Transfer duty on exploration and prospecting permits affirmed
Coal Royalty Rate increased
QLD State Budget 2012/2013 – Duty impact on the transfer of Exploration Permit's and ATP's
In his first State Budget, Treasurer Tim Nicholls announced that transfer duty will apply to direct and indirect transfers of exploration and prospecting (exploration permits) and authorities to prospect (ATP). This approach affirms the position adopted by the former State Government and the way in which the Office of State Revenue (OSR) currently administers the Duties Act 2001 (Qld) (Act).
Transfer duty on exploration permits and ATPs was imposed from 10:30am on 13 January 2012 (Start Time), the same day the former State Government released the 2011-2012 Mid Year Fiscal and Economic Review. At the time of the announcement, the legislation required to validate this change was yet to be introduced into Parliament. As such, the OSR announced that pending enactment of this legislation, the Act would be administered on the basis that the transfer or agreement to transfer exploration permits and ATPs would attract duty if entered into on or after the Start Time. Once passed, the legislation would apply retrospectively and commence at the Start Time.
Clarification of duty position
Following that announcement in January 2012, there was some confusion about the legality of imposing transfer duty on exploration permits and ATP's, since the required legislation was not introduced by the former State Government or after the election by the current State Government. In addition, the Mines Registry initially required transfers and agreements to transfer exploration permits and ATP's to be stamped by OSR and duty paid prior to registration.1
In May 2012, the Revenue Law and Mining and Resources Committees of the Queensland Law Society successfully obtained clarity from OSR and the former Department of Employment, Economic Development and Innovation (DEEDI) on the correct duty position. This position was that until the required legislation was enacted, transfers and agreements to transfer exploration permits and ATP's would be registered without requiring the payment of duty. It is clear from the Treasurer's announcement yesterday that this is will no longer be the position.
What is the effect of the Treasurer's announcement?
The Treasurer's announcement makes it clear that the Act will be retrospectively amended such that:
- Transfer duty will apply to transfers and agreements to transfer the following exploration permits and ATPs:
- Prospecting and Exploration Permits under the Mineral Resources Act 1989;
- ATPs under the Petroleum and Gas (Production and Safety) Act 2004 (including those under the Petroleum Act 1923);
- Geothermal exploration permits under the Geothermal Exploration Act 2004; and
- Greenhouse Gas exploration permits under the Greenhouse Gas Storage Act 2009.
- Exploration permits and ATPs held directly or indirectly by a 'target entity' landholder (ie, a corporation or a listed unit trust) will now be included in its landholdings and therefore should be taken into account for landholder duty purposes, when a relevant acquisition2 is made in that 'target' entity.
- The definitions of 'land' and 'statutory licence' under the Act will change to include the exploration permits and ATPs listed above.
What does this mean for you?
- A transfer or agreement to transfer exploration permits or ATP's made or entered into at or after the Start Time will attract duty. As such, a purchaser3 to an exploration permit or ATP acquisition must factor in this transaction cost when calculating the total cost of the acquisition.
- From 17 September 2012, the amount of duty payable on an acquisition exceeding AUD$980,000 will increase. As Treasurer Nicholls also announced that relevantly the maximum duty threshold will increase from AUD$980,000 to AUD$1.0 million and the maximum transfer duty rate will increase from 5.25% to 5.75%.4
- Transfers or agreements to transfer exploration permits and ATP's are made or entered into at or after the Start Time remain dutiable transactions and require both payment of duty and stamping for registration with the Department of Natural Resources and Mines.
- If you entered into a transfer or an agreement to transfer an exploration permit or ATP on or after the Start Time and:
- You did not opt to lodge the documentation for assessment and stamping with OSR – you must lodge the documentation for assessment and stamping with OSR and pay the transfer duty to ensure penalties will not also be payable; or
- You did opt to lodge the documentation for assessment and stamping with OSR and paid the transfer duty - it is clear this approach aligns with the Treasurer's announcement and no further action by you for transfer duty purposes is required.
However, before you act on these general rules you should seek legal advice to ensure they are correctly applied to your transaction and take into account your specific circumstances.
Increase to Coal Royalty Rate
Queensland Treasurer Nicholls announced that the royalty rate for coal sold, disposed of or used on or after 1 October 2012 will increase. A summary of the current rate and the new rate are set out in the table below.
Table: Coal Royalty Rate
|Value of Coal||Current Rate||Rate from 1 October 2012|
|Portion of value above AUD$100 per tonne||7%||10%|
|Portion of value between AUD$100 and AUD$150 per tonne||10%||12.5%|
|Portion of value above AUD$150 per tonne||N/A||15%|
The royalty rate of 7% for coal less than AUD$100 per tonne remains unchanged.
The Government have stated that the new coal royalty rates will not increase for a period of 10 years (i.e. the end of 2021-2022 financial year).
Treasurer Nicholls also announced that 'farm-in arrangements' will be exempt from duty in the future. In this regard, the exploration and development expenditure used to undertake or fund exploration activities, will be exempt from duty.
The Budget Paper5 provides that the 'scope and technical design of this exemption will be a matter for consultation with the exploration industry'.
1'Transfer duty reprieve', Proctor, Queensland Law Society, Vol.32, No.4. May 2012, page 35.
2The time of a relevant acquisition is set out in section 163 of the Act.
3Although section 17(2) of the Act provides that both parties are jointly liable for the payment of duty.
4The amending legislation is expected to commence on 17 September 2012.
5Budget Paper 2 – Budget Strategy and Outlook, Part 4 Revenue Measures, page 61.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.