The Queensland Government is now in caretaker mode until after the state election. Minimal updates will be made to this site until after the election results are declared.

Penalty for royalties

A penalty will be automatically imposed when any of the following happens:

  • a royalty return is not lodged for a return period and we make an assessment of royalty liability (a default assessment)
  • we make a reassessment and the first assessment was a default assessment
  • we make a reassessment that increases the royalty liability compared to an earlier assessment or reassessment, and the first assessment was not a default assessment.

The penalty is 75% of the understated royalty, or of the liability assessed on a default assessment. However, we have the discretion to fully or partially remit it. For more information, see these rulings:

The penalty can be increased by up to 20% if a resource authority holder hinders or stops us from becoming aware of their true royalty liability.

Calculating the penalty

The penalty will be calculated in the following cases.

Scenario Penalty
Default assessment 75% of the royalty as assessed
Reassessment where first assessment was a default assessment 75% of the royalty as reassessed
Other reassessment that increases royalty liability If the royalty liability on the reassessment is greater than the royalty liability on the first assessment, the penalty is 75% of the difference.

Otherwise, the penalty is 75% of the difference between the reassessed royalty and the lowest royalty assessed on an earlier reassessment

The following examples show how the penalty is applied.

Example 1 - default assessment when return not lodged

XYZ Co. has a royalty liability for the April-June quarter, but does not lodge a royalty return. Based on information from other sources, we make a default assessment for $8,000,000.

A penalty of $6,000,000 (i.e. 75% of the $8,000,000) is imposed.

Example 2 - reassessment following overstated liability

Consider the same facts as example 1, but we then find, during a subsequent investigation, that XYZ Co.'s actual royalty liability for the quarter is $7,500,000. We reassess the liability to reduce the primary royalty amount.

As the first assessment of liability was a default assessment, the total penalty imposed is $5,625,000 (i.e. 75% of $7,500,000).

Example 3 - reassessment following understated liability

XYZ Co. has a royalty liability of $7,500,000 for the April-June quarter, but lodges a return for the period stating that the royalty payable was $5,000,000. We discover the understatement of their royalty liability during a subsequent investigation.

We reassess XYZ Co.'s liability, and a penalty of $1,875,000 (i.e. 75% of the $2,500,000 increase) is imposed.

Example 4 - penalty following 2 reassessments

XYZ Co. has a royalty liability of $7,500,000 for the April-June quarter, but lodges a return for the period stating that the royalty payable was $8,000,000, which is the value we use for the assessment.

XYZ Co. then tells us that the royalty liability for the period should have been $7,000,000. We accept this based on the evidence provided, and reassess the liability using the new value.

However, during a subsequent investigation, we find that the actual liability for the period is $7,500,000.

We reassess XYZ Co.'s liability, and a penalty of $375,000 - that is, 75% of the difference between $7,500,000 (the reassessed royalty) and $7,000,000 (the lowest royalty assessed on an earlier reassessment) - is imposed.

Increases or decreases in penalty

The penalty can be increased by up to 20% if we believe that the resource authority holder has hindered or stopped us from knowing their true liability.

We can remit a penalty amount in part or in full. When deciding this, we will consider the reasons for the understatement of the liability and to what extent the resource authority holder is responsible.

Prosecution and the penalty

If a penalty is imposed on you, you cannot also be prosecuted for a corresponding offence. Because a penalty is an alternative to proceedings for particular offences, any penalty is remitted in full if proceedings for the particular offence commence.

Understated royalty or no return lodged

The penalty will apply for all default assessments and reassessments that increase your royalty liability, regardless of when the liability was first payable.

Contact

Office of State Revenue

  • Call 1300 300 734 (Australia) or
    +61 7 3179 2500 (overseas)
  • Send an email using our online enquiry form.