Andrew Murray (WA, Australian Democrats) Share this | Hansard source

The petroleum resource rent tax in the Petroleum Resource Rent Tax Assessment Amendment Bill 2006 is a tax on net income derived from all petroleum projects in the Commonwealth offshore areas, excluding the wonderful North West Shelf project area off the coast of Western Australia, which is interesting of itself. This tax is assessed on a project basis and the liability to pay the tax imposed on a producer company in relation to its interest in the project. The liability is based on the project receipts less project expenditures to get a net amount on which the calculation is made.

It is quite a fat little tax bill. It is 41 pages with five schedules. I agree with the report on this bill that the amendments in the bill are mostly—they do not use the word ‘mostly’, I do—intended to reduce compliance costs, improve administration and remove inconsistencies. I particularly like schedule 2, which allows internal corporate restructuring within company groups to occur without losing liability to transfer exploration expenditure between the petroleum projects of group members. However, I am very alert to the fact that schedule 3 has been a problem for three years. Labor have again indicated their disbelief at calculations which indicate no revenue loss as a result of a change in the PRRT to allow the present value of expected future expenditure associated with closing down a particular petroleum project where those future expenditures relate to so much of this project as continues to be used under an infrastructure licence, to be deductible against the PRRT receipts of this project. Having listened to that, if anyone thinks old-fashioned lawyers can convolute the English language, they have nothing on people who talk about tax.

This relates to closing down costs; when a project is terminated, costs from this project are allowed to be offset against revenue. The parliament has been asked to support a provision that allows proposed future expenditure of an unsuccessful project to be used as a deduction against PRRT as long as the infrastructure licence is held. However, the expenditure would not even have been made and yet the deduction is able to be claimed. So, in our view, the definition of expected expenditure is loose and needs clarification. The only thing I can ask is that Treasury keeps an eye on this one and reports back to the parliament if it is found that its hopes are less than realised and the costs are greater than expected.