NO.054

Joint Press Release

Treasurer and Minister for Industry, Tourism and Resources

POLICY MODIFICATIONS TO THE PETROLEUM RESOURCE RENT TAX AND THE PROPOSED

GAS TRANSFER PRICE REGULATIONS

Today the Treasurer and the Minister for Industry, Tourism and Resources announced

that the Australian Government will introduce a number of policy changes to

the petroleum resource rent tax (PRRT) and the proposed Gas Transfer Price Regulations.

The changes to the PRRT will reduce compliance costs, improve administration

and remove inconsistencies in the PRRT regime.

In particular, the PRRT legislation will be amended to:

• allow the deduction of transferable exploration expenditure when calculating

  quarterly instalments and of fringe benefits tax for PRRT purposes;

• allow the deduction of closing-down costs when moving from a production

  to an infrastructure licence;

• include the PRRT in the self-assessment regime;
• provide roll-over relief for internal corporate restructuring;
• introduce a transfer notice requirement for vendors disposing of an interest

  in a petroleum project; and

• extend the lodgement period for PRRT annual returns from 42 days to 60

  days.

These changes will take effect from 1 July 2006.

The Government has also considered policy changes to the treatment of data

package costs, indirect costs and feasibility assessment costs under the PRRT

regime but has decided that legislative change is not justified. In relation

to the treatment of indirect costs and feasibility assessment costs, an administrative

solution should be explored before any legislative amendment is considered.

Following extensive consultation with the petroleum industry, the Government

has also decided to make adjustments to the proposed Gas Transfer Pricing Regulations.

The changes will improve taxpayer certainty and simplify the calculation of

a gas transfer price for an integrated gas-to-liquids project.

Specifically, the method used to calculate the capital allowance rate in the

proposed Regulations will be changed from a weighted average cost of capital

approach to the long-term bond rate plus seven percentage points approach. Technical

changes will also be made to the proposed Regulations dealing with the materiality

threshold for apportioning costs and the endpoint of the downstream stage of

a project.

The implementation of the Regulations will facilitate investment in Australia’s

natural gas resources and provide a sound basis for the development of the liquefied

natural gas industry.

These changes will take effect once the Regulations are made.

CANBERRA

10 May 2005

Contact: Minister Macfarlane’s Office: Kirsty Boazman 02 6277 7580