35Types of cost associated with relevant operation

35  Types of cost associated with relevant operation  (1) For the purposes of step 1 of the residual pricing method, identify all costs associated with a relevant operation in accordance with this section.  (2) Include all costs incurred by or on behalf of the participants that are attributable, indirectly attributable or partly attributable to the operation, whether incurred during the operating life of the operation or before the production year.  (3) However, do not include, under subsection (2), a cost incurred by or on behalf of a participant that relates to acquiring an interest, directly or indirectly, in a brought‑in unit of property. Note: For example, if a participant purchases a brought‑in unit of property for use in the relevant operation, the cost of purchasing the unit is not included. Instead, certain capital costs incurred in respect of the construction, improvement or maintenance of the unit may be included (see subsection (10)).  (4) A payment or allowance between participants is not a cost associated with the relevant operation, unless it is a commercial tolling fee. Tolling  (5) A cost incurred by or on behalf of a participant is not a cost associated with the relevant operation to the extent that:  (a) the cost is incurred in carrying out one or more actions mentioned in section 8 in relation to petroleum recovered from the source project of the relevant operation; and  (b) a commercial tolling fee is paid by or on behalf of one or more participants in the relevant operation in consideration of the action or actions. Note: The commercial tolling fee may be a cost associated with the relevant operation. Costs partly attributable to the relevant operation  (6) A capital cost that was incurred in relation to a unit of property that:  (a) was not, at the time it was incurred, used in the relevant operation; and  (b) was later used in the operation; may be treated as a cost partly attributable to the operation.  (7) If a cost is only partly attributable to the relevant operation, the amount of the cost is taken to be the amount that can reasonably be apportioned to the operation.  (8) Subsections (6) and (7) do not apply to capital costs included under subsection (10). Capital costs for units of property brought into the relevant operation  (9) For the purposes of this section, a unit of property is a brought‑in unit of property if:  (a) when the unit of property was created, the unit of property was not used, and was not intended to be used, in the relevant operation or any other relevant operation; and  (b) the unit of property was later used in the relevant operation (otherwise than under a tolling arrangement in relation to the relevant operation); and  (c) before the unit of property was first used as mentioned in paragraph (b), the unit of property was not used to carry out any of the actions mentioned in section 8 in relation to any relevant operation. Note: The actions mentioned in section 8 all relate to petroleum recovered from a petroleum project. This means that the unit of property may have previously been used to process petroleum that was not recovered from a petroleum project. (For the meaning of petroleum project, see sections 19 and 20 of the Act.)  (10) Include a capital cost incurred in relation to a brought‑in unit of property to the extent that all of the following apply to the cost:  (a) the cost was incurred by a person who was the owner, or an owner, of the unit of property at the time the cost was incurred;  (b) the cost was incurred in respect of the construction, improvement or maintenance of the unit of property;  (c) the cost was not a payment or allowance between owners of the unit of property;  (d) the cost was incurred before the 31 December of the year of tax in which the unit of property was first used to carry out any of the actions mentioned in section 8 in relation to the relevant operation;  (e) the cost was not incurred for the purpose of preparing the unit of property to be used in the relevant operation;  (f) either or both of subparagraphs 40(1)(c)(ii) and (iii) apply to the cost.  (11) A cost included under subsection (10) may be treated as a cost partly attributable to the operation if the brought‑in unit of property has also been used to carry out any of the actions mentioned in section 8 in relation to another relevant operation.  (12) If a cost included under subsection (10) is only partly attributable to the relevant operation, the amount of the cost is taken to be the amount that can reasonably be apportioned to the operation.