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Wednesday, 25 March 1987
Page: 1521


Mr HURFORD (Minister for Community Services and Minister Assisting the Treasurer)(6.41) —by leave-I move:

(1) Clause 2, page 2, after the definition of ``employee amenities'' insert the following definition:

`` `excluded commodity' means a marketable petroleum commodity that-

(a) has been sold;

(b) after being produced, has been further pro- cessed or treated;

(c) has been moved away from the place of its production other than to a storage site adjacent to that place; or

(d) has been moved away from a storage site adjacent to the place of its production;''.

(2) Clause 2, page 5, after the definition of ``registered holder'' insert the following definition:

`` `re-inject', in relation to a marketable petroleum commodity produced from petroleum recovered from the eligible exploration or recovery area in relation to a petroleum project, means return the commodity to a natural reservoir in-

(a) where the return takes place before any production licence in relation to the project comes into force-any area from which the recovery of petroleum would, at the time of the return, constitute recovery of petroleum from the eligible exploration or recovery area in relation to the project; and

(b) in any other case-the production licence area or any of the production licence areas in relation to the project;''.

(3) Clause 2, page 5, after the definition of ``trustee'' insert the following definition:

`` `unincorporated association' does not include a joint venture;''.

(4) Clause 8, page 8, line 23, insert ``liable to be'' after ``is''.

(5) Clause 8, page 8, line 25, omit ``paid or'', insert ``liable to be''.

(6) Clause 9, page 8, lines 26 to 31, omit the clause, insert the following clause:

Amounts credited, reinvested, &c., to be taken to be receivable

``9. An amount shall be taken to have been receivable by a person although it is not actually to be paid over to the person but is to be reinvested, accumulated, capitalised, carried to any reserve, sinking fund or insurance fund however designated, or otherwise dealt with on behalf of the person or as the person directs.''.

(7) Clause 19, page 13, after subparagraph (4) (b) (ii) insert the following subparagraph:

``(iia) operations and facilities involved in the moving or storage of any such marketable petroleum commodity before it becomes an excluded commodity;''.

(8) Clause 20, page 14, after subclause (3) insert the following subclause:

``(3a) The Minister shall not accept or comply with any application or request (other than from an officer in the performance of his or her duties) for the issue of a certificate under sub-section (1) in respect of petroleum projects unless the application or request is from a person who is, or from persons who together are, entitled to receive at least half of the receipts from the sale of marketable petroleum commodities produced in relation to each of the projects.''.

(9) Clause 20, page 15, line 14, insert ``or persons'' after ``person''.

(10) Clause 24, page 16 (lines 22 to 42) and page 17 (lines 1 to 10), omit the clause, insert the following clause:

Assessable petroleum receipts

``24. For the purposes of this Act, a reference to assessable petroleum receipts derived by a person in relation to a petroleum project is a reference to-

(a) where any petroleum, or a constituent of petroleum, recovered from the production licence area or areas in relation to the project is or was sold, whether processed or unprocessed, before any marketable petroleum commodity is or was produced from it-the consideration receivable, less any expenses payable, by the person in relation to the sale;

(b) where any marketable petroleum commodity produced from petroleum recovered from the area or areas to which paragraph (a) applies becomes or became an excluded commodity by virtue of being sold-the consideration receivable, less any expenses payable, by the person in relation to the sale; and

(c) where any marketable petroleum commodity produced from petroleum recovered from the area or areas to which paragraph (a) applies becomes or became an excluded commodity otherwise than by virtue of being-

(i) sold; or

(ii) treated or processed, or moved, for re-injection or destruction or for use in carrying on or providing operations, facilities or other things of a kind referred to in section 37, 38 or 39 in relation to the petroleum project,

so much of the market value of the commodity immediately before it becomes or became an excluded commodity, or, where there is insufficient evidence of that market value, of such amount as, in the opinion of the Commissioner, is fair and reasonable, as is taken by section 26 to be derived by the person.''.

(1) Clause 25, page 17, lines 11 to 42, omit the clause, insert the following clause:

Assessable exploration recovery receipts

``25. For the purposes of this Act, a reference to assessable exploration recovery receipts derived by a person in relation to a petroleum project is a reference to-

(a) where any petroleum, or a constituent of petroleum, recovered from the eligible exploration or recovery area (other than any production licence area) in relation to the project is or was sold, whether processed or unprocessed, before any marketable petroleum commodity is or was produced from it-the consideration receivable, less any expenses payable, by the person in relation to the sale;

(b) where any marketable petroleum commodity produced from petroleum recovered from the area to which paragraph (a) applies becomes or became an excluded commodity by virtue of being sold-the consideration receivable, less any expenses payable, by the person in relation to the sale; and

(c) where any marketable petroleum commodity produced from petroleum recovered from the area to which paragraph (a) applies becomes or became an excluded commodity otherwise than by virtue of being-

(i) sold; or

(ii) treated or processed, or moved, for re-injection or destruction or for use in carrying on or providing operations, facilities or other things of a kind referred to in section 37, 38 or 39 in relation to the petroleum project,

so much of the market value of the commodity immediately before it becomes or became an excluded commodity, or, where there is insufficient evidence of that market value, of such amount as, in the opinion of the Commissioner, is fair and reasonable, as is taken by section 26 to be derived by the person.''.

(12) Clause 26, page 17 (lines 44 to 46) and page 18 (lines 1 to 4), omit all the words from and including ``Where'' to and including ``to the petroleum, constituent or'', insert the following:

``Where paragraph 24 (c) or 25 (c) applies in relation to any marketable petroleum commodity, the market value or other amount referred to in that paragraph in relation to the''.

(13) Clause 27, page 18, line 14, omit ``received'', insert ``receivable''.

(14) Clause 27, page 18, line 23, omit ``received'', insert ``receivable''.

(15) Clause 27, page 18, line 27, omit ``received'', insert ``receivable''.

(16) Clause 27, page 18, line 32, omit ``received'', insert ``receivable''.

(17) Clause 27, page 19, line 10, omit ``received'', insert ``receivable''.

(18) Clause 28, page 19, line 16, omit ``received'', insert ``receivable''.

(19) Clause 28, page 19, after subparagraph (a) (i) insert the following subparagraph:

``(ia) the loss or destruction, or the loss of any profit caused by the loss or destruction, of any marketable petroleum commodity produced from petroleum recovered from the area referred to in subparagraph (i), being a loss or destruction that occurred before the commodity became an excluded commodity; or''.

(20) Clause 28, page 19, line 29, omit ``received'', insert ``receivable''.

(21) Clause 29, page 19, line 40, omit ``received'', insert ``receivable''.

(22) Clause 37, page 25, line 36, insert ``liable to be'' before ``made''.

(23) Clause 37, page 26, after subparagraph (1) (b) (iii) insert the following subparagraph:

``(iiia) operations and facilities involved in the moving or storage of any such marketable petroleum commodity before it becomes an excluded commodity;''.

(24) Clause 37, page 26, line 13, omit ``the payment of''.

(25) Clause 37, page 26, line 14, insert ``Liable to be paid by the person'' before ``in relation to''.

(26) Clause 37, page 26, line 19, omit ``the payment during that period of any'', insert ``any liability incurred during that period to pay an''.

(27) Clause 38, page 26, line 30, insert ``Liable to be'' before ``made''.

(28) Clause 38, page 26, line 36, omit ``the payment of''.

(29) Clause 38, page 26, line 37, insert ``Liable to be paid by the person'' before ``in relation to''.

(30) Clause 39, page 26, line 43, insert ``Liable to be'' before ``made''.

(31) After clause 39, page 27, insert the following new clause:

Bad debts

``39a. (1) Where-

(a) a debt is a bad debt and is written off as such by a person during a financial year; and

(b) the debt has been brought to account by the person as a receipt of a kind referred to in section 24, 25, 27, 28 or 29 derived by the person in any financial year in relation to a petroleum project,

then, at the time at which the debt is written off and in relation to-

(c) the petroleum project; or

(d) if, at that time, there is a combined project in relation to which the petroleum project is a pre-combination project-the combined project,

the person shall be taken for the purposes of this Act to have incurred an amount of-

(e) where at or before the time at which the debt is written off the person has not incurred any general project expenditure or closing-down expenditure in relation to the petroleum project or the combined project (including any pre-combination project in relation to the project)-exploration expenditure;

(f) where at or before the time at which the debt is written off the person has incurred general project expenditure, but has not incurred any closing-down expenditure, in relation to the petroleum project or the combined project (including any pre-combination project in relation to the project)-general project expenditure; or

(g) where at or before the time at which the debt is written off the person has incurred closing-down expenditure in relation to the petroleum project or the combined project-closing-down expenditure,

equal to the amount of the debt.

``(2) If a debtor, after incurring a debt that has been brought to account as mentioned in paragraph (1) (b), becomes bankrupt or executes a deed of assignment or arrangement for the benefit of creditors-

(a) where, in the opinion of the Commissioner, no amount will be paid on account of the debt-the debt; or

(b) where, in the opinion of the Commissioner, an amount less than the amount of the debt will be paid on account of the debt-so much of the debt as exceeds the amount that, in the opinion of the Commissioner, will be so paid,

shall be deemed to be a bad debt.

``(3) Where a person receives an amount in respect of a debt to which sub-section (1) applies, that amount shall for the purposes of this Act be taken to be a receipt of the kind referred to in paragraph (1) (b) derived by the person in relation to-

(a) the petroleum project referred to in that paragraph; or

(b) if, at the time at which the amount is received, there is a combined project in relation to which the petroleum project referred to in that paragraph is a pre-combination project-the combined project.''.

(32) Clause 40, page 27, line 5, omit ``makes or made'', insert ``incurs or incurred a liability to make''.

(33) Clause 40, page 27, line 11, omit ``the payment shall be taken to have been made insert ``the liability shall be taken to have been incurred''.

(34) Clause 47, page 30, at the end of the clause add the following word and paragraph:

``; and (f) in any application of section 39a after the transfer time, the purchaser shall be taken to have brought to account as a receipt of a kind referred to in section 24, 25, 27, 28 or 29 in relation to the project (including any pre-combination project in relation to the project) any debt so brought to account by the vendor.''.

(35) Clause 56, page 34, line 28, omit ``26,''.

(36) Clause 56, page 35, line 3, omit ``26,''.

Following introduction of this Bill during the 1986 Budget sittings, representations have been made by the petroleum industry seeking various amendments of the Bill. After consideration of those representations, the Government has agreed to certain amendments that will clarify the intended operation of the Bill and ease the administrative burden on the industry. One of the amendments agreed to will change the timing of payments that determine a person's liability to the tax: Income will be taken into account when it is receivable-rather than when received, as in the Bill-and expenditure will be taken into account when the liability to pay it arises, rather than when paid. The adoption of this basis accords with that applying to petroleum project participants for income tax purposes. Allowing participants to use the same information for income tax and petroleum resource rent tax purposes will facilitate compliance with the requirements of the resource rent tax law.

A further significant amendment to which the Government has agreed is the shift in the point at which the value of a marketable petroleum commodity becomes assessable. This amendment will allow such a commodity to be stored prior to sale in an on-site storage facility without its value being brought to account as an assessable receipt at that point. An assessable receipt will in these circumstances arise only when the commodity is sold or moved from on-site storage, other than for re-injection, destruction or use on the project. Expenditure associated with an on-site storage facility will, by further amendment, qualify for deduction, as will expenses such as freight, insurance and demurrage in relation to the sale of a marketable petroleum commodity.

The Bill currently allows any person to apply to the Minister for Resources and Energy to have two projects combined for petroleum resource rent tax purposes. It is proposed to amend the Bill to ensure that such an application can be made only by parties with entitlement to 50 per cent or more of the proceeds from the sale of marketable petroleum commodities produced from petroleum recovered from each of the relevant projects. Another proposed amendment will make it clear that the individual venturers in a joint venture, and not the joint venture itself, will be required to account for their petroleum resource rent tax receipts and expenditures.

The Bill in its present form deals with projects that might straddle both a petroleum resource rent tax area and an area under Commonwealth or State jurisdiction and subject to excise and/or royalties. It does this by apportioning a quantity of petroleum from a project to be subject to petroleum resource rent tax. This issue raises a number of complex questions, some requiring resolution in Commonwealth-State discussions. Nevertheless, it is the Government's intention that, for reasons of both administration and industry certainty, the petroleum resource rent tax should apply to the total project where it extends beyond the resource rent tax area.

The Government intends to initiate discussions with the States on the question of treatment of projects which straddle resource rent tax areas and State excise royalty areas. Once these questions have been resolved, any necessary further amendments will be introduced. A supplementary explanatory memorandum containing detailed explanations of technical aspects of the amendments is being circulated to honourable members. I commend the amendments to the Committee.