Australian American Chamber of
Commerce Energy Conference
Australian Oil & Gas Fiscal Regime
Michael Anderson, Ernst & Young LLP
30 January 2014 – Houston
Australian tax landscape snapshot
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Corporate tax rate of 30%, proposed to be reduced to 28.5% from 1 July 2015
but with introduction of 1.5% parental leave levy
2011-12 fiscal year O&G directly contributed A$8.8bn of A$350bn tax revenue
Australia imposes direct income tax and various indirect taxes, including:
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Specific O&G resource taxes, include:
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Petroleum Resource Rent Tax, recently expanded to include onshore projects
State/Territory (non- Federal) based royalties
Level of taxation in Australia as a proportion to GDP has moved in a relatively
small range over the last two decades
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Goods and services tax (“GST”)
Excise and customs duties
Payroll tax (varies by state) and Fringe Benefits Tax taxes paid by employers
Fringe benefits tax on noncash employee benefits
Stamp Duty (varies by state)
But corporate tax contribution has been slowly declining
Tax-to-GDP ratio is low by international standards compared with other OECD
countries (5th lowest, USA 3rd lowest)
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Australian American Chamber of Commerce Energy
Conference
Tax Policy
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Change in federal government from Labor to Coalition in September 2013
Coalition campaigned on improving business certainty in Government actions
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Government sees the resources sector as an important contributor of total tax
revenues to achieve Budget surplus in 4 years. The following measures seek
to protect the revenue base
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Maintaining electoral promises such as repeal of mineral resources rent tax and removal of
carbon tax
Release of its position regarding 96 unlegislated tax measures going back to 2001
Reducing / streamlining regulations that can act as a brake on investment
Removal of immediate deduction for the acquisition cost of exploration assets to a deduction
over 15 years or effective life
Narrowing the interpretation of exploration expenditure
R&D removal of benefit for greater than $20bil turnover
Repeal loss carry back rules
Specific reforms or measures to encourage investment include
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Removal of carbon tax
Removal of mineral resource rent tax
Exploration development incentive, but no movement to introduce flow through mining company
Australian American Chamber of Commerce Energy
Conference
Australia developments and hot topics
Exploration
expenditure
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Petroleum
resource rent tax
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Other
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Proposed repeal of immediate deductions for petroleum titles
first used for exploration
Definition of exploration expenditure, particularly treatment of
“feasibility” and front end engineering design (FEED) costs
Recent case law (Esso Australia Resources, ZZGN)
Draft ATO ruling regarding the “definition” of exploration for
PRRT purposes
Time writing and cost allocation systems
Amendment of TARP definition to bring in mining information and
other non-asset, land linked intangible value drivers
General anti avoidance – asset leasing structures
Tax corporate governance
Australian American Chamber of Commerce Energy
Conference
Australia developments and hot topics
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Base erosion
profit shifting
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Transfer pricing
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Audit activity
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Introduction of transparency provisions publicly reporting
taxpayer details
Reductions to thin capitalization safe harbor limit and proposed
foreign affiliate debt dumping rule
Focus on what constitutes taxable activity
New transfer pricing legislation implemented focusing on the
arm’s-length conditions
Increased transfer pricing enforcement activity by Australian
Taxation Office (ATO)
Resource sector, private equity and M&A activity have seen
continued audit activity
Active use by ATO of GAAR to attack perceived aggressive
taxation arrangements
ATO has used court proceedings to secure foreign controlled
monies perceived at flight risk in tax disputes
Australian American Chamber of Commerce Energy
Conference