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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