It is 10 years since the uniform capital allowance regime was introduced and mining and petroleum tenements became depreciating assets. The income tax treatment of farmouts has been shrouded in uncertainty ever since. There has also been considerable debate over the correct GST treatment of farmouts since the GST regime commenced on 1 July 2000.
On 27 July 2011 the Australian Taxation Office released MT 2011/D1 which seeks to clarify the income tax and GST treatment of immediate farmouts and on 24 August 2011 the Australian Taxation Office are scheduled to release MT 2011/D2 which will deal with the income tax and GST treatment of deferred farmouts.
This event reviewed the draft rulings and considered whether the rulings provide the tax certainty that advisers and corporates have been looking for. The MRRT/PRRT and stamp duty consequences of farmouts were also considered.