The Office of State Revenue rulings close a royalties regime information gap left open since the regime was handed over to OSR from the Department of Natural Resources and Mines.

Companies will have an amnesty period until January 29 to review their historical mineral royalty obligations and make any voluntary disclosures or face the financial consequences.

At the end of the amnesty companies could be subject to significant penalties of up to 75% if they are found to be non-compliant.

“This is a case of better late than never and represents a positive and necessary change from the OSR to further strengthen the royalties regime,” BDO tax partner Leisa Rafter said.

“The new rulings seek to improve the limited compliance guidance provided in the historical ministerial determinations and follow a public consultation period that closed on August 28.

“The new rulings are also designed to provide some clarity on how the law, which has undergone a lot of revision over the past decade, will be applied.”

The MRA002 ruling applies to specified and prescribed minerals. It provides for the calculation of the value of minerals and states royalty will be payable in the return period the mineral is sold regardless of whether consideration for the minerals has been received.

The MRA001 ruling provides clarity around coal deductions relating to inter-mine transactions and port operating costs, while the MRA003 ruling provides guidance in relation to various minerals not covered previously.

The fourth is to be a draft ruling in relation to petroleum royalties. Rafter said that had not been finalised as yet and was yet to be issued.

“Given the amnesty period for these rulings is three months, royalty payers will need to review their circumstances and prepare and lodge any voluntary disclosures as a matter of priority,” she said.

Rafter said the sort of questions companies should be asking themselves included:

• What royalty payments had been made?
• Were those payments consistent with these rulings?
• If not, has the underpayment, if any, been determined and had the company considered making a voluntary disclosure to OSR?
• Did the companies have the processes in place to ensure compliance and correct and on time payment going forward?
• Did companies sell or dispose of any minerals to related entities? and
• If so, had they applied for a gross value royalty decision with the OSR?