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Edited version of your private ruling

Authorisation Number: 1012365089525

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Ruling

Subject: Whether a payment for an exploration licence is deductible

Question

Whether a payment for an exploration licence is deductible

Answer

Yes

This ruling applies for the following periods:

1 January 2008 to 31 December 2008

1 January 2009 to 31 December 2009

The scheme commences on:

1 January 2008

Relevant facts and circumstances

The entity is a wholly owned subsidiary of a foreign company listed on a foreign stock exchange and has carried on a business of production and sale of resources in a foreign country

Relevant legislative provisions

Income Tax Assessment Act 1997 (ITAA1997)

Subsection 40-25(1)

Section 40-30

Section 40-40

Section 40-60

Subsection 40-80(1)

Section 40-175

Section 40-180

Section 40-185

Subdivision 40-C

Subsection 40-730(4)

Subsection 40-730(7)

Subsection 701-1(1)

Section 995-1

Reasons for decision

Mining, quarrying or prospecting information is defined in section 40-730(8) of the ITAA 1997 as:

Mining, quarrying or prospecting information is geological, geophysical or technical information that:

The exploration tenements in which the entity has interests are depreciating assets under paragraph 40-30(2) of the ITAA 1997.

Subsection 40-80(1) of the ITAA 1997 provides that an asset's cost can be deductible if the asset is first used for exploration and prospecting for minerals obtainable by mining operations and when first used it is not used for operations in the course of working a mining property.

For purposes of the deduction in terms of subsection 40-80(1) of the ITAA 1997, it is also necessary that when the interests in the exploration tenements are first used you can satisfy one or more of the following:

Where these conditions are satisfied, the operation of subsection 40-25(1) of the ITAA 1997 and subsection 40-80(1) of the ITAA 1997, will mean the cost of a depreciating asset first used in exploration and prospecting for natural resources obtainable by mining operations will be fully deductible.

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