Closing-down costs Expenditure in closing down a project is deductible in the year it is incurred.

red. There is a refund of any previous PRRT payments where receipts in that year are inade uate to cover the expenditure. a tax credit of !"# of the abandonment costs in the year or years in which they are incurred. The tax credit is limited by the total of PRRT payments in previous years.

$nshore royalties and crude oil excise %ince the extension of PRRT to onshore areas& onshore %tate royalties and 'ederal Crude $il (evies are creditable against PRRT )ncremental effects of *ustralian PRRT regime +erivation of after-tax net cash flow under *ustralian PRRT terms *fter-Tax ,et Cash 'low - .ross revenue less PRRT less income tax less costs PRRT - .ross Revenue less costs / !"# 0where !"# is the rate of PRRT1 )ncome Tax - 0.ross revenue less PRRT less Costs1 x 2"# 0where 2"# is income tax rate1 *fter tax net cash flow - .ross revenue less PRRT less )ncome Tax less Costs - .ross revenue less !"# 0.ross revenue less Costs1333....0RRT1 Crude $il (evy Rates Crude $il Excise is calculated as a percentage of the value of gross production from an oil field. The excise is levied at varying rates depending upon the date of discovery and the production rate )n effect& 4)ntermediate4 fields are those which are 4old oil4 discoveries but which are uneconomic under the 4old oil4 discoveries on or after 56 %eptember 5789 Crude oil levies ring fence The ring fence for crude oil excise is the 4field4 and not the production licence. the 2" million barrel exemption would apply& for instance& to each of two geologically separate fields within the same production licence

%tate and commonwealth royalties Royalties are levied by all states in *ustralia on petroleum production onshore and also offshore within the Territorial %ea (imit royalties are levied at rates of between 5" percent and 5: percent of the wellhead value of all petroleum production.

The definition of well-head value varies depending on the %tate. a general rule& all costs associated with the transport and treatment of petroleum products are deducted from gross revenue in order to determine value at the well head.

Exploration Costs The rule is that all exploration costs ualify as upstream of the well end and therefore do not ualify for any royalty relief. Production +rilling all production drilling costs ualify as upstream of the wellhead& since the wellhead is ta;en as the outlet value on the production tree. relief is not available for drilling costs< casing< stimulation& fracturing< downhole pumps or the production tree.

.athering E uipment& %tabilising Plant& %torage etc. *ll authorities allow a deduction for capital expenditures incurred in connection with these facilities on a depreciation basis

,on-Production 'ield 'acilities To the extent these facilities can be apportioned to post wellhead activities& the capital expenditures will fall for depreciation deduction on the same bases described under 4gathering4 e uipment. Transportation 'acilities the costs incurred are li;ely to ualify for royalty relief )nterest That portion of the project=s interest will be deduction for royalty purposes $perating Costs *ll operating costs incurred will ualify for relief provided they relate to post wellhead facilities. $ffsite Costs ,ormally& head office allocations for expenditures such as insurance& travelling& general overheads and administration do not ualify for royalty relief. *ustralian income tax )ncome tax is a corporate tax payable after the Petroleum Resource Rent Tax and the Carbon Tax. currently levied at a rate of 2" per cent of taxable income. development costs are depreciated on a straight line 0prime cost1 or declining balance 0diminishing value1 basis over the effective asset life.

)f declining balance depreciation is adopted& the rate is set at :"" per cent of the straight line depreciation rate. The depreciation rate is the reciprocal of the effective life +epreciation begins when the assets is installed ready for use Payments of Resource Rent Tax are deductible when calculating income tax and are assessable when PRRT credits are received. The cost of Carbon Tax units is deductible when calculating income tax. Exploration and appraisal expenditure and operating costs are deductible immediately *bandonment costs are deductible immediately. )ncome tax - corporate tax so revenues and costs in same company are consolidated *bandonment costs cannot be deducted against revenue form a specific development can be deducted against income from other activities There are no ring fence arrangements for income tax purposes& therefore deductible expenses can be set off against income from any source 0not just petroleum income1.