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INCOME TAX ASSESSMENT ACT 1997

CHAPTER 2 - LIABILITY RULES OF GENERAL APPLICATION  

PART 2-10 - CAPITAL ALLOWANCES: RULES ABOUT DEDUCTIBILITY OF CAPITAL EXPENDITURE  

Division 40 - Capital allowances    View history reference

Subdivision 40-K - Farm-in farm-out arrangements    View history reference

Farm-in farm-out arrangements and exploration benefits

SECTION 40-1100  Meaning of farm-in farm-out arrangement and exploration benefit  

 View history reference

40-1100(1)  

A farm-in farm-out arrangement is an *arrangement under which:


(a) an entity (the transferor) transfers, or agrees to transfer, part of the entity's interest in a *mining, quarrying or prospecting right to another entity (the transferee); and


(b) in exchange for the transfer, the transferee provides to the transferor one or more *exploration benefits.

40-1100(2)  

The transferee provides an exploration benefit to the transferor if:


(a) the transferee:


(i) conducts *exploration or prospecting for *minerals, or quarry materials, obtainable by *mining and quarrying operations; or

(ii) undertakes to conduct exploration or prospecting for minerals, or quarry materials, obtainable by mining and quarrying operations; or

(iii) funds, on the transferor's behalf, expenditure that the transferor incurs in relation to exploration or prospecting by the transferor or another entity (other than the transferee); or

(iv) undertakes to fund, on the transferor's behalf, expenditure that the transferor incurs in relation to exploration or prospecting by the transferor or another entity (other than the transferee); and


(b) the exploration or prospecting relates to the part of the transferor's interest in the *mining, quarrying or prospecting right that the transferor does not transfer, or agree to transfer, under the arrangement; and


(c) in a case where the transferor conducts the exploration or prospecting - expenditure incurred by the transferor relating to the exploration or prospecting is:


(i) included in the *cost of *mining, quarrying or prospecting information *held by the transferor; or

(ii) included in any other *depreciating asset, held by the transferor, for which the decline in value is provided under section 40-80; or

(iii) expenditure, of a kind referred to in subsection 40-730(1), that meets the requirements of subsection (3) of this section; and


(d) in a case where the transferor does not conduct the exploration or prospecting - were the transferor to conduct the exploration or prospecting, expenditure incurred by the transferor relating to the exploration or prospecting would:


(i) be included in the cost of mining, quarrying or prospecting information held by the transferor; or

(ii) be included in any other depreciating asset, held by the transferor, for which the decline in value is provided under section 40-80; or

(iii) be expenditure, of a kind referred to in subsection 40-730(1), that meets the requirements of subsection (3) of this section.

40-1100(3)  

Expenditure meets the requirements of this subsection if:


(a) for that expenditure, the transferor satisfies, or would satisfy, one or more of paragraphs 40-730(1)(a) to (c); and


(b) the expenditure is not of a kind referred to in subsection 40-730(2) or (3); and


(c) the expenditure is not of a kind that another provision of this Act provides is not deductible.


 



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