Offset assessable PRRT income of liquefied natural gas (LNG) producers under the PRRT.
The Government will amend the Petroleum Resource Rent Tax (PRRT) in response to Treasury's Review of the PRRT Gas Transfer Pricing (GTP) arrangements. The Government will introduce a cap on the use of deductions to offset assessable PRRT income of liquefied natural gas (LNG) producers under the PRRT. The cap will bring forward PRRT receipts from LNG projects which are yet to pay PRRT and ensure a greater return to taxpayers from the offshore LNG industry. The cap will limit deductible expenditure to the value of 90 per cent of each taxpayer's PRRT assessable receipts in respect of each project interest in the relevant income year and apply after mandatory transfers of exploration expenditure. The amounts that are unable to be deducted because of the cap will be carried forward and uplifted at the Government long-term bond rate. The cap will only apply to PRRT projects that produce LNG. Projects would not be subject to the cap until 7 years after the year of first production or from 1 July 2023, whichever is later. The cap will not apply to certain classes of deductible expenditure in the PRRT - closing-down expenditure, starting base expenditure and resource tax expenditure. The Government will also make a number of supporting changes to the GTP arrangements. From 1 July 2023, the Government will update the PRRT general anti-avoidance rule and the arm's length rule to clarify their application to the Petroleum Resource Rent Tax Assessment Regulation 2015. From 1 July 2024, the Government will modernise the PRRT for emerging developments in LNG project structures, better reflect the contributions and risks of the notional entities that comprise the LNG value chain, align the regulations with current transfer pricing practices and provide appropriate integrity rules for the regime. This measure is estimated to increase receipts by $2.4 billion over the 5 years from 2022-23. The Government will also provide $4.4 million in resourcing to the ATO to administer and ensure compliance with this measure. The Government will consult on final design and implementation details for the deductions cap and on the draft PRRT regulation later this year. Consultation on the other policy changes will occur in early 2024. The Petroleum Resource Rent Tax Assessment Regulation 2015 will not be remade until the legislation implementing the deductions cap has been enacted.