Royalty changes from 1 October 2020

On 1 October 2020 royalty administration changed. Some reporting and compliance obligations have changed as a result.

A new administration framework

The Taxation Administration Act 2001 now applies to mineral and petroleum royalty. As part of this:

  • royalty payers have objection rights for assessments and reassessments made on or after 1 October 2020
  • for return periods starting on or after 1 October 2020, unpaid tax interest and penalty tax may apply to underpaid royalty amounts, instead of unpaid royalty interest and royalty penalty
  • mineral-specific Royalty Rulings (MRA001, MRA002, MRA003 and MRA004) have been replaced with Public Rulings (no substantive changes have been made)
  • the general and tax administration Public Rulings have been updated.

Mineral royalty framework

No changes have been made to royalty rates or the way in which royalty liability is determined.

Some additional details in relation to the finalisation of sales for various commodities are required when lodging a return, refer to the relevant commodity guides.

A new petroleum royalty framework

A new petroleum royalty framework applies for petroleum produced on or after 1 October 2020.

Key aspects include:

  • Measuring by volume: petroleum royalty will be calculated by applying a prescribed royalty rate to the volume of liable petroleum produced.
  • Classifying liable petroleum: petroleum will be classified by four types (domestic gas, supply gas, project gas and liquid petroleum) with separate rates applying to each.
  • Determining the royalty rate:
    • the royalty rate for each petroleum type will be determined with reference to the average sales price for that type of petroleum
    • the average sales price will either be calculated based on the volume and value of certain sales or be equal to a legislated benchmark price, depending on circumstances.

You can access position papers on these aspects of the new framework for more guidance.

Want to know more?

Find out more about these changes and how they apply to you here.

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