Reviewing your royalty affairs

To help you determine if you have a shortfall for a previous royalty return period, see the following categories for some common issues you should consider.

Our royalty rulings can help you understand your royalty obligations. You can also read our ministerial determinations (which must be read subject to the royalty rulings) for information about royalties for:

  • minerals sold, disposed of or used before 14 October 2015
  • petroleum disposed of before 11 January 2016.

For petroleum royalty, you can read about our treatment of claims for depreciation deductions in previous royalty return periods.

All minerals

IssueDescription/Example

Data-entry error

  • Numbers transposed when completing royalty return

  • Using cumulative (i.e. year-to-date) data rather than period-specific data

Computational error

Mathematical error when royalty rate or royalty payable was calculated

Failing to include all relevant sales/disposals

Royalty return does not contain details of all minerals sold, disposed of or used in a return period, including those that are:

  • given away for no payment
  • swapped or otherwise traded (whether or not payment was also received under the transaction)
  • used as payment for services provided by a third party
  • by-products of the extraction of another mineral, where such by-products are sold, disposed of or used
  • transferred to another operation

Declaring revenue or expenses in wrong return period

Sales occurring, or expenses incurred, around the end of a return period are not recorded in the royalty return for the period, but are instead recorded in a royalty return for a subsequent period

Failure to obtain ministerial value determination

Failing to obtain a gross value royalty decision where required under legislation, especially in relation to related-party transactions or marketing arrangements

Claiming inappropriate deductions

Deductions claimed that are:

  • not permitted by legislation or ministerial authorisation
  • based on the total from a general ledger account, which includes a mix of deductible and non-deductible expenses

Incorrect treatment of currency conversions

  • Incorrect exchange rate used to convert foreign currency amount into Australian dollars
  • Failure to recognise changes in value on account of changes in exchange rates between time of sale and time of receipt of each payment
  • Incorrect date used for currency conversion

Coal

Issue Description/Example

Incorrect treatment of export and domestic coal

Export coal (i.e. coal sold or disposed of for consumption, or used, outside Queensland) recorded in royalty returns as domestic coal (i.e. coal sold or disposed of for consumption, or used, inside Queensland) and vice versa

Incorrect royalty rate

  • Average price per tonne for the return period calculated incorrectly (due to error in net revenue billed or total invoiced payable tonnes)
  • When calculating net revenue billed
    • exchange rate variations between the date of shipment and the date of receipt of funds are incorrectly included (such adjustments are only relevant when calculating the value of the coal to which the royalty rate is applied)
    • revenue is converted into Australian dollars at a rate other than the exchange rate prevailing on the bill of lading date
    • ocean freight is not deducted

Incorrect calculation of gross value

Gross value:

  • includes amounts representing interest received for coal sold on an extended credit basis
  • does not include amounts attributable to recovery of royalty from a purchaser
  • does not include despatch revenue

Incorrect deduction of port operating costs

  • Deduction claimed for premiums paid to other coal producers for port entitlement
  • Failing to offset amounts received from other coal producers against port operating costs

Incorrect deduction of assay costs

Deduction claimed for assay costs that are not directly related to the sale of coal

Incorrect deduction of port infrastructure costs

  • Deduction for capital contributions in excess of $50,000, claimed in single return period or other than over 10 years
  • Deduction claimed for refundable contributions

Incorrect deduction of levies

Deduction claimed for:

  • levies other than the coal research levy, COAL21 levy or Commonwealth levy for long service leave (e.g. special levies or contributions to fighting funds)
  • the long service leave levy for employees working in a head office or corporate administration office

Incorrect deduction of counter trade costs

Deduction claimed for commissions payable to agents for activities other than a counter trade arrangement

Incorrect deduction of bank commissions

Deduction claimed for bank charges other than commissions in relation to issuing letters of credit for export shipments

Other incorrect claiming of deductions

  • Deductions claimed based on the total from a general ledger account that includes a mix of deductible and non-deductible expenses
  • Deductions claimed twice for expenses (once on an accruals basis, and once when the expense is actually paid)
  • Deductions claimed for any expenses other than those authorised by legislation, MIN 140 or royalty ruling MRA001, including the following expenses
    • rail and haulage costs and capital contributions
    • marketing costs and sales commissions (other than counter trade costs)
    • premiums paid to other coal producers when acquiring port capacity entitlement
    • coal royalty
    • bad and doubtful debts
    • gains or losses from currency hedging activities
  • Deductions claimed on a GST-inclusive basis

Misallocation of private royalties

Failing to:

  • pay royalty to the state in relation to mining under roads
  • properly recognise changed private royalty obligations from period to period as mining activities move around tenures in the operation

Base and precious metals

Issue Description/Example

Incorrect royalty rate used

  • For periods ending on or before 31 December 2010, a fixed rate was used instead of a variable rate or vice versa
  • Failing to properly recognise changes in variable rates from period to period

Incorrect claiming of payable metal deduction

Discount claimed other than in accordance with:

  • MIN 164 (for sales on or before 31 December 2010)
  • MIN 1 (for sales between 1 January 2011 and 31 December 2015)
  • royalty ruling MRA002 (for sales on or after 1 January 2016)

Incorrect claiming of processing discount

  • Discount claimed for minerals
    • given away
    • processed outside Queensland
    • not processed to the requisite minimum metal content
  • Incorrect percentage discount claimed
  • Discount claimed on minerals under the $100,000 royalty-free threshold for which no royalty was paid

Failure to include all relevant payments

Failing to make an appropriate adjustment in a particular return period to reflect the final invoice amount payable for a sale in a previous return

Petroleum

Issue Description/Example

Data entry error

  • Numbers transposed when completing royalty return
  • Cumulative (i.e. year-to-date) data rather than period-specific data used

Computational error

Mathematical error when royalty payable was calculated

Failing to include all relevant sales/disposals

Royalty return does not contain details of all petroleum disposed of in a return period, including petroleum that is:

  • sold or otherwise has ownership transferred to another person (including swapping)
  • flared or vented
  • used

Declaring revenue or expenses in wrong return period

Sales occurring, or expenses incurred, around the end of a return period are not recorded in the royalty return for the period, but are instead recorded in a royalty return for a subsequent period

Incorrect treatment of currency conversions

  • Incorrect exchange rate used to convert foreign currency amount into Australian dollars
  • Incorrect date used for currency conversion

Failure to lodge a return when required

  • Quarterly royalty return not lodged, even if no royalty was payable, for a period when either
    • the producer produced petroleum
    • petroleum that had been produced at any time was disposed of or stored in a natural underground reservoir
  • Annual royalty return not lodged, even if no royalty was payable, for a period where there was petroleum that was the producer's property and for which petroleum royalty was, or could be, payable

Error in treatment of negative wellhead value

Negative wellhead value:

  • carried forward past the end of an annual return period
  • from one petroleum operation used to offset a liability from another petroleum operation owned by the same petroleum producer

Failure to pay royalty on petroleum used

Royalty not paid on petroleum that the producer uses for purposes other than the production of petroleum from the tenure

Failure to pay petroleum royalty on gas that is flared or vented

Royalty not paid on petroleum that is flared or vented, other than as part of testing for the presence of petroleum during the drilling of a well or as part of production testing

Failure to pay petroleum royalty on coal seam gas or natural gas production testing

Royalty not paid on gas flared or vented during production testing:

  • exceeding 3 million cubic metres
  • that continues after the end of the statutory exemption period

Incorrect claiming of deduction for pipeline tariff

Deduction claimed for a tariff that is not reasonable on a commercial basis

Incorrect claiming of deduction for processing toll

Deduction claimed for a toll that has not been calculated on a commercial basis or an alternative basis approved by the Minister

Incorrect claiming of deduction for operating costs

  • Deductions claimed for costs not directly related to treating, processing, refining or transporting petroleum (e.g. associated water, or wages for accounting staff preparing royalty returns)
  • Failing to apportion costs between activities directly related to treating, processing, refining or transporting petroleum, and other activities conducted by the producer (e.g. wages for staff who perform a range of duties at various points in the production chain, including lifting)
  • Deduction claimed for 100% of operating costs associated with nodal compression or first stage compression

Other incorrect claiming of deductions

  • Deductions claimed for costs relating to post-disposal activities
  • Deductions claimed for any expenses other than those authorised by legislation or MIN 68 or royalty ruling PGA001, including the following expenses expressly prohibited by legislation:
    • costs incurred in producing the petroleum (e.g. lifting costs)
    • overhead costs for an office not located within the area of the tenure or the site at which the petroleum is produced
    • marketing costs
    • Commonwealth excise levies
    • penalties or interest payable in relation to royalty

Contact

Office of State Revenue

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