40Capital costs incurred before the production year—project sales gas produced first

40 Capital costs incurred before the production year—project sales gas produced first

(1) For the purposes of step 9 of the residual pricing method, this section applies to an included capital cost for the taxpayer if: (a) the included capital cost is incurred before the production year; and (b) the MPC production year for the operation, if any, is not before the production year. (2) The included capital cost: (a) is augmented for the number of calendar years between the start date for the included capital cost and the production date; and (b) is taken to be incurred in the production year.

Note 1: The start date for the included capital cost may have been affected:

(a) by subsection 39(2), if that subsection applied to the cost; or
(b) by subsection 37(2), if subsection 39(2) did not apply to the cost and an election was made under section 50.

Note: The amount of the cost may also have been affected by subsection 39(2), if that subsection applied to the cost.

Note 2: The steps of the method work sequentially. So, (assuming this subsection applies to the cost) the next applicable step or provision that refers to the cost will be referring to:

(a) the cost as augmented under this subsection; and
(b) a start date for the cost of 1 January in the production year.