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Australia – Queensland Duties Changes Affecting Exploration Authorities And Other Tenements.

 6 October, 2012

 

 

In brief

 

  • Recent Queensland duties changes imposing duty on tenements involving particular "exploration authorities" (and which apply retrospectively from 10.30am on 13 January 2012) could give rise to a number of issues about the way duty is imposed and how to comply with the lodgement and notification requirements.
  • The definition of "land" in the Duties Act 2001 has been changed so that it is clear that transactions involving mining and petroleum tenements such as mining leases, mineral development licences and petroleum leases fall within the meaning of "land". This change does not have retrospective effect.
  • The Queensland Government has announced that transfers of interests in an exploration authority under a farm-in agreement would be exempt from duty. The Government will undertake consultation with industry about the scope and technical design for this exemption.
  • The duty rate has increased to 5.75% for a dutiable value above $1 million. The existing 4.5% rate now applies for a dutiable value up to $1 million.

 

The Fiscal Repair Amendment Act 2012 (the "Amending Act") was passed on 14 September 2012 and received Royal Assent on 21 September 2012 (the "Commencement Date").

 

Exploration authorities

 

The Amending Act implements measures outlined in the Queensland Budget 2012-13 which include, among others, amendments to the Duties Act 2001 (the "Duties Act") to legislate for the changes announced by the previous Treasurer for imposing duty on transactions involving "exploration authorities" and indirect transfers of interests in exploration authorities. The changes have retrospective effect from 10.30am on 13 January 2012 (the "Start Time").

 

"Exploration authorities" include prospecting and exploration permits under the Mineral Resources Act 1989, authorities to prospect under Queensland petroleum legislation, geothermal exploration authorities under the Geothermal Exploration Act 2004 and GHG exploration authorities under the Greenhouse Gas Storage Act 2009.

 

Transactions involving exploration authorities and indirect transfers of interests in exploration authorities made or entered into since the Start Time are subject to duty. Such transactions include:

 

  • a transfer or agreement to transfer an interest in an exploration authority;
  • a grant or exercise of an option to acquire an exploration authority;
  • an acquisition of an interest in an exploration authority by way of a lease or licence;
  • a right to use the exploration authority;
  • a transaction involving an increase or decrease in a trust interest or partnership interest that holds an interest in an exploration authority; and
  • certain acquisitions of shares in a company or corporate trustee which holds an exploration authority.

 

The Amending Act requires taxpayers and other persons to take certain steps by 22 October 2012 in order to comply with lodgement and notice requirements. Otherwise, penalties can apply. In particular, the notice requirements apply to:

 

  • a person who recorded an instrument or transaction in a register of interests (eg a share register) of a company or unit trust which holds an interest in an exploration authority; and
  • the trustee or responsible entity of a unit trust who recorded an instrument that evidences or effects a trust acquisition or trust surrender of units in a unit trust that holds an interest in an exploration authority.

 

Farm-in agreement exemption

 

The Queensland Government announced that transfers of interests in an exploration authority under a farm-in agreement would be exempt from duty. However, the scope and technical design of this exemption is subject to consultation with industry. Because this exemption has not yet been enacted, it is unclear how the Office of State Revenue (the "OSR") will administer the Duties Act pending enabling legislation to implement this exemption.Increase in general rate The Amending Act increases the transfer duty rate to 5.75% for a dutiable value above $1 million, with effect from the Commencement Date. The existing 4.5% rate now applies for a dutiable value up to $1 million.

 

Change to the definition of "land"

 

The Amending Act also amends the definition of "land" to specifically include particular "resource authorities". This change does not have retrospective effect. Resource authorities include the exploration authorities discussed above, and tenements such as mining leases, mineral development licences and petroleum leases. Relevantly, the changes to the definition of land make clear that such tenements (and other specified tenements) should be taken into account as landholdings for landholder duties purposes. 

 

What do you need to do?

 

We anticipate that taxpayers and registrars/trustees will be required to undertake at least some investigation to determine the extent (if any) these changes may apply to transactions involving exploration authorities.

 

A taxpayer, registrar or trustee may wish to consider undertaking a number of steps to determine whether it needs to make a lodgement or notification.

 

Relevant steps could include:

 

  1. Identifying all transactions undertaken since 13 January 2012 that involve exploration authorities.
  2. Considering whether the Amending Act could potentially apply to such transactions, including whether the transitional provisions could provide relief from an exposure to duty.
  3. Determining what action (if any) needs to be undertaken by 22 October 2012 and before the transaction documents can be lodged for stamping or restamping (eg obtaining valuations and signing statutory forms).
  4. Determining whether unpaid interest tax ("UTI") or penalty tax may have already started accruing and whether specific submissions could to be made to the OSR in order to mitigate these or further penalties.

 

Timing and possible extensions

 

We expect that it could take some time to carry out the necessary steps to properly form a view about whether the amendments require an entity to take any further action.

 

If you think that it is unlikely that the 30-day lodgement period will be met, you may wish to consider making submissions to the Commissioner now to seek an extension of time to comply (and certainly before the 30-day period ends) and request that UTI and penalty tax be remitted. Such a request would need to be made in writing and be accompanied by reasons why the Commissioner should grant an extension of time and remit all or part of any UTI and penalty tax (if applicable).

 

 

  

For further information, please contact:

 

Barbara Phair, Partner, Ashurst

[email protected]

 

Bill Cannon, Partner, Ashurst

[email protected]

 

Steven Paterson, Ashurst

[email protected]

 

Steven Hunwicks, Ashurst

[email protected]

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