Reviewing your royalty affairs

We have several resources to help you understand your royalty obligations.

  • Public rulings for royalty liabilities arising on or after 1 October 2020
  • Royalty rulings for:
    • mineral liabilities (14 October 2015 to 30 September 2020)
    • petroleum liabilities (11 January 2016 to 30 September 2020).
  • Ministerial determinations (which must be read subject to the royalty rulings) for:
    • mineral liability before 14 October 2015
    • petroleum liability before 11 January 2016.

For petroleum produced on or before 30 September 2020, you can read about our treatment of claims for depreciation deductions in previous royalty return periods. There are transitional arrangements for petroleum produced but not disposed of before 1 October 2020.

Learn more about calculating royalty for petroleum produced from 1 October 2020.

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.

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

IssueDescription/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 or insurance 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
Incorrect calculation of demurrage and early despatch revenue
  • Despatch revenue is not accounted for
  • Using an incorrect foreign exchange rate to convert the relevant amounts to Australian dollars (e.g. using the rate on the wrong date)
Incorrect calculation of foreign exchange gains or losses
  • The foreign exchange gains or losses are not calculated from the difference in the foreign exchange rate between the time the coal is sold to the time any payment for the sale is received
  • The foreign exchange rate is not obtained from a consistent, reasonable external source (e.g. the WM/Reuters Australia Fix 10.00am rate on the relevant day)

Incorrect deduction of port operating costs

  • Deduction claimed for costs other than port operating costs payable to the operator of a port facility (e.g. agency fees)
  • Deduction claimed includes service or administration fees, or premiums paid to another entity
  • Did not account for reimbursements of port operating costs received from another person (including by way of compensation or refunds from the operator of the port facility)
  • Did not account for port operating cost true-ups

Incorrect deduction of assay costs

  • Deduction claimed for costs that are not assay costs
  • Deduction claimed for costs that are not payable directly in relation to the sale of the coal (e.g. costs relating to marketing samples or site sampling)

Incorrect deduction of port infrastructure costs

  • Deduction claimed for refundable capital contributions
  • For capital contributions in excess of $50,000, deduction claimed
    • for more than 3.679088% of the cost in single quarterly return period
      or
    • other than over 10 years from the time the cost was incurred

Incorrect deduction of levies

Deduction claimed for:

  • levies other than the ACARP coal research levy, COAL21 levy or Commonwealth long service leave levy (e.g. special levies or contributions to fighting funds)
  • Long service leave levy claimed for employees not directly employed by the producer

Incorrect deduction of counter trade costs

Deduction claimed for commissions payable to agents for activities other than selling products received by the producer as part of a countertrade arrangement

Incorrect deduction of bank commissions

Deductions claimed for bank charges other than bank commissions payable in relation to issuing letters of credit for export shipments
Incorrect apportionment of costs
  • Did not apportion costs relating to both export and domestic coal on a reasonable basis
  • Did not apportion costs that relate to both produced and purchased coal sold in a blended product (e.g. harbour dues)

Other incorrect claiming of deductions

  • Deductions claimed for costs that were not payable by the producer
  • 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 when the amount is payable (e.g. invoice issued) and once when the expense is actually paid
  • Deductions claimed for any expenses other than those authorised by legislation or as described in royalty ruling MRA001 or in public ruling MRA001, including
    • rail and road haulage costs and capital contributions
    • marketing costs and sales commissions (other than the counter trade costs mentioned above)
    • coal royalty
    • bad and doubtful debts
    • losses from currency hedging activities
  • Deduction claimed for costs for which the producer has been reimbursed by another person
  • Deductions claimed on a GST-inclusive basis

Misallocation of private royalties

Did not:

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

Base and precious metals

IssueDescription/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 produced before 1 October 2020

IssueDescription/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 tariffs or processing tolls

Deduction claimed exceeds the tariff or toll paid or payable

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
  • Deductions claimed for
    • costs of documentation, review or audit of procedures, whether or not in relation to relevant activities
    • costs of maintenance of a site on which a relevant activity is conducted, including control of weeds and other vegetation, pest control, minor civil works
    • end-of-life costs of any assets (e.g. decommissioning studies), whether or not such assets are used directly in a relevant activity
    • wages and salaries for a person not engaged directly in a relevant activity to the extent that the person performs administrative functions (on-site or off-site) such as human resources, tenure administration, finance or accounting, training, information technology, information management, landowner liaison, community liaison and cultural heritage
    • training costs, to the extent the training does not relate directly to a relevant activity (e.g. training on human resources, staff development, workplace health and safety, or environmental safety)
    • any other land or tenure-based payments (e.g. council rates, landholder compensation), other than annual rents payable under the Petroleum and Gas (Production and Safety) Act 2004 or the Petroleum Act 1923 for a petroleum tenure for the operation
    • fire safety and control expenses
    • most government taxes, excise, levies, fees and charges (e.g. GST, state taxes, royalties, fees payable to the Department of Environment and Science (formerly Department of Environment and Heritage Protection) or the Department of Resources (formerly Department of Natural Resources, Mines and Energy), council charges, water commission levy, customs duty)

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
Incorrect claiming of deduction for depreciation
  • Read about claims from 2016 for petroleum produced before 1 October 2020
  • Review your claims for any calculation errors (including calculating depreciation over a period other than 10 years) and data input errors
  • Review the eligibility of capital costs depreciated if you changed the types of capital costs depreciated after 11 January 2016
Transitional arrangement Royalty for petroleum produced but not disposed of before 1 October 2020 was not included in the annual return ending 30 September 2020. This means the relevant royalty liability was not paid at 12.5% of the wellhead value of petroleum

Petroleum produced from 1 October 2020

IssueDescription/Example

Tenure holding different to beneficiary interest

Producer reported their beneficiary interest holding instead of their tenure interest, and the non-tenure holder (a person who is a participant in a joint venture or other arrangement involving the production of petroleum) did not apply to be treated as a petroleum producer

Incorrect LPG classification

LPG was classified as liquid petroleum instead of domestic gas

Incorrect gas classification

Producer that is a member of a Liquified Natural Gas (LNG) project classified the gas as supply gas instead of project gas

Inaccurate measurement

The petroleum volume might not have been accurately measured because the meters or methods used for estimation were not compliant with the accuracy requirements

Liability calculated on volume sold

The liability was calculated on the volume of petroleum sold rather than the volume produced

Exemption claimed incorrectly

A petroleum exemption did not meet the conditions; for example, the petroleum used in transportation was claimed as exempted petroleum

Incorrect formula used to calculate royalty

Where the average sales price (ASP) formula method was used to determine ASP (and in turn the royalty rate), the producer:

  • did not have all the necessary data for each relevant sale (the benchmark price method should apply in this situation)
    or
  • did not include all the relevant sales in the ASP calculations.

For example, a producer member of an LNG project did not include all LNG sold in the return period by each member.

Or, a producer omitted separately invoiced tariff income in the ASP calculations.

Swap arrangements not compliant

The swap arrangements did not meet the definition under the Regulation, meaning the petroleum may not have been classified or priced correctly; for example, a sale arrangement was entered into between a petroleum producer and an aggregator, rather than between two petroleum producers

Contact

Queensland Revenue Office

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