Section DZ 5 — Income Tax Act 2007: Farm-out arrangements for petroleum mining before 16 December 1991

DZ 5 Farm-out arrangements for petroleum mining before 16 December 1991 Deduction: excess expenditure incurred before 16 December 1991 (1) A transferee under a farm-out arrangement is allowed a deduction of excess expenditure incurred before 16 December 1991 in a farm-out arrangement entered into before 16 December 1991, and for which a deduction has not been allowed in any earlier income year. The deduction is allowed under section DT 1 (Petroleum exploration expenditure) or DT 5 (Petroleum development expenditure). Deduction: excess expenditure incurred on or after 16 December 1991 (2) A transferee under a farm-out arrangement is allowed a deduction of excess expenditure incurred on or after 16 December 1991 in a farm-out arrangement entered into before 16 December 1991 if the expenditure has the character of exploratory well expenditure, petroleum exploration expenditure, or petroleum development expenditure. The deduction is allowed under section DT 1 or DT 5 to DT 7 (which relate to petroleum development expenditure) and quantified and allocated under whichever of sections EJ 12 to EJ 16 (which relate to petroleum mining) applies. Reduction of deductions (3) A transferor under a farm-out arrangement entered into before 16 December 1991 must reduce, but is denied as a deduction, the deductions described in subsection (4) by the amount determined under subsection (5). Deductions to which subsection (3) applies (4) The deductions to which subsection (3) applies are deductions for expenditure incurred before, on, or after 16 December 1991 that— (a) are not deductions of a kind referred to in subsection (5)(a) to (c); and (b) are attributable to— (i) the petroleum permit to which the farm-out arrangement relates; and (ii) a licence-specific asset or permit-specific asset held for conducting petroleum mining operations under the petroleum permit. Amount of reduction (5) The amount of the reduction under subsection (4), in an income year, is the same amount as would have been determined under section 214I(2) and (3) of the Income Tax Act 1976 immediately before its repeal by section 15 of the Income Tax Amendment Act (No 5) 1992, as if references in section 214I(2) and (3) to deferred deductions were references to any deductions, deferred or not, attributable to the relevant permit or asset, except deductions for— (a) residual expenditure; and (b) expenditure incurred on or before the date on which the application for an existing privilege or prospecting permit for petroleum was submitted for the relevant licence area; and (c) expenditure that is neither petroleum exploration expenditure nor petroleum development expenditure. Some definitions (6) In subsections (2) to (5), excess expenditure , farm-out arrangement , licence-specific assets , permit-specific asset , transferee , and transferor have the same meanings as in section 214D of the Income Tax Act 1976 immediately before its repeal by section 15 of the Income Tax Amendment Act (No 5) 1992. Link with subpart DA (7) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. Defined in this Act: amount , capital limitation , deduction , excess expenditure , existing privilege , exploratory well expenditure , farm-out arrangement , general limitation , general permission , income year , licence-specific assets , permit-specific asset , petroleum , petroleum development expenditure , petroleum exploration expenditure , petroleum mining operations , petroleum permit , prospecting permit , residual expenditure , supplement , transferee , transferor , Compare: 2004 No 35 s DZ 5