Petroleum produced before 1 October 2020

Queensland's petroleum royalty arrangements changed on 1 October 2020, with the volume model replacing the wellhead value model.

Review of wellhead value liabilities

In September 2021, petroleum producers were invited to review wellhead value liabilities and provide a voluntary disclosure of any royalty shortfall.

If you made a disclosure by the due date (5 November 2021), you may be eligible for full remission of penalty on the amount you disclosed. Penalty can otherwise be up to 75% of the shortfall.

If you haven't yet made a voluntary disclosure, you can still do so. You may be eligible for a partial or full remission of penalty, depending on the reasons for any royalty shortfall.

Depending on your circumstances, you should review annual royalty return periods for the last 5 years unless we tell you otherwise.

See the common issues to consider when reviewing your royalty affairs.

If you identify an error that caused a shortfall:

  • send an email to royalty.audit@treasury.qld.gov.au
  • include sufficient information about the shortfall to enable us to correctly determine your royalty liability, and state that you are requesting a reassessment
  • pay the royalty shortfall to avoid unpaid interest accruing.

Calculation of wellhead value liabilities

To calculate your petroleum royalty liability, you first need to establish the source of the petroleum.

Source When royalty liability arises

Petroleum tenure under the Petroleum and Gas (Production and Safety) Act 2004 or the Petroleum Act 1923

The return period in which the petroleum is disposed of

Any other source

The return period in which the petroleum is produced

Petroleum is disposed of when:

  • it is sold
  • ownership is otherwise transferred to another person
  • it is flared or vented
  • it is used.

Petroleum is produced when it is released or recovered to ground level from a natural underground reservoir.

Royalty rate

The royalty rate for petroleum and gas (including oil, condensate, natural gas, LPG and coal seam methane) produced before 1 October 2020 is 12.5% of the wellhead value disposed of or produced in the return period.

Calculating the correct amount of royalty is important because we will impose a penalty of 75% of any understated liability.

Wellhead value

The wellhead value of petroleum disposed of or produced in a royalty return period is:

  • the amount that the petroleum could reasonably be expected to realise if it were sold on a commercial basis
  • minus
  • the sum of the following
    • certain transportation and processing capital and operating costs between the wellhead and the first point of disposal (including depreciation)
    • any applicable negative wellhead value.

Read the royalty ruling on determining petroleum royalty (PGA001) – that was in effect until 30 September 2020 – for information on how to calculate wellhead value.

In certain circumstances (especially where the wellhead value of petroleum cannot be readily established by reference to arm's length transactions), we may determine the value of petroleum or the amount of certain deductible expenses through a petroleum royalty decision. If you wish to apply for a petroleum royalty decision, phone Queensland Revenue Office on 1300 300 734.

Depreciation arrangements

The following guidelines for claiming depreciation deductions have been in place since 11 January 2016.

  • Except where noted below, we will not review depreciation claims for periods before 11 January 2016.
  • Continue to calculate your depreciation deductions after 11 January 2016 on the same basis as before that date, unless we tell you differently.
  • For any assets you acquire after 11 January 2016, calculate your depreciation deduction on the same basis as for similar assets before that date.
  • We will review any changes you make to the way you calculate your depreciation deductions, and apply penalties if you make adjustments to benefit from these interim arrangements.
  • If we have begun a review of your petroleum royalty liability before 11 January 2016, we will continue to review your depreciation claims. However, we will only make adjustments on a case-by-case basis if appropriate.
  • We will continue to review your claims if we believe that you have engaged in royalty avoidance activities when making depreciation claims for past periods or during these interim arrangements.

Also consider...

Contact

Queensland Revenue Office

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