All material subject to strictly enforced copyright laws. © 2022 ITR is part of the Euromoney Institutional Investor PLC group.

A closer look at the Shell Energy decision and recent reforms in Australia

Sponsored by Sponsored_Firms_piper.png
On January 25 2022 the Full Federal Court handed down the Shell Energy decision

Jock McCormack of DLA Piper discusses the recent Full Federal Court decision in the Shell Energy Holdings Australia Ltd case, and summarises recent legislative reforms affecting alternative investments and patents.

On January 25 2022 the Full Federal Court handed down its decision on the deductibility of certain exploration costs and related tax issues.

The decision dealt specifically with the tax treatment of the acquisition of additional proportional interests in exploration permits and retention leases (i.e. statutory titles) by Shell from Chevron in relation to the Browse offshore petroleum project.

Most importantly, the court unanimously held that ‘exploration’ encompasses all activities directed towards investigating the commercial recoverability of the petroleum, and not just discovery activities/costs.

The case dealt, among other things, with the distinction between ‘exploration’ and ‘development’ activities under domestic Australian tax and other regulatory laws – but mainly under the tax law, i.e. section 40-80 of the 1997 Tax Act.

The case also held that the ‘first use’ of the relevant assets was ‘immediately upon acquisition’, that is when these assets were held ready for use. Shell was therefore entitled to an outright deduction under Australian law.

New CIIV regime

The new Australian corporate collective investment vehicles (CCIV) regime passed through Parliament in early February and will be operative from July 1 2022.

The new CCIV regime will provide an alternative investment vehicle largely similar to and aligned with the existing attribution management investment trust regime. However, it will be a corporate rather than a trust structure.

It will provide a new ‘flow-through’ vehicle for tax purposes and will allow various flexibilities including facilitating sub-funds of the CCIV to provide different products and pursue different investment strategies.

The regime is intended to be linked to the Asia Regional Funds Passport and allow a potential listing of a retail CCIV.

New patent box regime

On February 10 2022, a new bill was introduced into the Australian Parliament containing the proposed patent box regime in Division 357 of the 1997 Tax Act.

The new regime will apply to patents related to the Australian medical and biotechnology industries and will provide an incentive for businesses to undertake their research and development  and to commercialise their patented inventions in Australia.

An effective taxation rate of 17% will apply to certain income attributable to eligible patented inventions in Australia.

While the proposed regime will apply to eligible medical or biotechnology patents linked to therapeutic goods included in the Australian Register of Therapeutic Goods, it may in the future be extended to patents associated with low emissions and clean energy technologies.

The bill containing the new regime is expected to be debated and passed by the Australian Parliament in the coming months with a view to being operative in respect of income years commencing on or after July 1 2022. This means it will apply to eligible patents granted or issued after May 11 2021.

 

 

Jock McCormackPartner, DLA Piper AustraliaE: jock.mccormack@dlapiper.com  

More from across our site

The state secretary told the French press that the country continues to oppose pillar two’s global minimum tax rate following an Ecofin meeting last week.
This week the Biden administration has run into opposition over a proposal for a federal gas tax holiday, while the European Parliament has approved a plan for an EU carbon border mechanism.
Businesses need to improve on data management to ensure tax departments become much more integrated, according to Microsoft’s chief digital officer at a KPMG event.
Businesses must ensure any alternative benchmark rate is included in their TP studies and approved by tax authorities, as Libor for the US ends in exactly a year.
Tax directors warn that a lack of adequate planning for VAT rule changes could leave businesses exposed to regulatory errors and costly fines.
Tax professionals have urged suppliers of goods from Great Britain to Northern Ireland to pause any plans to restructure their supply chains following the NI Protocol Bill.
Tax leaders say communication with peers is important for risk management, especially on how to approach regional authorities.
Advances in compliance tools in international markets and the digitalisation of global tax administrations are increasing in-house demand for technologists.
The US fast-food company has agreed to pay €1.25 billion to settle the French investigation into its transfer pricing arrangements over allegations of tax evasion.
HM Revenue and Customs said the UK pillar two legislation will be delayed until at least December 2023, while ITR reported on a secret Netflix settlement and an IMF study on VAT cuts.
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree