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Section EJ 16 of the Income Tax Act 2007 limits the amount of
the deduction available for Petroleum Development Expenditure to
a Petroleum Miner when the Petroleum Miner disposes a Petroleum
Mining Asset to an associated person.
In terms of context the activities of a Petroleum Miner
generally fall within the tax base with the capital revenue
boundary legislatively amended. Specifically:
1.
Proceeds from the sale of Petroleum Mining Assets fall within
the tax base
2.
Petroleum Development Expenditure is generally able to be
deducted over a 7 year period noting however that if an asset
that gave rise to that Petroleum Development Expenditure is
sold, any unamortised deduction will be able to be taken in the
year of sale.
3. Section
EJ 16 of the Income Tax Act 2007 (and it predecessors) seek to
modify this later rule to limit the amount of deduction of any
such unamortised expenditure in an associated party context to
the extent of the income derived from the sale, so that
associated party transactions can not be used to advance
deductions that otherwise would be required to be taken over 7
years.
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