Monthly royalty payments

Quarterly return lodgers pay royalties monthly on specific dates, unless otherwise notified. Payments are calculated using one of two methods.

First and second monthly payments

There are 2 ways to calculate your first and second monthly payments:

  1. Standard method – the monthly payment is equal to one-third of the royalty liability for the previous quarter.
  2. Estimates method – the monthly payment must be at least one-third of your estimate of your royalty liability for the current quarter.

You can only use the estimates method if all the following apply:

  • You reasonably believe the amount payable for the current quarter will be less than the amount paid for the previous quarter.
  • You have not been prevented from using it (because you used the estimates method for a previous quarter without a reasonable basis).
  • You make the choice before the due date for the payment (or a later date advised by us).

Third monthly payment

This is the difference between the total payable for the quarter and the 2 monthly payments already made.

When the first 2 monthly payments for a quarter exceed the total liability for the quarter, we will either refund the overpayment or apply it to the next quarter's liability.

Standard method example

XYZ Co.'s royalty liability for the April – June quarter is $33 million.

For the next quarter (July – September), payments of $11 million (i.e. one-third of the previous quarter's liability) are due on 31 August and on 30 September.

XYZ's actual liability for the July – September quarter is $35 million. A payment of $13 million is due on 31 October (i.e. $35 million less $22 million).

Estimates method example

XYZ Co.'s royalty liability for the April – June quarter is $33 million.

On 1 July, XYZ reasonably estimates that its royalty liability for the July – September quarter will be $27 million. That estimate is not revised during the quarter.

XYZ elects to pay $9 million on 31 August and on 30 September (i.e. one-third of the estimated liability for the quarter).

XYZ's actual liability for the July – September quarter is $28 million. A payment of $10 million is due on 31 October (i.e. $28 million less $18 million).

Choosing and changing a calculation method

Generally, you have until the due date for a particular monthly payment to decide which method to use. You can use a different method for each of the first and second monthly payments.

Lodge a monthly payment statement in OSRconnect using your chosen method. If you do not lodge by the due date (or a later day advised by us), the standard method will apply.

Changing the calculation method example

XYZ Co.'s royalty liability for the April – June quarter is $33 million.

On 31 August, XYZ reasonably estimates that its liability for the July – September quarter will be $36 million. As the estimated amount is greater than the royalty paid for the previous quarter, the standard method must be used. XYZ pays $11 million (i.e. one-third of the previous quarter's liability) for the first monthly payment.

In early September, a force majeure event interrupts production. Before 30 September, XYZ revises its estimate of the royalty liability for the quarter to $27 million. As this is less than the previous quarter's liability, XYZ elects to calculate its second monthly payment using the estimates method. Accordingly, $9 million is paid on 30 September (i.e. one-third of the revised estimated liability for the quarter).

XYZ's actual liability for the July – September quarter is $30 million. A payment of $10 million is due on 31 October (i.e. $30 million less $20 million).

Liability for the previous quarter

Where your royalty liability for the previous quarter has not been assessed by the time the current quarter's first monthly payment is due, we will notify you of our estimate of your liability for the previous quarter. This estimate is used only to calculate the first and second monthly payments for the current quarter.

We may reassess your previous quarter's liability if it has been incorrectly assessed. If this happens, to calculate the current quarter's payments only take into account the reassessments that occur before the first monthly payment for the current quarter is paid or falls due.

Civil penalties for incorrect calculations

If you used the standard method to calculate your monthly payments and the calculation was incorrect, no civil penalty will be applied.

A civil penalty will apply to any monthly payment made using the estimates method in either of the following situations:

  • The actual liability for the current quarter is more than 115% of the liability for the previous quarter.
  • The actual liability for the current quarter is less than the liability for the previous quarter, and the total of the first and second monthly payments is less than 50% of the actual liability for the current quarter.

For each month in which the estimates method was used, the civil penalty is 25% of the difference between the instalment payable under the standard method and the instalment paid under the estimates method.

When using the estimates method to calculate a monthly payment, you can pay more than the minimum payment (one-third of the current quarter's estimated liability) to reduce the amount of any civil penalty imposed in relation to that payment.

In appropriate circumstances, we may remit some or all of the civil penalty.

A civil penalty is different to the royalty penalty that is charged when your liability is reassessed or a return has not been lodged.

Example - Current quarter liability is more than 115% of previous quarter's liability

XYZ Co.'s royalty liability for the April – June quarter is $33 million. Under the standard method, the first and second monthly payments for the July – September quarter would be $11 million.

On 31 August, XYZ estimates that its liability for the July – September quarter will be $27 million. XYZ elects to use the estimates method for its first monthly payment for the quarter, and pays $9 million.

Before 30 September, XYZ revises its estimate of the royalty liability for the quarter to $30 million. Because this estimate is still less than the previous quarter's royalty liability, XYZ decides to calculate its second monthly payment using the estimates method, and pays $10 million on 30 September.

XYZ's actual liability for the July – September quarter is $39.6 million (i.e. 120% of the April – June quarter liability). A civil penalty will be payable for each of the 2 monthly payments.

The maximum civil penalty payable (subject to remission) is:

  • First monthly payment
    25% × ($11 million – $9 million) = $500,000 civil penalty
  • Second monthly payment
    25% × ($11 million – $10 million) = $250,000 civil penalty

Variation A

Instead of using the estimates method for the second monthly payment, XYZ uses the standard method and pays $11 million on 30 September.

No civil penalty will apply to the payment made using the standard method. This is because a civil penalty can only apply where a payment is made using the estimates method.

A maximum civil penalty of $500,000 (subject to remission) will apply to the first monthly payment.

Variation B

XYZ uses the estimates method to calculate the second monthly payment, but pays $12 million instead of $10 million.

No civil penalty will apply to that payment because the amount paid under the estimates method ($12 million) exceeds the amount that would have been payable under the standard method ($11 million).

A maximum civil penalty of $500,000 (subject to remission) will apply to the first monthly payment.

Example - First 2 monthly payments less than 50% of current quarter's liability

XYZ Co.'s liability for the April – June quarter is $33 million. Under the standard method, the first and second monthly payments for the July – September quarter would be $11 million.

As a result of a force majeure event interrupting production in July, on 31 August XYZ estimates that its liability for the July – September quarter will be $12 million. XYZ elects to use the estimates method for its first monthly payment for the quarter, and pays $4 million.

Production resumed in early September, significantly earlier than originally anticipated. As a result, before 30 September XYZ revises its estimate of the liability for the quarter to $30 million. Because this estimate is still less than the previous quarter's royalty liability, XYZ decides to calculate its second monthly payment using the estimates method, and pays $10 million on 30 September.

XYZ's actual liability for the July – September quarter is $32 million. A civil penalty will be payable for each of the 2 monthly payments because the total of those payments ($14 million) is less than 50% of the actual liability for the quarter ($32 million). This applies even though the royalty payable for the July – September quarter is less than for the previous quarter.

The maximum civil penalty payable (subject to remission) is:

  • First monthly payment
    25% × ($11 million – $4 million) = $1,750,000 civil penalty
  • Second monthly payment
    25% × ($11 million – $10 million) = $250,000 civil penalty

Variation A

Instead of using the estimates method for the second monthly payment, XYZ uses the standard method and pays $11 million on 30 September.

No civil penalty will apply to the payment made using the standard method. This is because a civil penalty can only apply where a payment is made using the estimates method.

A maximum civil penalty of $1,750,000 (subject to remission) will apply to the first monthly payment.

Variation B

XYZ uses the estimates method to calculate the second monthly payment, but pays $11.5 million instead of $10 million.

No civil penalty will apply to that payment because the amount paid under the estimates method ($11.5 million) exceeds the amount that would have been payable under the standard method ($11 million).

A maximum civil penalty of $1,750,000 (subject to remission) will apply to the first monthly payment.

Variation C

XYZ uses the estimates method to calculate its second monthly payment, but pays $13 million instead of $10 million. No civil penalty will apply to either the first or second monthly payments, as the total of the 2 monthly payments ($17 million) is more than 50% of the actual liability for the July – September quarter ($32 million).

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Contact

Office of State Revenue

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