|
Section DT 9 of the Income Tax Act 2007 ("the 2007 Act") limits
the amount of the deduction available for Petroleum Development
Expenditure when a Petroleum Miner disposes of a Petroleum
Mining Asset to an associated person.
In terms of context, the following provisions
govern the ability of a Petroleum Miner to claim a deduction for
Petroleum Development Expenditure:
1.
Section DT 5 of the 2007 Act allows a Petroleum Miner a
deduction for Petroleum Development Expenditure.
2.
Section EJ 12 of the 2007 Act allocates the deduction
allowed under section DT 5 of the 2007 Act in equal amounts over
a period of 7 years.
3.
Section CT 1 of the 2007 Act provides that consideration
derived from the sale of Petroleum Mining Assets is income of a
Petroleum Miner.
4.
Section EJ 15 of the 2007 Act provides that if a
petroleum miner sells a Petroleum Mining Asset that had given
rise to Petroleum Development Expenditure, then the balance of
the amortised deduction allocated to the year of sale and
subsequent income years is able to be taken in the year of
disposal.
5.
Section EJ 16 of the 2007 Act (and its predecessors)
seeks to modify the rule in Section EJ 15 of the 2007 Act by
limiting the amount of the deduction of the unamortised
expenditure ("the deferred deductions") in an associated party
context to the extent of the income derived from the sale. The
purpose of this is to prevent section EJ 15 of the 2007 Act
being used to circumvent the treatment prescribed by section EJ
12 of the 2007 Act (which requires the deduction to be taken
over 7 years) through a disposal transaction with an associated
party.
6.
Section DT 9 of the 2007 Act, as drafted, read literally,
not only limits the deduction (where section EJ 16 of the 2007
Act applies) to the extent of the income derived from the sale
but goes further (by reference to section DT 9(2) of the 2007
Act) and denies a deduction for any portion of the deferred
deduction amounts that had been allocated to the years
subsequent to the year of disposal.
The relevant sections were first inserted
into income tax legislation in 1990 as part of the Income Tax
Act 1976 ("the 1976 Act"). They were then carried into the
Income Tax Act 1994 ("the 1994 Act"). These sections allowed
for any deferred deductions that had not been claimed in earlier
years to be deductible in the year that the consideration from
the disposal was included as assessable income. If the disposal
was to an associated person, the Petroleum Miner was allowed a
deduction to the extent that the deduction did not exceed the
assessable income received by the Petroleum Miner from the
disposal. | 
