INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART III - LIABILITY TO TAXATION  

Division 10 - Mining and quarrying  

Subdivision B - Quarrying  

SECTION 122JF   EXPLORATION AND PROSPECTING EXPENDITURE  

122JF(1)   [Expenditure incurred 15 August 1989 to end 1996/97 year]  

Subject to this section, expenditure incurred by the taxpayer after 15 August 1989 and before the 1997-98 year of income on exploration or prospecting for materials obtainable by eligible quarrying operations is an allowable deduction in the year of income the expenditure was incurred.

Note:

Subdivision 330-A of the Income Tax Assessment Act 1997 gives a taxpayer a deduction for expenditure incurred on exploration or prospecting for quarry materials obtainable by eligible quarrying operations in the 1997-98 year of income or a later year of income.

122JF(2)   [Maximum amount of deduction]  

Subject to subsection (4), the amount of the deduction allowable under this section in respect of expenditure incurred during the year of income is not to exceed an amount equal to so much of the assessable income of the year of income as remains after deducting all allowable deductions, other than deductions allowable under this section or under section 122J .

122JF(3)   [Election by taxpayer]  

A taxpayer may elect, in relation to a year of income, that the limit in subsection (2) is not to apply in relation to actual expenditure in relation to the taxpayer in relation to the year of income.

122JF(4)   [Calculation of deduction]  

Where:

(a) a taxpayer makes an election under subsection (3) in relation to a year of income; and

(b) but for this subsection, subsection (2) would apply to limit the amount of the deduction otherwise allowable under this section in relation to expenditure incurred by the taxpayer during the year of income;

the following provisions have effect:

(c) subsection (2) does not apply in relation to expenditure incurred by the taxpayer during the year of income;

(d) the deduction allowable under this section in respect of any deemed expenditure in relation to the taxpayer in relation to the year of income is an amount calculated using the following formula:

Reduced assessable income × Deemed expenditure Deemed expenditure + Actual expenditure

where:

``Reduced assessable income'' means an amount equal to the assessable income of the taxpayer of the year of income, reduced by the sum of all deductions allowable from that assessable income, other than deductions allowable under this section;

``Deemed expenditure'' means the number of whole dollars in the amount of the deemed expenditure in relation to the taxpayer in relation to the year of income;

``Actual expenditure'' means the number of whole dollars in the amount of the actual expenditure in relation to the taxpayer in relation to the year of income.

122JF(5)   [``Actual expenditure''; ``deemed expenditure'']  

For the purposes of subsections (3) and (4):

(a) a reference to actual expenditure in relation to a taxpayer in relation to a year of income is a reference to expenditure of a kind referred to in subsection (1) incurred by the taxpayer during the year of income, other than deemed expenditure in relation to the taxpayer in relation to the year of income; and

(b) a reference to deemed expenditure in relation to a taxpayer in relation to a year of income is a reference to expenditure of a kind referred to in subsection (1) that is taken by subsection (6) to have been incurred by the taxpayer during the year of income.

122JF(6)   [Expenditure exceeds allowable deduction]  

Where the amount of the expenditure of the kind referred to in subsection (1) that was incurred during the year of income (including any expenditure that is taken to have been incurred during the year of income by any previous application or applications of this subsection) exceeds the amount of the deduction allowable under this section in respect of that expenditure in respect of the year of income, the excess amount is to be taken, for the purposes of subsection (1), to have been incurred by the taxpayer during the first subsequent year of income in which the taxpayer derives assessable income.

Note:

Section 330-40 of the Income Tax (Transitional Provisions) Act 1997 converts any excess amount at the end of the 1996-97 year of income into exploration or prospecting expenditure incurred by the taxpayer in the 1997-98 year of income.

122JF(7)   [Conditions for allowable deduction]  

A deduction is not allowable under this section in respect of expenditure incurred during the year of income unless:

(a) the Commissioner is satisfied that, during the year of income, the taxpayer carried on, or proposed to carry on, eligible quarrying operations; or

(b) the Commissioner is satisfied that:

(i) during the year of income, the taxpayer carried on a business of, or a business that included, exploration or prospecting for materials obtainable by eligible quarrying operations; and

(ii) the expenditure was necessarily incurred in carrying on that business.

122JF(8)   [Income exempt under s 23(pa)]  

Where:

(a) an amount of income derived by the taxpayer from the sale, transfer or assignment of rights to mine in a particular area in Australia is or has been exempt from income tax in a year of income (in this subsection called the year of sale ) by virtue of paragraph 23(pa); and

(b) in relation to that area there are any excess amounts of expenditure referred to in subsection (6) that have not been, and are not required to be, taken, for the purposes of subsection (1), to have been incurred by the taxpayer in the year of sale or in a prior year of income;

subsection (6) does not operate so as to require the taxpayer to be taken to have incurred, in any year of income after the year of sale, any part of those excess amounts that does not exceed the amount of the exempt income.

122JF(9)   [Amount specified in notice under s 122JD]  

Where an amount specified in a notice given to the Commissioner under section 122JD in relation to the acquisition from the taxpayer of a quarrying or prospecting right or quarrying or prospecting information is attributable to the whole or a part of an excess amount of expenditure referred to in subsection (6), the excess amount or the part of the excess amount, as the case may be:

(a) is not, under subsection (6), to be taken to have been incurred by the vendor in the year of income in which the transaction to which the notice relates occurred or in any subsequent year of income; and

(b) is not to be taken into account in calculating the amount to be included in the allowable capital expenditure of a purchaser by virtue of a notice given to the Commissioner under section 122JD in respect of a transaction entered into after the first-mentioned transaction.

122JF(10)   [Application of subsection re unit of plant]  

A person may elect that this subsection is to apply in respect of expenditure on a unit of plant referred to in the election, being expenditure incurred in the year of income specified in the election, and any further expenditure on that unit of plant incurred in a subsequent year and, where such an election has been made, expenditure to which the election applies is not to be taken to be expenditure referred to in subsection (1).

122JF(11)   [Year of income]  

The year of income specified in an election under subsection (10) must be the first year of income in which the taxpayer incurs, in relation to the unit of plant referred to in the election, expenditure, that, but for the election would be expenditure referred to in subsection (1).

122JF(12)   [``exploration or prospecting'']  

In this section:

exploration or prospecting
means any one or more of the following:

(a) geological mapping, geophysical surveys, systematic search for areas containing quarry materials, and search by drilling or other means for quarry materials within those areas;

(b) search for quarry materials by drives, shafts, cross-cuts, winzes, rises and drilling;

but does not include operations in the course of working a quarrying property.