Section 25 - Petroleum Resource Rent Tax Assessment Regulations 2005 - The residual pricing method for working out cost‑plus and netback prices

25 The residual pricing method for working out cost‑plus and netback prices

The residual pricing method of calculating an RPM price for a taxpayer, in relation to the assessment year, is the following:

When the method can be used	An RPM price can be calculated by this method only if information about the direct costs of all the participants (other than marketing and selling costs) is available. Information about the operating costs is required for the year of tax concerned. Information about the capital costs is required for all previous financial years as well (except if an election under regulation 43 or 44 applies to the operation, in which case less information is needed for capital costs incurred before 2 May 2010). If the information is not available, regulation 21 will apply.
What the method does	The method identifies the pooled costs of the operation attributable to the project product, and the personal costs of the taxpayer attributable to the taxpayer’s share of project product. The pooled costs are used to calculate the major element of the cost‑plus and netback prices; this element will be the same for each taxpayer participating in the operation. The personal costs are used only to calculate a minor element of the netback price; this element will vary with the individual taxpayer.First, the costs that were incurred by the participants in relation to the integrated operation are identified.Certain costs relating to exploration, etc, are excluded.That portion of the costs that is not attributable to the integrated operation is excluded.The personal costs of other participants are excluded. The personal costs of the taxpayer are included, but treated separately.The included costs, where necessary divided into separate costs, are attributed to the various phases of the operation.Capital costs are spread over the life of the operation and the costs for the assessment year identified.The amount of each cost attributed to an assessment year is adjusted to account for the use of facilities of the operation for activities that are not part of the project.The direct costs of all the participants (other than marketing and selling costs) that are attributable to the production of assessable gas and project liquid (for an integrated GTL operation) or project electricity (for an integrated GTE operation) are pooled to give unit costs that apply to the operation as a whole. The personal costs of the taxpayer (marketing and selling costs) attributable to the taxpayer’s shares of assessable gas and project liquid or project electricity are applied to give supplementary unit costs. These are then used to calculate the taxpayer’s cost‑plus and netback prices.

When the method can be used

An RPM price can be calculated by this method only if information about the direct costs of all the participants (other than marketing and selling costs) is available. Information about the operating costs is required for the year of tax concerned. Information about the capital costs is required for all previous financial years as well (except if an election under regulation 43 or 44 applies to the operation, in which case less information is needed for capital costs incurred before 2 May 2010). If the information is not available, regulation 21 will apply.

What the method does

The method identifies the pooled costs of the operation attributable to the project product, and the personal costs of the taxpayer attributable to the taxpayer’s share of project product. The pooled costs are used to calculate the major element of the cost‑plus and netback prices; this element will be the same for each taxpayer participating in the operation. The personal costs are used only to calculate a minor element of the netback price; this element will vary with the individual taxpayer.First, the costs that were incurred by the participants in relation to the integrated operation are identified.Certain costs relating to exploration, etc, are excluded.That portion of the costs that is not attributable to the integrated operation is excluded.The personal costs of other participants are excluded. The personal costs of the taxpayer are included, but treated separately.The included costs, where necessary divided into separate costs, are attributed to the various phases of the operation.Capital costs are spread over the life of the operation and the costs for the assessment year identified.The amount of each cost attributed to an assessment year is adjusted to account for the use of facilities of the operation for activities that are not part of the project.The direct costs of all the participants (other than marketing and selling costs) that are attributable to the production of assessable gas and project liquid (for an integrated GTL operation) or project electricity (for an integrated GTE operation) are pooled to give unit costs that apply to the operation as a whole. The personal costs of the taxpayer (marketing and selling costs) attributable to the taxpayer’s shares of assessable gas and project liquid or project electricity are applied to give supplementary unit costs. These are then used to calculate the taxpayer’s cost‑plus and netback prices.

25The residual pricing method for working out cost‑plus and netback prices

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25 The residual pricing method for working out cost‑plus and netback prices