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  • Combining PRRT projects

    Entities that hold interests in, or in relation to, two or more petroleum projects can apply to the Resources Minister for those projects to be combined and treated as a single project for petroleum resource rent tax (PRRT) purposes if certain criteria are satisfied.

    The projects that are combined are specified in a combination certificate issued by the Resources Minister.

    For PRRT purposes, a petroleum project is taken to exist if there is a production licence in force. If an entity holds an interest in, or in relation to, an exploration permit or retention lease, a petroleum project does not exist for PRRT purposes and these interests cannot be combined with an interest in a petroleum project.

    Specific combination rules apply to the North West Shelf project and the Bass Strait project.

    With the extension of PRRT to onshore petroleum projects, different criteria are used to assess whether projects can be combined, depending on whether the projects are offshore or onshore.

    How to combine projects for PRRT

    Entities that want to combine petroleum projects for PRRT purposes need to lodge an application with the Resources Minister within the qualifying period.

    The Resources Minister will not accept or comply with an application unless it is from an entity, or entities that together are entitled to receive at least half of the receipts from the sale of petroleum or marketable petroleum commodities (MPCs) produced in relation to each of the projects they want to combine.

    The Resources Minister will use specific criteria to consider whether the petroleum projects in the combination application are sufficiently related to combine.

    Qualifying period

    The qualifying period is the timeframe in which the application to combine petroleum projects needs to be submitted to, and decided by, the Resources Minister.

    The qualifying period in relation to a petroleum project is 90 days after the production licence comes into force.

    However, the qualifying period may be extended if the Resources Minister needs additional time to consider whether the petroleum projects should be combined.

    Resources Minister

    Under the PRRT, the Resources Minister has the authority to combine offshore and onshore petroleum projects by issuing a combination certificate.

    Before issuing a combination certificate, the Resources Minister considers whether the petroleum projects are sufficiently related by applying a set of criteria.

    The criteria used to work out whether offshore projects are sufficiently related is different to the criteria used for onshore projects, however, the application process is the same.

    The combination certificate comes into force when it is issued. However, this does not mean that an entity has to lodge separate PRRT returns for any pre-combination petroleum projects in the year of tax that the petroleum projects are combined.

    Any assessable receipts derived, or deductible expenditure incurred, in relation to the petroleum projects before combination are included in the PRRT return for the combined petroleum project.

    Combining offshore projects

    The criteria the Resources Minister considers in working out whether offshore projects are sufficiently related to one another in order to be combined are:

    • the operations, facilities and other things that comprise, have comprised or will comprise, that petroleum project and any other petroleum project (or projects) existing at the time at which the production licence came into force
    • the entities (either directly or on whose behalf) that carry on or provide, carried on or provided or propose to carry on or provide, the operations, facilities and other things referred to above
    • the geological, geophysical and geochemical and other features of the production licence areas in relation to the petroleum projects.

    Combining onshore projects

    The criteria the Resources Minister considers in working out whether onshore projects are sufficiently related to one another in order to be combined are:

    • the operations, facilities and other things that comprise, have comprised or will comprise, that petroleum project and any other petroleum project (or projects) existing at the time at which the production licence came into force
    • the entities (either directly or on whose behalf) that carry on or provide, carried on or provided or propose to carry on or provide, the operations, facilities and other things referred to above
    • the operations, facilities, and other things that are involved, have been involved or will be involved in any further processing or treating of any petroleum or MPC produced by the petroleum projects (downstream activities).

    In considering how related the downstream operations of two or more petroleum projects are, the Resources Minister considers the operations, facilities and other things involved in any further processing or treating of petroleum or MPCs produced in relation to the petroleum projects, for example, a common processing hub would be the kind of facility considered.

    However, if the petroleum or an MPC produced from separate petroleum projects does not undergo any common processing or treating, but instead only shares transportation or storage facilities, such as port facilities, this is insufficient to show that the petroleum projects are downstream related.

    Combining offshore projects with onshore projects

    An onshore petroleum project can combine with an offshore petroleum project if the Resources Minister is satisfied the projects are sufficiently related and a production licence was not in force in relation to the onshore petroleum project before 1 July 2012.

    The Resources Minister takes into account all the criteria for combining onshore projects and offshore projects as listed above.

    If an offshore petroleum project and an onshore petroleum project are combined, the combined petroleum project is treated as an offshore petroleum project.

      Last modified: 24 Nov 2016QC 26135