3.7 Consumption tax benchmark
Natural resource taxes
The Australian Government taxes profits from the extraction and production of unprocessed petroleum (for example, crude oil, LPG and condensate) and, in certain cases, natural gas. Different taxation arrangements for unprocessed petroleum products applied to projects that commenced before the 1986-87 financial year.
The benchmark for petroleum projects that commenced on or after 1 July 1986 is based on the petroleum resource rent tax (PRRT).
- The tax base includes receipts from offshore petroleum production (excluding projects located in the North West Shelf) less eligible project expenditures.
- Under the PRRT any eligible expenditure which is not offset against revenue in the current year can be compounded and offset against future PRRT income. The rate at which expenditure is compounded and carried forward depends on the category of expenditure and when it was incurred. The benchmark uplift rate for exploration expenditure is the long term bond rate plus 15 percentage points and for general project expenditure is the long term bond rate plus 5 percentage points.
- The benchmark tax rate is 40 per cent of the project's profits.
- The benchmark tax unit is the petroleum project.
- The benchmark for petroleum projects that commenced before 1 July 1986 (for example, the North West Shelf) is the crude oil excise and is comprised of the following features:
- the barrel equivalent production of crude oil from fields of greater than 30 million barrels as the tax base;
- the rate of tax that applies to crude oil as the tax rate, with applicable rates determined by the date that the field was discovered (that is, new, intermediate or other); and
- the entity that has the legal obligation to pay the tax as the tax unit.
In July 2010, the Government announced that it would implement a minerals resource rent tax (MRRT) and an extended PRRT, with effect from 1 July 2012. As the Government is currently considering the recommendations of the Policy Transition Group in respect of the final design of these proposed tax reforms, this benchmark does not yet take into account the proposed MRRT or PRRT arrangements as there is not yet sufficient certainty around these reforms for a consistent benchmark to be specified.
Tax expenditures for manufacturing and mining
G1 Gas transfer price regulations
Fuel and energy ($m)
| 2006-07 | 2007-08 | 2008-09 | 2009-10 | 2010-11 | 2011-12 | 2012-13 | 2013-14 | ||
|---|---|---|---|---|---|---|---|---|---|
| * | * | * | * | * | * | * | * | ||
| Tax expenditure type: | Deduction | 2009 TES code: | G1 | ||||||
| Estimate Reliability: | Not Applicable | * Category | 2+ | ||||||
| Commencement date: | 20 December 2005 | Expiry date: | |||||||
| Legislative reference: | Petroleum Resource Rent Tax Assessment Regulations 2005 | ||||||||
For petroleum resource rent tax purposes, the gas transfer price regulations stipulate rules for calculating the gas transfer price where there is no arm's length transaction. The regulations provide an allowance for capital expenditure which is based on the long term bond rate plus 7 percentage points rather than the benchmark rate (long term bond rate plus 5 percentage points).
G2 Increased deduction for petroleum exploration expenditure in designated offshore frontier areas
Fuel and energy ($m)
| 2006-07 | 2007-08 | 2008-09 | 2009-10 | 2010-11 | 2011-12 | 2012-13 | 2013-14 | ||
|---|---|---|---|---|---|---|---|---|---|
| * | * | * | * | * | * | * | * | ||
| Tax expenditure type: | Deduction | 2009 TES code: | G2 | ||||||
| Estimate Reliability: | Not Applicable | * Category | 1+ | ||||||
| Commencement date: | 29 March 2004 | Expiry date: | 2009 | ||||||
| Legislative reference: | Section 36C of the Petroleum Resource Rent Tax Assessment Act 1987 | ||||||||
For petroleum resource rent tax purposes, petroleum exploration companies receive a 150 per cent uplift on pre-appraisal exploration expenditure conducted in the first term of an exploration permit in a designated frontier area.
G3 Transfer of exploration expenditure between petroleum resource rent tax projects
Fuel and energy ($m)
| 2006-07 | 2007-08 | 2008-09 | 2009-10 | 2010-11 | 2011-12 | 2012-13 | 2013-14 | ||
|---|---|---|---|---|---|---|---|---|---|
| * | * | * | * | * | * | * | * | ||
| Tax expenditure type: | Deduction | 2009 TES code: | G3 | ||||||
| Estimate Reliability: | Not Applicable | * Category | 2+ | ||||||
| Commencement date: | 1 July 1990 | Expiry date: | |||||||
| Legislative reference: | Petroleum Resource Rent Tax Assessment Act 1987 | ||||||||
Exploration expenditure can be transferred, under certain circumstances, between projects for petroleum resource rent tax (PRRT) purposes. Under the benchmark, the taxable entity is the project and undeducted expenditure is compounded and applied against future PRRT assessable receipts.
Petroleum
G4 Crude Oil Excise — Condensate
Fuel and energy ($m)
| 2006-07 | 2007-08 | 2008-09 | 2009-10 | 2010-11 | 2011-12 | 2012-13 | 2013-14 | ||
|---|---|---|---|---|---|---|---|---|---|
| 790 | 980 | 580 | 600 | 580 | 580 | 580 | 590 | ||
| Tax expenditure type: | Exemption | 2009 TES code: | G4 | ||||||
| Estimate Reliability: | Medium | ||||||||
| Commencement date: | 1977 | Expiry date: | |||||||
| Legislative reference: | Schedule to the Excise Tariff Act 1921 | ||||||||
Prior to midnight (Canberra time), 13 May 2008, condensate produced in a State or Territory, or inside the outer limits of the territorial sea of Australia, or marketed separately from a crude oil stream, or in the North West Shelf project area was exempt from the crude oil excise. Condensate is light oil extracted from 'wet' gas and primarily processed for use in motor vehicles (commonly known as petrol).
As announced in the 2008-09 Budget, the tax exemption for condensate was abolished with effect from midnight (Canberra time) 13 May 2008. From this date, condensate production from petroleum fields located in the North West Shelf project area and onshore Australia have been subject to the same excise rates as those applicable to petroleum fields discovered after 18 September 1975.
However, the benchmark for condensate produced from fields discovered prior to 18 September 1975 are the higher excise rates applied to production from fields discovered prior to 18 September 1975.