Income Tax Assessment Act 1997
Note: A Commissioner ' s Remedial Power (CRP 2017/2) is relevant to this part of the tax law. Taxation Administration (Remedial Power - Small Business Restructure Roll-over) Determination 2017 (F2017L01687) modifies the operation of s 40-340 of the Income Tax Assessment Act 1997 and any other provisions of a taxation law whose operation is affected by the modified operation of s 40-340 in relation to an asset transferred under a small business restructure roll-over (item 8 of the table in s 40-340(1) ).
The operation of the relevant provisions is modified as follows:
If s 40-340 of ITAA 1997 provides for rollover relief in relation to a disposal of a depreciating asset because the condition in item 8 of the table in s 40-340(1) of ITAA 1997 is satisfied in relation to the asset, that section has effect as if it also provided that the disposal of the asset has no direct consequences under the income tax law (other than Div 40 of ITAA 1997).
The modification applies in respect of transfers on or after 8 May 2018.
An entity must treat a modification as not applying to it or any other entity if the modification would produce a less favourable result for it. The Commissioner is empowered by s 370-5 of Sch 1 to the Taxation Administration Act 1953 to make modifications, by legislative instrument, to ensure the law is administered to achieve its intended purpose or object.
A farm-in farm-out arrangement is an *arrangement under which:
(a) an entity (the transferor ) transfers, or agrees to transfer, part of the entity ' s interest in a *mining, quarrying or prospecting right to another entity (the transferee ); and
(b) in exchange for the transfer, the transferee provides to the transferor one or more *exploration benefits. 40-1100(2)
The transferee provides an exploration benefit to the transferor if:
(a) the transferee:
(i) conducts *exploration or prospecting for *minerals, or quarry materials, obtainable by *mining and quarrying operations; or
(ii) undertakes to conduct exploration or prospecting for minerals, or quarry materials, obtainable by mining and quarrying operations; or
(iii) funds, on the transferor ' s behalf, expenditure that the transferor incurs in relation to exploration or prospecting by the transferor or another entity (other than the transferee); or
(iv) undertakes to fund, on the transferor ' s behalf, expenditure that the transferor incurs in relation to exploration or prospecting by the transferor or another entity (other than the transferee); and
(b) the exploration or prospecting relates to the part of the transferor ' s interest in the *mining, quarrying or prospecting right that the transferor does not transfer, or agree to transfer, under the arrangement; and
(c) in a case where the transferor conducts the exploration or prospecting - expenditure incurred by the transferor relating to the exploration or prospecting is:
(i) included in the *cost of *mining, quarrying or prospecting information *held by the transferor; or
(ii) included in any other *depreciating asset, held by the transferor, for which the decline in value is provided under section 40-80 ; or
(iii) expenditure, of a kind referred to in subsection 40-730(1) , that meets the requirements of subsection (3) of this section; and
(d) in a case where the transferor does not conduct the exploration or prospecting - were the transferor to conduct the exploration or prospecting, expenditure incurred by the transferor relating to the exploration or prospecting would:
(i) be included in the cost of mining, quarrying or prospecting information held by the transferor; or
(ii) be included in any other depreciating asset, held by the transferor, for which the decline in value is provided under section 40-80 ; or
(iii) be expenditure, of a kind referred to in subsection 40-730(1) , that meets the requirements of subsection (3) of this section.
Expenditure meets the requirements of this subsection if:
(a) for that expenditure, the transferor satisfies, or would satisfy, one or more of paragraphs 40-730(1)(a) to (c); and
(b) the expenditure is not of a kind referred to in subsection 40-730(2) or (3) ; and
(c) the expenditure is not of a kind that another provision of this Act provides is not deductible.
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