Commonwealth Consolidated Acts

INCOME TAX ASSESSMENT ACT 1997 - SECT 40.1100

  (1)   A farm - in farm - out arrangement is an * arrangement under which:

  (a)   an entity (the transferor ) transfers, or agrees to transfer, part of the entity's interest in a * mining, quarrying or prospecting right to another entity (the transferee ); and

  (b)   in exchange for the transfer, the transferee provides to the transferor one or more * exploration benefits.

  (2)   The transferee provides an exploration benefit to the transferor if:

  (a)   the transferee:

  (i)   conducts * exploration or prospecting for * minerals, or quarry materials, obtainable by * mining and quarrying operations; or

  (ii)   undertakes to conduct exploration or prospecting for minerals, or quarry materials, obtainable by mining and quarrying operations; or

  (iii)   funds, on the transferor's behalf, expenditure that the transferor incurs in relation to exploration or prospecting by the transferor or another entity (other than the transferee); or

  (iv)   undertakes to fund, on the transferor's behalf, expenditure that the transferor incurs in relation to exploration or prospecting by the transferor or another entity (other than the transferee); and

  (b)   the exploration or prospecting relates to the part of the transferor's interest in the * mining, quarrying or prospecting right that the transferor does not transfer, or agree to transfer, under the arrangement; and

  (c)   in a case where the transferor conducts the exploration or prospecting--expenditure incurred by the transferor relating to the exploration or prospecting is:

  (i)   included in the * cost of * mining, quarrying or prospecting information * held by the transferor; or

  (ii)   included in any other * depreciating asset, held by the transferor, for which the decline in value is provided under section   40 - 80; or

  (iii)   expenditure, of a kind referred to in subsection   40 - 730(1), that meets the requirements of subsection   (3) of this section; and

  (d)   in a case where the transferor does not conduct the exploration or prospecting--were the transferor to conduct the exploration or prospecting, expenditure incurred by the transferor relating to the exploration or prospecting would:

  (i)   be included in the cost of mining, quarrying or prospecting information held by the transferor; or

  (ii)   be included in any other depreciating asset, held by the transferor, for which the decline in value is provided under section   40 - 80; or

  (iii)   be expenditure, of a kind referred to in subsection   40 - 730(1), that meets the requirements of subsection   (3) of this section.

  (3)   Expenditure meets the requirements of this subsection if:

  (a)   for that expenditure, the transferor satisfies, or would satisfy, one or more of paragraphs 40 - 730(1)(a) to (c); and

  (b)   the expenditure is not of a kind referred to in subsection   40 - 730(2) or (3); and

  (c)   the expenditure is not of a kind that another provision of this Act provides is not deductible.