture operators and participants.

The committee discussed the availability of a sufficient level of information to the Commissioner, in respect of the joint venture operator and participant, as a critical requirement to attaining consistent assurance ratings for both joint venture partners.


  • Industry stakeholders outlined it would be unlikely that historical joint venture agreements would allow information sharing between operators and participants.
  • Future joint venture agreements would likely consider the current tax environment.
  • ATO agreed to reduce multiple information requests where possible.
  • Subcommittee closed. The issue can be revisited if required.

Application of the GST Analytical Tool (GAT) to Joint Ventures (JV)

The ATO is aware of the difficulties in applying the GAT within the joint venture context. The ATO are developing a GST joint venture guide which will include the application of the GAT to GST joint ventures.

Action item

Application of the GAT to GST JV guidance



Action item details

Application of the GAT to GST JV guidance in the form Frequently Asked Questions will be published on the ATO website. A link to the website will be circulated to the members once the guidance is published.

Other public guidance updates

Earnout consultation

The ATO position will be finalised by way of updates on

Action item

Earnout consultation



Action item details

A draft of the guidance will be circulated amongst members for comment prior to publication.

Capitalised labour

The final ruling TR 2020/6 Income tax: application of paragraph 8-1(2)(a) of the Income Tax Assessment Act 1997 to labour costs related to the construction or creation of capital assets, and the associated Compendium, are in the final stages of approval and will be published shortly.

Subsequent to the meeting, received feedback and comments from the working group.

Intellectual property migration

Targeted consultation is currently underway for the Draft Practical Compliance Guideline.

COVID-19 Permanent Establishment guidance

Subsequent to the meeting, alerted the working group of the following updates:

  • ATO website guidance on COVID-19 and permanent establishments 
  • Taxation Ruling TR 2002/5 Income tax: Permanent establishment – What is 'a place at or through which [a] person carries on any business' in the definition of permanent establishment in subsection 6(1) of the Income Tax Assessment Act 1936? and the Taxation Ruling TR 2002/5A3 – Addendum Income tax: Permanent establishment – What is 'a place at or through which [a] person carries on any business' in the definition of permanent establishment in subsection 6(1) of the Income Tax Assessment Act 1936?


Attendees list




Rebecca Saint (Chair), Public Groups and International


Andrew Werbik, Policy, Analysis and Legislation


Jonathan Chamarette, Public Groups and International


Shahzeb Panhwar, Public Groups and International


Sharon Murray, Public Groups and International

AMPLA The Resources and Energy Law Association

Nick Heggart

Association of Mining and Exploration Companies

David Ocello

Australian Petroleum Production and Exploration Association

Glen Gasper

Australian Petroleum Production and Exploration Association

Marc Lewis

Australian Petroleum Production and Exploration Association

Therese Stephenson

Chartered Accountants Australia and New Zealand

Mark Crossman

Department of Industry, Science, Energy and Resources

Joshua Reakes

Institute of Public Accountants

Basil Mistilis

Law Council of Australia

Craig Bowie

Minerals Council of Australia

Anthony Portas

Minerals Council of Australia

Dominic Smith

Minerals Council of Australia

Premila Roe

Minerals Council of Australia

Ross Lyons

The Tax Institute

Catherine Dean


Apologies list



Association of Mining and Exploration Companies

Neil van Drunen

Australian Petroleum Production and Exploration Association

Simon Staples

Australian Petroleum Production and Exploration Association

Sean Jermy

Institute of Public Accountants

Lance Cunningham


Simon Winckler