The ATO has made a legislative determination to prevent the provisions of Div 29 (attribution rules) and Ch 4 (special rules) of the GST Act applying in a way that is inappropriate in particular circumstances under a deferred transfer farm-out arrangement to which Miscellaneous Taxation Ruling MT 2012/2 Miscellaneous taxes: application of the income tax and GST laws to deferred transfer farm-out arrangements applies: A New Tax System (Goods and Services Tax) (Particular Attribution Rules Where Supply or Acquisition Made Under a Contract Subject To Preconditions) Determination 2012 (F2012L00866; made 12 April 2012; registered 16 April 2012).
Under a deferred transfer farm-out arrangement certain supplies and acquisitions are subject to preconditions being satisfied.
MT 2012/2 explains how the GST and income tax laws apply to a deferred transfer farm-out arrangement.
This determination applies if a farmor and a farmee have entered into a deferred transfer farm-out arrangement after the commencement date of this instrument, 24 August 2011, and the arrangement is covered by MT 2012/2.
The instrument sets out the attribution rules that override the basic attribution rules under s 29-5 to attribute GST payable if a farmor receives an exploration benefit as consideration, or part of the consideration, for the supply of an interest in a mining tenement and before the farmor knows if the farmee will exercise the right to acquire that interest.
It also sets out the attribution rules that apply in place of the basic attribution rules under s 29-10 to attribute input tax credits if the farmee exercises the right to acquire the interest in the mining tenement and this is a creditable acquisition for the farmee.