Section EJ 12B — Income Tax Act 2007: Petroleum development expenditure: reserve depletion method

EJ 12B Petroleum development expenditure: reserve depletion method When this section applies (1) This section applies to a petroleum miner's petroleum development expenditure that relates to petroleum mining developments in a permit area, when the expenditure is incurred–– (a) on or after 1 April 2008; and (b) an election to apply this section, described in subsection (2), is made for the permit area. Choice: first year of commercial production and later years (2) An election to apply this section may be made by a petroleum miner for a permit area, in a return of income for an income year, only if that income year is the first one in which petroleum is produced in commercial quantities in the permit area. The election is irrevocable, and applies this section to petroleum development expenditure that relates to petroleum mining developments in the relevant permit area for the income year and later income years. Reserve depletion method expense allocation rule (3) For the purposes of section DT 5(2)(b) (Petroleum development expenditure), the deduction allocated to an income year for the petroleum development expenditure that relates to a petroleum mining development in the relevant permit area is the amount calculated using the following formula, if the amount is positive: (reserve expenditure − previous expenditure) × reserve depletion for the year probable reserves. Definition of items in formula (4) The items in the formula are defined in subsections (5) to (8). Reserve expenditure (5) Reserve expenditure is the total petroleum development expenditure that relates to the petroleum mining development for the income year or an earlier income year to which this section applied. Previous expenditure (6) Previous expenditure is the total petroleum development expenditure that relates to the petroleum mining development and that has been allocated to an earlier income year to which this section applied. Reserve depletion for the year (7) Reserve depletion for the year is the amount, expressed in barrels of oil equivalent, of petroleum produced from the petroleum mining development for the income year. Probable reserves (8) Probable reserves is the amount, expressed in barrels of oil equivalent, of the reserves of petroleum for the petroleum mining development that are not yet proven but are estimated, at the beginning of the income year, to have a better than 50% chance of being technically and commercially producible. Relationship with other petroleum mining provisions (9) Sections EJ 13 to EJ 16 override subsection (3). Sections DT 7 , DT 8 , DT 10 , DT 11 , DT 16 , and IS 5 (which relate to petroleum miners) override this section. Defined in this Act: amount , deduction , income year , permit area , petroleum development expenditure , petroleum miner , petroleum mining development Section EJ 12B: inserted (with effect on 1 April 2008), on 6 October 2009, by section 127(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).