Helen Coonan (NSW, Liberal Party, Minister for Communications, Information Technology and the Arts) Share this | Hansard source

I would like to thank the senators who have taken part in this debate on the Petroleum Resource Rent Tax Assessment Amendment Bill 2006 and the Petroleum Resource Rent Tax (Instalment Transfer Interest Charge Imposition) Bill 2006. The Petroleum Resource Rent Tax Assessment Amendment Bill 2006 implements a range of changes and improvements to Australia’s primary offshore petroleum taxation system, with effect from 1 July 2006. Schedule 1 to this bill amends the Petroleum Resource Rent Tax Assessment Act 1987 to require taxpayers to transfer and deduct transferable exploration expenditure when calculating the petroleum resource rent tax quarterly instalment. Currently, of course, this expenditure can only be transferred and deducted at the end of the financial year.

The Petroleum Resource Rent Tax (Instalment Transfer Interest Charge Imposition) Bill 2006 ensures constitutional validity of an instalment transfer interest charge. This charge is designed to recoup the time value of money associated with the transfer of exploration expenditure in working out a quarterly instalment of tax that is subsequently reversed. It relates to the measure contained in schedule 1 to the Petroleum Resource Rent Tax Assessment Amendment Bill 2006. Schedule 2 to the Petroleum Resource Rent Tax Assessment Amendment Bill makes amendments to allow internal corporate restructuring within company groups to occur without losing the ability to transfer exploration expenditure between the petroleum projects of group members. Currently, some company groups maintain inactive companies in order to protect their future ability to transfer unused exploration expenditure.

Schedule 3 to this bill allows the present value of expected future expenditures to close down an infrastructure facility associated with a particular petroleum project to be deductible against the petroleum resource rent tax receipts of this project. Schedule 4 to the bill applies the self-assessment regime to petroleum resource rent tax taxpayers, as it is generally applies to income tax. This will result in petroleum resource rent tax taxpayers fully self-assessing their liabilities, and it will also enable them to obtain binding rulings from the Australian tax office.

Schedule 5 introduces several unrelated amendments to petroleum resource rent tax, including the following three primary amendments. Firstly, payment of fringe benefits tax will be a deductible expense for petroleum resource rent tax purposes, and this is consistent with the income tax treatment of these payments. Secondly, vendors disposing of an interest in a petroleum project will be required to provide a transfer notice to the purchaser of the project, setting out relevant information such as the amount of undeducted expenditure available. This is designed to encourage better provision of available information between vendors and purchasers transferring an interest in a petroleum project. Unlike income tax, the purchaser inherits the vendor’s petroleum resource rent tax position. Finally, the lodgment period for petroleum resource rent tax annual returns is extended from 42 days to 60 days, which will ease compliance costs for petroleum resource rent tax taxpayers.

The amendments in these bills reduce compliance costs, improve administration and remove inconsistencies in the Petroleum Resource Rent Tax Assessment Act 1987, improving the efficiency of the tax. Furthermore, the bills contain positive amendments that are consistent with the government’s overall approach to taxation reform, directed at simplifying Australia’s tax system and making the system internationally competitive.

I want to take up an issue that Senator Stephens mentioned in her contribution. The Labor Party has expressed concerns about allowing the estimated future value of closing down costs to be a deduction for petroleum resource rent tax purposes when a production licence converts to an infrastructure licence. The government notes that the current law takes account of estimated future closing down costs for petroleum resource rent tax purposes at the time when a production licence converts to an infrastructure licence in particular circumstances.

The amendments ensure that these costs are taken into account in all circumstances—that is, the amendments remove a tax disincentive against continuing to use project facilities under an infrastructure licence to ensure all circumstances are taken into account. Consequently, the amendments ensure that project facilities are used in the most efficient manner possible and are not closed down early or unnecessarily for tax reasons. Further, the amendments encourage the development of marginal petroleum resources located near existing facilities. So the Labor Party’s comment—conveyed to the chamber by Senator Stephens—that the petroleum resource rent tax is currently based in actual cash flows is not correct. A feature of the petroleum resource rent tax since its inception in 1987 has been that both revenues and expenditures are based on estimates in particular circumstances. For the reasons that I have mentioned in my summing up comments, I commend these bills to the Senate.

Question agreed to.

Bills read a second time.