Part 1 Preliminary
1 Name of Regulations
These Regulations are the Petroleum Resource Rent Tax Assessment Regulations 2005.
2 Commencement
These Regulations commence on the day after they are registered.
Part 2 Definition provisions
3 Definitions
In these Regulations:
Act means the Petroleum Resource Rent Tax Assessment Act 1987.
actual volume of project natural gas, in relation to an integrated GTL operation and a year of tax in which the operation produces project liquid, means the volume of project natural gas that was used to produce project liquid.
advance pricing arrangement has the meaning given by subregulation 18 (1).
annual allocation, of a capital cost, has the meaning given by regulation 36.
arm’s length price means the consideration received or receivable in relation to a transaction in which the parties are dealing with each other at arm’s length.
assessment year means the year of tax for which an RPM price is to be calculated using the residual pricing method.
augmented, in relation to a capital cost, has the meaning given by regulation 11.
capital allowance, for a year of tax, has the meaning given by regulation 13.
capital cost has the meaning given by subregulation 31 (1).
comparable uncontrolled price or CUP, in relation to sales gas, has the meaning given by subregulation 19 (1).
direct cost has the meaning given by regulation 28.
downstream, in relation to a cost, has the meaning given by subregulation 32 (6).
downstream stage has the meaning given by paragraph 5 (b).
estimated average annual volume of project natural gas, in relation to an integrated GTL operation, has the meaning given by subregulation 9 (6).
expected operating life, of an integrated GTL operation, has the meaning given by subregulation 9 (7).
included cost has the meaning given by regulation 30.
indirect cost has the meaning given by subregulation 28 (5).
integrated GTL operation has the meaning given by regulations 4 and 5.
MPC production year, for an integrated GTL operation, has the meaning given by subregulation 4 (9).
multiple use, of a unit of property, has the meaning given by regulation 7.
operating cost has the meaning given by subregulation 31 (2).
operating life, of an integrated GTL operation, has the meaning given by subregulation 4 (8).
participant, in an integrated GTL operation, has the meaning given by regulation 8.
personal cost has the meaning given by subregulation 28 (6).
petroleum product, of an operation, means petroleum, or a product of petroleum, that is recovered, produced or processed in the operation.
phase, of an integrated GTL operation, has the meaning given by subregulation 6 (2).
phase cost, for a phase of an integrated GTL operation, means the phase cost worked out using subregulations 32 (2) and (3).
production date, for an integrated GTL operation, has the meaning given by subregulation 4 (7).
production year, for an integrated GTL operation, has the meaning given by subregulation 4 (6).
project liquid, of an integrated GTL operation, has the meaning given by subregulation 4 (4).
project natural gas, of an integrated GTL operation, has the meaning given by subregulation 4 (2).
project product, of an integrated GTL operation, has the meaning given by subregulation 4 (5).
project sales gas, of an integrated GTL operation, has the meaning given by subregulation 4 (3).
reduced, in relation to a capital cost, has the meaning given by regulation 12.
residual pricing method has the meaning given by regulation 25.
RPM price, for a participant in an integrated GTL operation in a year of tax, has the meaning given by regulations 20 and 21.
start date, in relation to capital cost incurred in an integrated GTL operation, means 1 January of the year of tax in which the cost is incurred.
taxpayer means a person who is a participant in an integrated GTL operation and whose assessable petroleum receipts in relation to sales gas produced in that operation are to be worked out under these Regulations because of regulation 14 or 15.
upstream, in relation to a cost, has the meaning given by subregulation 32 (5).
upstream stage has the meaning given by paragraph 5 (a).
volume coefficient or VC, for an integrated GTL operation in a year of tax, has the meaning given by subregulation 10 (2).
4 When an integrated GTL operation exists
(1) An integrated GTL operation exists, with the elements described in regulation 5, if there is an operation (the overall operation) in which:
(a) petroleum is, or will be, recovered from a petroleum project; and
(b) sales gas is, or will be, produced from some or all of the petroleum; and
(c) some or all of the sales gas is, or will be, processed into a liquefied product.
(2) The project natural gas of the integrated GTL operation is the petroleum (natural gas) mentioned in paragraph (1) (a) from which sales gas will be produced and processed into liquefied product within the overall operation (including any of that natural gas that is used in that production and processing).
(3) The project sales gas of the integrated GTL operation is the sales gas mentioned in paragraph (1) (b) that will be processed into liquefied product within the overall operation (including any of that sales gas that is used in that processing).
(4) The liquefied product mentioned in paragraph (1) (c) is project liquid of the integrated GTL operation.
(5) The project natural gas, project sales gas and project liquid are project product of the integrated GTL operation.
(6) The year of tax in which the project sales gas is first processed into project liquid is the production year for the integrated GTL operation.
(7) The 31 December of the production year is the production date for the integrated GTL operation.
(8) The period beginning with the production year and ending with the year of tax in which project sales gas is last processed into project liquid is the operating life of the integrated GTL operation.
(9) If the integrated GTL operation produces a marketable petroleum commodity other than project sales gas, the year of tax in which it is first produced is the MPC production year for the integrated GTL operation.
5 What an integrated GTL operation consists of
If an integrated GTL operation exists because of regulation 4, it consists of:
(a) an upstream stage that is a series of phases ending when all of the following actions have been completed:
(i) the recovery of project natural gas;
(ii) any multiple use of units of property that are used in the recovery of project natural gas;
(iii) the production of project sales gas;
(iv) any multiple use of units of property that are used in the production of project sales gas;
(v) the transportation of project product for the recovery mentioned in subparagraph (i) or the production mentioned in subparagraph (iii);
(vi) any multiple use of units of property for transportation mentioned in subparagraph (v); and
(b) a downstream stage that is a series of phases ending when all of the following actions have been completed:
(i) the transportation (if any) of project sales gas from the upstream stage for processing into project liquid;
(ii) the processing of the project sales gas into project liquid;
(iii) any multiple use of units of property that are used in the processing of the project sales gas into project liquid;
(iv) the transportation of project product for the processing of project sales gas mentioned in subparagraph (ii);
(v) any activity associated with an action mentioned in subparagraphs (i) to (iv) for the purpose of using project sales gas to produce project liquid;
(vi) any multiple use of units of property for the transportation mentioned in subparagraph (iv);
(vii) the sale of project liquid without further processing;
(viii) the storage of project liquid at or adjacent to the place at which it is produced by the processing mentioned in subparagraph (ii);
(ix) the loading of project liquid at a loading facility:
(A) adjacent to the place at which it is produced by the processing mentioned in subparagraph (ii); or
(B) adjacent to the place at which it is stored as mentioned in subparagraph (viii);
(x) the transportation of project liquid between any or all of:
(A) the place at which it is produced by the processing mentioned in subparagraph (ii); and
(B) the place at which it is stored as mentioned in subparagraph (viii);
(C) the place at which it is loaded as mentioned in subparagraph (ix);
(xi) any multiple use of units of property for the storage, loading or transportation mentioned in subparagraphs (viii), (ix) and (x).
Note Phases are explained using subregulations 6 (1) and (2).
In general terms, a phase is a stage of an operation during which the ratio of project product to total product flowing through the operation remains the same (and is expected to remain the same). The upstream and downstream stages of an integrated GTL operation will include a number of phases, but each stage ends when the actions associated with the phase have been completed.
6 Phase points of an integrated GTL operation
Note This regulation divides the integrated GTL operation into phases in such a way that petroleum product is not brought into or taken out of the operation except at the beginning or end of a phase. In obtaining the cost-plus and netback prices:
· the various joint costs incurred by participants in the operation are attributed to each phase (regulation 32); and
· the capital costs are annualised (Division 5.3); and
· the costs for the assessment year are apportioned between the project product and other product, using an energy coefficient appropriate for the phase (regulation 37).
This procedure assumes that the same phase points apply over the life of the project. If a new phase point emerges that was not identified before the production year, there may need to be a recalculation of the annualised capital costs.
(1) The phase points of an integrated GTL operation are:
(a) the point where the upstream stage ends and the downstream stage begins; and
(b) any point in the flow of project product through the operation at which there is expected to be a difference in the ratio of project product to total product flowing through the operation before and after the point.
Examples
1 An integrated GTL operation begins with the recovery of natural gas and liquid petroleum, using the same extraction facilities. Separate pipelines are used to carry off the natural gas and the liquid petroleum, so that only the gas pipeline is part of the operation. Since the quantity of petroleum product is reduced at the beginning of the pipeline, that point is a phase point.
2 At the sales gas production facility of an integrated GTL operation, natural gas from another source is added to the project natural gas. The point at which the natural gas is added is a phase point.
3 Some of the sales gas produced in an integrated GTL operation is transported in a pipeline that is part of the operation, and therefore enters the down stream phase; it is then sold before liquefaction. There is a decrease in the quantity of petroleum product in the operation at that point, which is therefore a phase point.
(2) The integrated GTL operation is divided into phases by the phase points.
Note In general terms, a phase is a stage of an operation during which the ratio of project product to total product flowing through the operation remains the same (and is expected to remain the same).
(3) The participants in the integrated GTL operation must:
(a) in the year of tax before the production year, notify the Commissioner of any phase points of the operation that are apparent to any of them at that time; and
(b) notify the Commissioner as soon as practicable of any phase point that becomes apparent at a later time.
(4) The participants in the integrated GTL operation must satisfy the Commissioner that they can provide accurate records of the quantities of petroleum product before and after each phase point (for example, by including metering facilities at the phase point or using other reliable estimation techniques).
7 When there is multiple use of a phase
(1) A reference to multiple use of a phase relating to the recovery of project natural gas is a reference to the use of the unit of property, at any time during the operating life of the integrated GTL operation, in operations to recover petroleum other than project natural gas from the petroleum project.
Examples
1 An oil platform is used to recover both natural gas and liquid petroleum.
2 An oil platform is used to recover petroleum from a petroleum project outside the operation.
(2) A reference to the multiple use of a phase relating to the production of project sales gas is a reference to the use of the unit of property, at any time during the operating life of the integrated GTL operation, to produce marketable petroleum commodities other than project sales gas from petroleum (whether or not the petroleum was recovered from the petroleum project of the operation).
Examples
1 Plant is used to produce sales gas, some of which is to be sold for direct consumption as energy.
2 Plant is used to produce sales gas from natural gas recovered outside the operation.
(3) A reference to the multiple use of a phase relating to the processing of project sales gas into project liquid is a reference to the use of the unit of property, at any time during the operating life of the integrated GTL operation, to process marketable petroleum commodities other than project sales gas into liquefied product (whether or not the other marketable petroleum commodities were produced in the operation).
Example
Plant used to liquefy project sales gas is also used to liquefy sales gas produced outside the operation.
(4) A reference to the multiple use of a phase relating to the transportation of project product is a reference to the use of the unit of property, at any time during the operating life of the integrated GTL operation, to transport petroleum product other than project product within the operation (whether or not the petroleum product was recovered or produced in the operation).
Example
A pipeline from an offshore petroleum recovery platform that carries natural gas to shore, only some of which is project natural gas.
(5) A reference to the multiple use of a storage facility is a reference to the use of the storage facility, at any time during the operating life of the integrated GTL operation, to store petroleum product other than project product within the operation (whether or not the petroleum product was recovered or produced in the operation).
Example
The use of a storage facility both:
(a) to store project liquid; and
(b) to store petroleum that is not project liquid.
(6) A reference to the multiple use of a loading facility is a reference to the use of the loading facility, at any time during the operating life of the integrated GTL operation, to load petroleum product other than project product within the operation (whether or not the petroleum product was recovered or produced in the operation).
Example
The use of a loading facility to load petroleum product of another operation.
8 Who the participants are in an integrated GTL operation
A person is a participant in the operation if the person holds an interest in the operation that entitles the person to petroleum product of the operation at the end of at least one phase.
9 The estimated average annual volume of project natural gas
(1) The participants in an integrated GTL operation must, in the year of tax before the production year, give to the Commissioner estimates of:
(a) the operating life of the operation, in years (N); and
(b) the total volume of project natural gas to be recovered during the life of the operation (VNG).
(2) As soon as practicable after receiving an estimate (including a revised estimate under subregulation (4)) from the participants, the Commissioner must notify them in writing that the Commissioner:
(a) accepts the estimate or revised estimate; or
(b) has substituted an estimate under subregulation (5).
(3) The estimate of N so notified is NE and the estimate of VNG so notified is VNGE.
(4) If, from new information, it appears that either NE or VNGE is inaccurate as an estimate, the participants must give to the Commissioner a revised estimate of N or VNG.
(5) If, having regard to relevant information, the Commissioner is not satisfied that an estimate given by the participants for subregulation (1) or (4) is reasonable, the Commissioner may substitute an estimate that the Commissioner is satisfied is reasonable.
(6) The estimated average annual volume of project natural gas for the operation is given by the following formula:
(7) The expected operating life of the integrated GTL operation is the period of NE years beginning with the production year.
10 Meaning of volume coefficient
(1) In this regulation, for an integrated GTL operation:
base year means the year of tax in which the actual volume of project natural gas first exceeds the estimated average annual volume of project natural gas for the operation.
Note If the estimated average annual volume of project natural gas changes from one year of tax to another, the base year for the calculation of the volume coefficient may also change.
(2) The volume coefficient (or VC) for an integrated GTL operation in a year of tax (the current year) is:
where:
VA is the actual volume of project natural gas for the current year.
VB is:
(a) if the current year is before the base year — the estimated average annual volume of project natural gas; or
(b) if the current year is the base year — VA; or
(c) if the current year is after the base year — the amount calculated using the formula:
where:
Vn is the actual volume of project natural gas for each year of tax (n represents the year of tax).
N is the number of years of tax from the base year to the current year (inclusive).
11 Augmentation of a capital cost
A capital cost for an integrated GTL operation is augmented for a number of years by applying the formula:
where:
Capital allowance is:
(a) for subregulation 33 (2) — the capital allowance for the final cost year; and
(b) for subregulation 34 (3) — the capital allowance for the production year; and
(c) for subregulation 35 (3) — the capital allowance for the production year; and
(d) for paragraph 35 (4) (a) — the capital allowance for the MPC production year.
N is the number of years.
12 Reduction of a capital cost
A capital cost for an integrated GTL operation is reduced for a number of years by applying the formula:
where:
Capital allowance is:
(a) for paragraph 35 (4) (b) — the capital allowance for the MPC production year;
(b) for subregulation 35 (5) — the capital allowance for the year of tax of the start date for the capital cost.
N is the number of years.
13 Capital allowance
The capital allowance, for a year of tax, is calculated using the formula:
long-term bond rate + 7 percentage points
Part 3 Assessable petroleum receipts for sales gas
14 Assessable petroleum receipts — sales gas becoming excluded commodity by being sold (Act s 24 (1) (d) (i))
(1) For subparagraph 24 (1) (d) (i) of the Act, this regulation sets out the method for working out the amount of assessable petroleum receipts derived by the person (the taxpayer) in relation to the non-arm’s length sale of sales gas.
(2) If:
(a) the sales gas is project sales gas of an integrated GTL operation; and
(b) the taxpayer is a participant in the operation;
the amount of assessable petroleum receipts of the taxpayer is the amount worked out under regulation 16.
(3) In any other case, the amount of assessable petroleum receipts of the taxpayer is worked out as if the sales gas were a marketable petroleum commodity other than sales gas.
Note Paragraph 24 (1) (b) of the Act applies to a sale of a marketable petroleum commodity other than sales gas; section 57 of the Act applies to a sale not at arm’s length.
15 Assessable petroleum receipts — sales gas becoming excluded commodity otherwise than by being sold (Act s 24 (1) (e))
(1) For paragraph 24 (1) (e) of the Act, this regulation sets out the method for working out the amount of assessable petroleum receipts derived by the person (the taxpayer) in relation to the sales gas that becomes or became an excluded commodity.
(2) If:
(a) the sales gas is project sales gas of an integrated GTL operation; and
(b) the taxpayer is a participant in the operation;
the amount of assessable petroleum receipts of the taxpayer is the amount worked out under regulation 17.
(3) In any other case, the amount of assessable petroleum receipts of the taxpayer is worked out as if the sales gas were a marketable petroleum commodity other than sales gas.
Note Paragraph 24 (1) (c) of the Act applies to a marketable petroleum commodity other than sales gas that becomes an excluded commodity.
16 Integrated GTL operations with non-arm’s length sale
(1) For subregulation 14 (2), the amount of assessable petroleum receipts of the taxpayer, in relation to the project sales gas subject to the sale, is:
(a) if an advance pricing arrangement applies to the sale — the amount calculated in accordance with the arrangement; and
(b) if no advance pricing arrangement applies to the sale, but a comparable uncontrolled price exists for the sale — the CUP amount for the sale; and
(c) if no advance pricing arrangement applies to the sale, and no comparable uncontrolled price exists for the sale — the RPM amount for the sale.
(2) For this regulation, the CUP amount for the sale is the higher of:
(a) the amount calculated using the formula:
where:
CUP is the comparable uncontrolled price.
VG is the volume of project sales gas sold.
and:
(b) the consideration received or receivable, less any expenses payable, by the participant in relation to the sale.
(3) For this regulation, the RPM amount for the sale is the higher of:
(a) the amount calculated using the formula:
where:
RPM price is the RPM price for the taxpayer in relation to the integrated GTL operation in the year of tax in which the sale took place.
VG is the volume of project sales gas sold.
and:
(b) the consideration received or receivable, less any expenses payable, by the participant in relation to the sale.
17 Integrated GTL operations with no sale
(1) For subregulation 15 (2), the amount of assessable petroleum receipts of the taxpayer, in relation to the project sales gas subject to the transaction, is:
(a) if an advance pricing arrangement applies to the transaction — the amount calculated in accordance with the arrangement; and
(b) if no advance pricing arrangement applies to the transaction, but a comparable uncontrolled price exists for the transaction — the CUP amount for the transaction; and
(c) if no advance pricing arrangement applies to the transaction, and no comparable uncontrolled price exists for the transaction — the RPM amount for the transaction.
(2) For this regulation, the CUP amount for the transaction is the amount calculated using the formula:
where:
CUP is the comparable uncontrolled price.
VG is the volume of project sales gas subject to the transaction.
(3) For this regulation, the RPM amount for the transaction is the amount calculated using the formula:
where:
RPM price is the RPM price for the taxpayer in relation to the integrated GTL operation in the year of tax in which the transaction took place.
VG is the volume of project sales gas subject to the transaction.
(4) In this regulation:
transaction means the act by which the project sales gas becomes or became an excluded commodity.
18 Advance pricing arrangements
(1) The Commissioner may, at the request of a participant in an integrated GTL operation, make an agreement (advance pricing arrangement) with the participant about how the assessable petroleum receipts of the participant are to be calculated in relation to project sales gas that is subject to subparagraph 24 (1) (d) (i) or paragraph 24 (1) (e) of the Act.
(2) An advance pricing arrangement must specify:
(a) the term of the arrangement; and
(b) how the assessable receipts of the participant are to be calculated; and
(c) conditions under which the arrangement will apply.
Part 4 The substitute prices
19 The comparable uncontrolled price
(1) A comparable uncontrolled price, or CUP, in relation to a relevant transaction for a volume of project sales gas, is a price for sales gas:
(a) that was obtained for a sale in a market that the Commissioner is satisfied is a relevant market in relation to the transaction; and
(b) that the Commissioner is satisfied is an observable arm’s length price.
(2) In determining whether a market is relevant, the demand and supply characteristics of the market must be taken into account, including:
(a) the composition of sales gas sold in the market; and
(b) geographic differences between the production facilities and the product delivery point of the sales gas sold in the market; and
(c) the end use for the sales gas sold in the market.
Example
Retail, wholesale, manufacturing, feedstock, domestic.
(3) In determining whether a market is relevant, the following factors must also be taken into account:
(a) the terms of contracts usual in the market, including volumes, discounts, exchange exposures and other relevant conditions that would reasonably be considered to affect the price;
(b) market strategies;
(c) the existence of spot sales (including market penetration sales) below or above marginal cost;
(d) processing costs;
(e) technology used in processing;
(f) any other factors that it would be reasonable to consider.
(4) In this regulation:
relevant transaction, for a volume of project sales gas, means:
(a) a sale of the gas for subparagraph 24 (1) (d) (i) of the Act; or
(b) an act by which the gas becomes an excluded commodity for paragraph 24 (1) (e) of the Act.
20 The RPM price (the project sales gas transfer price using the residual pricing method)
Subject to this Part, the RPM price for a taxpayer in a year of tax is a price for project sales gas that is:
(a) if the cost-plus price is higher than the netback price — the netback price; and
(b) otherwise — the price given by the formula:
where the cost-plus price and the netback price are obtained by following Steps 1 to 13 of the residual pricing method.
21 RPM price where information is not available
(1) This regulation applies if a taxpayer does not have sufficient information to work out the taxpayer’s RPM price for a year of tax using the residual pricing method.
(2) If the taxpayer and the Commissioner are able to agree on a price for this subregulation, that price is the RPM price.
(3) If the Commissioner and the taxpayer cannot agree on a price, and the Commissioner is satisfied that a price worked out by the Commissioner using the residual pricing method, and using the information available from other participants in the integrated GTL operation, is a fair and reasonable price, that price is the RPM price.
(4) If the Commissioner and the participant cannot agree on a price, but the Commissioner is not satisfied as to a price under subregulation (3), the RPM price is the price determined by the Commissioner as fair and reasonable.
Examples
1 If a participant incurs direct costs in the participant’s own right in relation to the integrated GTL operation, and there is no agreement between the participants as to how these costs are to be shared amongst them, information about those direct costs may not be available to the other participants to allow them to work out the RPM amount.
2 If a person becomes a participant in the integrated GTL operation, but does not have access to all the information required to work out the RPM price, then this regulation would apply.
22 Cost-plus price
The cost-plus price for a taxpayer who is a participant in an integrated GTL operation in a year of tax is:
where:
UCC (upstream capital costs) is the total amount of upstream capital costs incurred by the participants and allocated to the year of tax (see regulation 25).
VC is the volume coefficient for the year of tax.
UOC (upstream operating costs) is the total amount of upstream operating costs incurred by the participants in the year of tax (see regulation 25).
VPSG (volume of project sales gas) is the volume of the project sales gas that was produced in the operation in the year of tax.
23 Netback price
(1) The netback price for a taxpayer who is a participant in an integrated GTL operation in a year of tax is:
where:
PLVal (project liquid value) is the total market value of the project liquid produced in the year of tax.
DCC (downstream capital costs) is the total amount of downstream capital costs incurred by the participants and allocated to the year of tax (see regulation 25).
DPC (downstream personal costs) is the total amount of downstream personal costs of the taxpayer for the year of tax.
VC is the volume coefficient for the year of tax.
DOC (downstream operating costs) is the total amount of downstream operating costs incurred by the participants in the year of tax (see regulation 25).
VPSG (volume of project sales gas) is the volume of the project sales gas that was produced in the operation in the year of tax.
VTDG (volume of taxpayer’s downstream gas) is the volume of the project sales gas that was:
(a) produced in the upstream stage in the year of tax; and
(b) processed into project liquid that the taxpayer was entitled to receive (including any of that project sales gas that was used in that processing).
(2) If the taxpayer sells a quantity of project liquid from the operation as part of the operation in the year of tax, and the sale is an arm’s length transaction, the market value of the quantity is taken to be the amount received for the sale.
(3) For a quantity of project liquid to which subregulation (2) does not apply, the market value of the quantity is the market value at the end of the downstream stage.
(4) If the Commissioner is not satisfied that sufficient information is available to determine a market value for subregulation (3), the market value of the quantity of project liquid is the amount determined by the Commissioner as fair and reasonable.
Part 5 The residual pricing method
Division 5.1 The residual pricing method
24 Costs are net of GST tax credits and adjustments
A reference in this Part to a cost incurred by a person is a reference to the cost as reduced by:
(a) an input tax credit to which the person is, or becomes, entitled; or
(b) a decreasing adjustment.
25 The residual pricing method for working out cost-plus and netback prices
The residual pricing method of calculating an RPM price for a taxpayer, in relation to the assessment year, is the following:
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When the method can be used |
An RPM price can be calculated by this method only if information about the direct costs of all the participants (other than marketing and selling costs) is available. Information about the operating costs is required for the year of tax concerned. Information about the capital costs is required for all previous years of tax as well. If the information is not available, regulation 21 will apply. |
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What the method does |
The method identifies the pooled costs of the operation attributable to the project product, and the personal costs of the taxpayer attributable to the taxpayer’s share of project product. The pooled costs are used to calculate the major element of the cost-plus and netback prices; this element will be the same for each taxpayer participating in the operation. The personal costs are used only to calculate a minor element of the netback price; this element will vary with the individual taxpayer.
First, the costs that were incurred by the participants in relation to the integrated GTL operation are identified.
Certain costs relating to exploration, etc, are excluded. |
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That portion of the costs that is not attributable to the integrated GTL operation is excluded.
The personal costs of other participants are excluded. The personal costs of the taxpayer are included, but treated separately.
The included costs, where necessary divided into separate costs, are attributed to the various phases of the operation.
Capital costs are spread over the life of the operation and the costs for the assessment year identified.
The amount of each cost attributed to an assessment year is adjusted to account for the use of facilities of the operation for activities that are not part of the project.
The direct costs of all the participants (other than marketing and selling costs) that are attributable to the production of project sales gas or project liquid are pooled to give unit costs that apply to the operation as a whole. The personal costs of the taxpayer (marketing and selling costs) attributable to the taxpayer’s shares of project sales gas and liquefied product are applied to give supplementary unit costs. These are then used to calculate the taxpayer’s cost-plus and net back prices. |
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Step 1 |
Identify the types of cost associated with the operation
Apply regulation 26 to identify all types of cost associated with the integrated GTL operation up to and including the assessment year. At this point, only the type of cost needs to be known — information about individual costs and their amounts is not necessary. |
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Step 2 |
Exclude exploration costs, etc
Apply regulation 27 to exclude certain types of cost, including costs of such matters as exploration or feasibility studies. |
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Step 3 |
Identify direct and indirect costs for the operation
Apply regulation 28 to classify each type of cost not so far excluded as a direct cost or an indirect cost. |
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Step 4 |
Exclude personal costs of other participants
Apply regulation 29 to exclude personal costs of other participants.
The costs that are left are the included costs for the taxpayer (regulation 30). These consist of the pooled non-personal costs of all the participants in the integrated GTL operation, and the personal costs of the taxpayer. |
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Step 5 |
Classify the included costs as operating or capital costs
Apply regulation 31 to classify each included cost as an operating cost or a capital cost. |
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Step 6 |
Identify the amounts of the relevant included costs
Identify the amount of:
· each included operating cost incurred in the assessment year; and
· each included capital cost incurred up to and including the assessment year. |
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Step 7 |
Attribute the direct costs to the different phases
Apply regulation 32 to classify each direct cost as a phase cost of one of the phases of the integrated GTL operation, or as a combination of such phase costs. Regulation 32 also divides phase costs and indirect costs into upstream and downstream costs. |
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Step 8 |
Augment capital costs for units of property that take several years to complete
If a capital cost was incurred in a year before the completion year of the unit of property for which it was incurred, augment it as appropriate, then treat it for Step 9 (if applicable) or Step 10 (otherwise) as having been incurred in the completion year for that unit of property (regulation 33). |
Step 9 |
Augment and reduce early capital costs
If a capital cost was incurred before the production year, augment it and reduce it as appropriate, then treat it for Step 10 as having been incurred in the production year (regulations 34 and 35). |
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Step 10 |
Allocate capital costs to years of tax
For each capital cost, allocate to each year of tax from the production year onward a cost with the amount given by regulation 36. |
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Step 11 |
Identify costs for the assessment year
The costs for the assessment year are:
· the included operating costs for the assessment year; and
· the capital costs allocated to the assessment year under Step 10. |
|
Step 12 |
Apply the energy coefficients to the costs
For each cost for the assessment year, apply regulation 37 with the energy coefficient appropriate for the phase to which the cost has been attributed.
Note This removes that part of each cost attributable to multiple use of a phase. |
|
Step 13 |
Obtain the cost-plus and netback prices
Use the costs for the assessment year to calculate the participant’s cost-plus price (regulation 22) and netback price (regulation 23) for the assessment year. |
|
Step 14 |
Obtain the RPM price
Apply regulation 20 to determine the participant’s RPM price for the assessment year. |
Division 5.2 Identifying and classifying included costs
26 Types of cost associated with an integrated GTL operation
(1) For Step 1 of the residual pricing method, costs associated with an integrated GTL operation include all costs incurred by or on behalf of the participants that are attributable, or indirectly attributable, or partly attributable, to the operation, whether incurred during the operating life of the operation or before the production year.
(2) For Step 1 of the residual pricing method, a payment or allowance between participants is not a cost associated with the integrated GTL operation.
(3) A capital cost that was incurred in relation to a unit of property that:
(a) was not, at the time it was incurred, used in the integrated GTL operation; and
(b) was later used in the operation;
may be treated as a cost partly attributable to the operation.
(4) If a cost is only partly attributable to the integrated GTL operation, the amount of the cost is taken to be the amount that can reasonably be apportioned to the operation.
27 Exclusion of certain costs of an integrated GTL operation
For Step 2 of the residual pricing method, a cost associated with an integrated GTL operation is excluded from the costs of the operation if it is one of the following:
(a) an exploration cost under section 37 of the Act;
(b) a cost incurred in carrying out a feasibility or environmental study before the production of project sales gas;
(c) a cost incurred in removing infrastructure facilities used for an integrated GTL operation;
(d) an environment or site restoration cost;
(e) expenditure listed in paragraphs 44 (a) to (h) of the Act.
28 Direct, indirect and personal costs
(1) For Step 3 of the residual pricing method, costs associated with a integrated GTL operation are divided into direct costs and indirect costs in accordance with this regulation.
(2) A cost is a relevant sector cost if it is wholly and directly attributable to 1 or more of the following activities of the operation:
(a) production;
(b) transport;
(c) storage;
(d) marketing;
(e) selling.
(3) A relevant sector cost that is wholly attributable to either the upstream stage or the downstream stage of the operation is a direct cost.
(4) A relevant sector cost that:
(a) is not wholly attributable to either the upstream stage or the downstream stage; and
(b) is greater than the threshold amount;
is taken to be divided into two direct costs, attributed to the upstream and downstream stages, each of the amount that can reasonably be apportioned to that stage.
(5) A cost that is not a direct cost because of subregulation (3) or (4) is an indirect cost.
Examples of indirect costs
Business insurance, office expense, administrative and accounting costs, payment in respect of land and buildings used in connection with administrative or accounting activities, intra company charges, contract penalties, legal and audit costs, travel and buyer liaison costs.
(6) If a cost is related to the marketing and selling of project liquid, the cost is a personal cost of the participant that incurred it.
(7) For this regulation, the threshold amount for a financial year is:
(a) an amount agreed by the taxpayer and the Commissioner for that financial year; or
(b) if the taxpayer and the Commissioner cannot agree on an amount for a financial year:
(i) if that financial year is the financial year 2005–2006 or an earlier financial year — $20 million; and
(ii) if that financial year is a later financial year — $20 million indexed by the GDP factor as applied under the Act, adjusted from 1 January each year.
29 Exclusion of personal costs of other participants
For Step 4 of the residual pricing method, a personal cost that was incurred by another participant is excluded.
30 Included costs
A cost associated with an integrated GTL operation is an included cost for the taxpayer if it is not excluded under regulation 27 or 29.
31 Capital and operating costs
(1) For Step 5 of the residual pricing method, an included cost for a participant in an integrated GTL operation is a capital cost if:
(a) it is not a personal cost; and
(b) either:
(i) it was incurred before the production date; or
(ii) the unit of property for which it was incurred is a depreciating asset for section 40–30 of the Income Tax Assessment Act 1997.
Example of application of subparagraph (1) (b) (i)
If a person incurs operating expenses before the production date, they are treated as capital costs for the purposes of these Regulations.
(2) For Step 5 of the residual pricing method, an included cost for a participant in an integrated GTL operation is an operating cost if:
(a) it is not a personal cost; and
(b) it is not a capital cost.
(3) A cost which is a capital cost only because of subparagraph (1) (b) (i) is taken to have been incurred on the 1 January of the year of tax in which it was incurred.
Note Costs that relate to a unit of property that is constructed over several years of tax are dealt with in regulation 33.
32 Phase costs and upstream and downstream costs
(1) For Step 7 of the residual pricing method, the included direct and indirect costs are attributed to the various phases of the operation in accordance with this regulation.
(2) For each phase of the integrated GTL operation, each direct cost that can be wholly attributed to the phase is a phase cost for the phase.
(3) If a direct cost for the integrated GTL operation cannot be wholly attributed to activities of a single phase:
(a) the cost is taken to be made up of separate costs for each phase, each of the amount (if any) that can reasonably be apportioned to that phase; and
(b) each of those costs is attributed to the appropriate phase.
(4) Each included indirect cost for the integrated GTL operation is taken to be made up of two costs of equal amounts, of which one is attributable to the upstream stage and one to the downstream stage.
Note Regulation 37 does not apply to these costs, so that they are not reduced because of the multiple use of a phase.
(5) A cost that is a phase cost of a phase in the upstream stage, or an indirect cost allocated to the upstream stage by subregulation (4), is an upstream cost.
(6) A cost that is a phase cost of a phase in the downstream stage (which will include marketing and selling costs), or an indirect cost allocated to the downstream stage by subregulation (4), is a downstream cost.
Division 5.3 Allocating capital costs to years of tax
33 Capital costs incurred for a unit of property completed over several years
(1) For Step 8 of the residual pricing method, this regulation applies to an included capital cost for the taxpayer that is incurred in relation to a unit of property that is constructed over a period of time and for which the last capital cost is incurred in a later year of tax (the final cost year).
(2) The included capital cost is augmented for the number of calendar years between the start date for the included capital cost and the 1 January of the final cost year.
Note Regulations 34 and 35 are also relevant to the included capital cost.
(3) The included capital cost so augmented is taken to be incurred in the final cost year.
34 Capital costs incurred before the production year — project sales gas produced first
(1) For Step 9 of the residual pricing method, this regulation applies to an included capital cost for the taxpayer if:
(a) the included capital cost is incurred before the production year; and
(b) the MPC production year for the operation, if any, is not before the production year.
(2) The included capital cost:
(a) is taken to be the amount that has been augmented in accordance with regulation 33; and
(b) is taken to be incurred in the final cost year;
and is not to be the actual included capital cost incurred when it was actually incurred.
(3) The included capital cost is augmented for the number of calendar years between the start date for the included capital cost and the production date.
(4) The included capital cost so augmented is taken to be incurred in the production year.
35 Capital costs incurred before the production year — other marketable petroleum commodities produced first
(1) For Step 9 of the residual pricing method, this regulation applies to an included capital cost for the taxpayer if:
(a) the included capital cost is incurred before the production year; and
(b) marketable petroleum commodities other than project sales gas are produced in the operation; and
(c) the MPC production year for the operation is before the production year.
(2) The included capital cost:
(a) is taken to be the amount that has been augmented in accordance with regulation 33; and
(b) is taken to be incurred in the final cost year;
and is not to be the actual included capital cost incurred when it was actually incurred.
(3) If the included capital cost is incurred for a unit of property that will be used solely for the recovery of project natural gas, the production of project sales gas, the processing of project sales gas into project liquid or the transportation of project product, the included capital cost is augmented for the number of calendar years between the start date for the included capital cost and the production date.
(4) If subregulation (3) does not apply, and the included capital cost is incurred before the MPC production year, the included capital cost is:
(a) augmented for the number of calendar years between the start date for the included capital cost and the 31 December of the MPC production year; and
(b) reduced for the number of calendar years between the 31 December of the MPC production year and the production date.
(5) If subregulation (3) does not apply, and the included capital cost is incurred in or after the MPC production year and before the production year, the included capital cost is reduced for the number of calendar years between the start date for the included capital cost and the production date.
(6) An included capital cost as augmented, or as augmented and reduced, under this regulation is taken to be incurred in the production year.
36 Allocating capital costs to a year of tax
(1) For Step 10 of the residual pricing method, this regulation applies to an included capital cost for the taxpayer (the capital cost) that was incurred in a year of tax (the cost year) in relation to a unit of property (the unit) and has, if appropriate, been augmented or reduced under regulation 34 or 35.
(2) The annual allocation for the capital cost is allocated to the cost year and to each subsequent year of tax during the remainder of the expected life of the unit.
(3) If the expected operating life of the unit is 15 years or less, the annual allocation for the capital cost is:
where:
Capital allowance is the capital allowance for the cost year (regulation 13).
N is the number of calendar years in the expected operating life of the unit.
(4) If the expected operating life of the unit is more than 15 years, the annual allocation for the capital cost is:
where:
Capital allowance is the capital allowance for the cost year (regulation 13).
(5) If, at the end of the assessment year, the expected operating life of the unit has changed since the end of the cost year:
(a) the annual allocation of the capital cost for the assessment year is calculated using the new expected operating life of the unit; and
(b) the annual allocations of the capital cost for the calculation of RPM prices for years before the change are unaffected.
(6) For this regulation, the expected operating life of the unit is the period of N calendar years between:
(a) the start date for the capital cost; and
(b) the 31 December of the last year of tax that is within the expected operating life of the operation and during which the unit of property is expected to be used for the operation.
(7) For this regulation, a cost that is a capital cost only because of subparagraph 31 (1) (b) (i) is taken to have been incurred in relation to a unit of property that has an expected operating life that is the expected operating life of the operation.
Division 5.4 Accounting for multiple use of a phase
37 Applying the energy coefficients to costs of each phase
For Step 12 of the residual pricing method, the amount of each phase cost for a phase, for the year of tax, is taken to be:
where:
C is the amount of the cost before the application of this regulation.
Phase project energy is the energy content of the project product that enters the phase in the year of tax.
Total phase energy is the energy content of all the petroleum product that enters the phase in the year of tax.
Part 6 Notional tax amount — sales gas
38 Notional tax amount when RPM price not used (Act s 97 (1AA) (b))
For paragraph 97 (1AA) (b) of the Act, if any of the following is used in working out assessable petroleum receipts for a person under regulation 14 or 15:
(a) the comparable uncontrolled price;
(b) the consideration received or receivable, less any expenses payable, by the person in relation to the sale;
(c) an advance pricing arrangement;
the amount that is to be included in calculating the current period liability under subsection 97 (1A) of the Act is the amount of assessable petroleum receipts worked out under regulation 14 or 15.
39 Notional tax amount when RPM price used (Act s 97 (1AA) (b))
(1) This regulation applies if a participant in an integrated GTL operation uses an RPM price in working out assessable petroleum receipts under regulation 14 or 15, and had an RPM price for the previous year of tax.
(2) For paragraph 97 (1AA) (b) of the Act, the amount that is to be included in calculating the current period liability under subsection 97 (1A) of the Act is:
where:
PLVal is the project liquid value for the participant in the instalment period.
RPMPREV is the RPM price for the participant for the previous year of tax.
VPGPREV is the volume of project sales gas that was, in the previous year of tax, processed into project liquid that the participant was entitled to receive in the downstream stage (including any of that project sales gas that was used in that processing).
PLValPREV is the project liquid value for the participant in the previous year of tax.
(3) The project liquid value for the participant in a period is the total market value of the project liquid to which the participant is entitled in the period.
(4) If the participant sells a quantity of project liquid from the operation as part of the operation in the period, and the sale is an arm’s length transaction, the market value of the quantity is taken to be the amount received for the sale.
(5) For a quantity of project liquid to which subregulation (4) does not apply, the market value of the quantity is the market value at the end of the downstream stage.
(6) If the Commissioner is not satisfied that sufficient information is available to determine a market value for subregulation (5), the market value of the quantity of project liquid is the amount determined by the Commissioner as fair and reasonable.
40 Notional tax amount when no previous RPM price
(1) This regulation applies if a taxpayer uses an RPM price in working out assessable petroleum receipts under regulation 14 or 15, but does not have an RPM price for the previous year of tax.
(2) Subject to subregulation (3), the amount that is to be included in calculating the current period liability under subsection 97 (1A) of the Act is:
where:
VPG is the volume of project sales gas that was, in the instalment period, processed into project liquid that the participant was entitled to receive in the downstream stage (including any of that project sales gas that was used in that processing).
RPM is the RPM calculated as if the instalment period were the assessment year (including under regulation 21, if applicable).
(3) If the taxpayer became a participant in the assessment year because of a transfer of interests from a participant or participants (the previous participants), the taxpayer may elect to apply subregulation 39 (2) as if the factors in the equation were replaced by the following:
RPMPREV is the average RPM price for the previous participants for the previous year of tax, weighted according to the project liquid value for the each of the previous participants in the previous year of tax.
VPGPREV is the total volume of project sales gas that was, in the previous year of tax, processed into project liquid that the previous participants were entitled to receive in the downstream stage (including any of that project sales gas that was used in that processing).
PLValPREV is the total project liquid value for the previous participants in the previous year of tax.
Part 7 Miscellaneous
41 Review of decisions — prescribed decisions
For section 106A of the Act, a person dissatisfied with any of the following decisions may object against it in the manner set out in Part IVC of the Taxation Administration Act 1953:
(a) a decision under subsection 24 (2) of the Act whether a transaction is a non-arm’s length transaction;
(b) a decision to substitute an estimate of N or VNG under subregulation 9 (5);
(c) a determination under regulation 19 that no comparable uncontrolled price exists;
(d) a determination of the RPM price under regulation 21;
(e) a determination under subregulation 23 (4) or 39 (6) of the market value of project liquid.