The Full Federal Court has unanimously allowed the taxpayer’s appeal from the decision in PTTEP Australasia (Ashmore Cartier) Pty Ltd v FCT [2013] FCA 1175. In that case, the Court at first instance held in the Commissioner’s favour that in calculating the taxpayer’s taxable profit under s 22 of Petroleum Resource Rent Tax Assessment Act 1987 (the ‘PRRT Assessment Act’), the “consideration receivable” by the taxpayer for the sale of shipments of crude oil was to be determined in accordance with clause 4.1 of the agreement between the parties.
The issue both at first instance and on appeal was whether clause 8 of a supplemental agreement between the parties operated to substitute the amount payable under that clause for the amount originally payable under clause 4.1 of the initial agreement.
The Commissioner contended that this (and related) clauses did not operate to substitute a new adjusted amount payable, as the amount introduced by new clause 8 was not part of the relevant consideration, but as a separate financing arrangement and therefore could not be part of the consideration receivable.
However, in allowing the taxpayer’s appeal, the Full Court found that the net effect of the new arrangement was the economic recognition that the actual amount payable to the taxpayer had to take into account the fact that it, as seller, had the economic use of funds for a short period of time. In this way, it found that it was conceptually no different from the parties agreeing to accept an amount paid in advance for a different amount paid on the date of transfer and that, furthermore, the parties accounted for the amounts consistent with this construction.
(PTTEP Australasia (Ashmore Cartier) Pty Ltd v FCT [2014] FCAFC 71, Full Federal Court, Middleton, Pagone and Wigney JJ, 13 June 2014.)
[LTN 115, 18/6/14]