Bills Digest no. 155 2005–06
Petroleum Resource Rent Tax (Instalment Transfer
Interest Charge Imposition) Bill 2006
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage History
Purpose
Background
Main Provisions
Endnotes
Contact Officer & Copyright Details
Passage History
Petroleum Resource Rent Tax (Instalment Transfer
Interest Charge Imposition) Bill 2006
Date introduced: 25 May 2006
House: House of
Representatives
Portfolio: Treasury
Commencement: 1 July 2006
To impose, as a tax, the
instalment transfer interest charge that can be imposed under the
Petroleum Resource Rent Tax Assessment Act 1987.
The Petroleum Resource Rent Tax Assessment Amendment Bill 2006
seeks to introduce a new interest charge: the instalment transfer
interest charge . This charge recoups the time value of money
associated with excess transfers of exploration expenditure under
the Petroleum Resource Rent Tax Assessment Act 1987 (the
PRRT Act).
Rent is a payment to a factor of production, such as capital,
that exceeds the amount necessary to keep that factor in its
current occupation. Under the PRRT Act, liability for the petroleum
resource rent tax (PRRT) is incurred when all allowable
expenditures have been deducted from assessable receipts.
Undeducted exploration expenditure incurred on or after 1
July 1990 can be transferred to other projects subject to
conditions, notably the common-ownership rule.
This rule tests the continuity of common ownership between the
source project incurring the exploration expenditure (the non-PRRT
paying project) and the receiving project (the PRRT paying
project). In particular, the company with unused exploration
expenditure (the loss company) must be part of the same group of
companies as the receiving project company. In short, the PRRT
allows intra-group transfers.
Breaches of the common ownership rule could give rise to
situations where taxpayers claim amounts of deductible exploration
expenditure that exceed those they can legally claim (companies pay
the PRRT in quarterly instalments). The resulting excess transfer
of exploration expenditure reduces the amount of PRRT paid below
the amount that is legally payable. In effect, the Australian
Taxation Office provides an interest-free loan to the taxpayer
until the excess transfer is reversed. To offset this, the
instalment transfer interest charge is imposed on the excessive
transfer.
The Petroleum Resource Rent Tax (Instalment Transfer Interest
Charge Imposition) Bill 2006 (the Bill) seeks to give
constitutional validity to the instalment transfer interest charge.
Section 55 of the Constitution states:
Laws imposing taxation shall deal only with the
imposition of taxation, and any provision therein dealing with any
other matter shall be of no effect.
For more information, see the Bills
Digest for the Petroleum Resource Rent Tax Assessment Amendment
Bill 2006.(1)
Proposed section 3(1) imposes the instalment
transfer interest charge as a tax, while proposed section
3(2) states that the instalment transfer interest charge
means the charge payable under section 98A of the PRRT Act.
- Richard Webb and Bernard Pulle, Petroleum Resource Rent Tax
Assessment Amendment Bill 2006 , Bills Digest No. 154,
2005 06, Parliamentary Library, Canberra, 2 March
2006. http://www.aph.gov.au/library/pubs/bd/2005-06/06bd154.pdf
Richard Webb
15 June 2006
Bills Digest Service
Parliamentary Library
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ISSN 1328-8091
© Commonwealth of Australia 2006
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Published by the Parliamentary Library, 2006.
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