Goods and Services Tax Industry Issues
Mining and Energy Industry Partnership

Underlifts/overlifts within a GST Joint venture

• Please note that the PDF version is the authorised version of this ruling.
  This publication is extracted from the Mining and Energy Industry Partnership - issues register. See Chapter 3 (part) of that register. This publication should be read in conjunction with the related content of that register where further context is required.

This publication provides you with the following level of protection: This publication (excluding appendixes) is a public ruling for the purposes of the Taxation Administration Act 1953. A public ruling is an expression of the Commissioner's opinion about the way in which a relevant provision applies, or would apply, to entities generally or to a class of entities in relation to a particular scheme or a class of schemes. If you rely on this ruling, the Commissioner must apply the law to you in the way set out in the ruling (unless the Commissioner is satisfied that the ruling is incorrect and disadvantages you, in which case the law may be applied to you in a way that is more favourable for you - provided the Commissioner is not prevented from doing so by a time limit imposed by the law). You will be protected from having to pay any underpaid tax, penalty or interest in respect of the matters covered by this ruling if it turns out that it does not correctly state how the relevant provision applies to you.

Background

1. Typically, the participants in a GST joint venture produce and share product (for example, iron ore, petroleum) in accordance with an agreed equity ratio.

2. As an example, petroleum that is produced within a GST joint venture is marketed individually by the joint venture participants.

'Lifts'

3. To facilitate a normal commercial sale, it is necessary for individual participants to 'lift' a saleable quantity of petroleum. This quantity may range from a relatively small amount (a number of thousand barrels via a road tanker) to a large amount (many hundreds of thousands of barrels by ship). For any single period, it may be commercially impractical for each party to 'lift' their share of petroleum as specified in the joint venture arrangement.

Are 'lifts' taxable supplies

4. Provided that, over the longer term, the 'lifts' of each party to the GST joint venture equate to their share as specified in the Joint venture agreement, our view is that unequal individual product 'lifts' do not constitute supplies for GST purposes.

5. This is because we consider that, over the longer period, these unequal product 'lifts' are simply a means of allowing the product of the GST joint venture to be shared in the proportions set out in the agreement.

References