Meaning of operating costs
4B Meaning of operating costs
(1) In this Act operating costs, in relation to a production unit in respect of a royalty year for the purposes of a deduction under section 10(2), means:
(a) expenditure which was reasonable in amount and which is directly attributable to, the production, or maintenance for the purposes of production, or the sale or marketing of the saleable mineral commodity of a production unit;
and includes:
eligible research and development expenditure; and
accounting and auditing fees; and
(d) legal fees (other than those directly attributable to royalty matters); and
(e) insurance premiums that are directly related to the operation of the production unit; and
(f) salary, allowances, termination or similar payments or approved benefits of a similar nature, employer contributions to superannuation schemes and wages in respect of an employee for a pay period during which the employee:
worked solely in the Territory; and
(ii) was engaged primarily in work that was directly attributable to the operation of the production unit; and
office expenses that:
(i) relate to an office of the royalty payer that is in the Territory; and
(ii) are directly attributable to the operation of the production unit; and
(iii) in the case of expenses for work or services – are for the work or services performed solely in the Territory; and
reasonable fees for management services that:
are performed solely in the Territory; and
(ii) are directly attributable to the operation of the production unit; and
tenement rentals; and
(ja) accommodation costs expended for employees, contractors and other workers who:
work solely in the Territory; and
whose principal place of residence is in the Territory; and
(k) fees and charges imposed under a law in force in the Territory; and
such fees, charges or costs as may be prescribed; and
payroll tax; and
(p) other matters which were necessary for the proper administration of the production unit;
but does not include:
compensation:
(i) in relation to pastoral land or private land, each as defined in section 8 of the Mineral Titles Act 2010 – in excess of that reasonably required to be paid for or in respect of the use or disturbance of the land and any improvements on the land as provided by section 107(1) of the Mineral Titles Act 2010; or
(ii) in relation to any other land – that would otherwise be required to be paid for or in respect of the use or disturbance of the land and any improvements on the land as provided by section 107(1) of the Mineral Titles Act 2010 if it were land mentioned in subparagraph (i); or
taxes on income or profits; or
(ra) MRRT, as defined in section 300-1 of the Minerals Resource Rent Tax Act 2012 (Cth); or
(rb) unit shortfall charge, as defined in section 5 of the Clean Energy Act 2011 (Cth); or
mineral royalties; or
(t) the costs of negotiating with land holders unless the amounts were required to be expended in accordance with a law in force in the Territory; or
(u) interest payments or payments in the nature of interest or any amount representing depreciation; or
payments in the nature of royalties; or
(wa) costs associated with the provision of a mining security required under an environmental (mining) licence under section 124ZJ(2)(b), 124ZK(2)(c) or 124ZL(2)(b) of the Environment Protection Act 2019; or
(wb) payment of a levy as defined in section 12(1) of the Legacy Mines Remediation Act 2023; or
(y) any other payment being, or in the nature of a levy on mineral output, value, profits, income or export; or
(ya) travel and ancillary costs expended in respect of employees, contractors and other workers whose principal place of residence is outside the Territory; or
a payment in respect of an employee where:
the criterion in paragraph (f)(i) is not met; and
(ii) if that criterion were met, the payment would ordinarily be classified by the Secretary as being of a kind mentioned in paragraph (f);
(whether or not the payment might also be classified as being expenditure of a kind mentioned in any other paragraph); or
an office expense where:
(i) the criteria mentioned in paragraphs (g)(i) and (iii) are not met; and
(ii) if those criteria were met, the expense would ordinarily be classified by the Secretary as being of a kind mentioned in paragraph (g);
(whether or not the expense might also be classified as being expenditure of a kind mentioned in any other paragraph); or
fees for management services where:
the criterion in paragraph (h)(i) is not met; and
(ii) if that criterion were met, the fees would ordinarily be classified by the Secretary as being of a kind mentioned in paragraph (h);
(whether or not the fee might also be classified as being expenditure of a kind mentioned in any other paragraph).
Example for subsection (1)(ya)
An amount expended for flights to move interstate resident employees to the production unit and for their accommodation.
(2) In the first royalty year after the production unit commences the production of a commercial quantity of a saleable mineral commodity, any amounts expended in the 4 year period before that date, being amounts in the nature of operating costs under subsection (1), may be claimed as an operating cost.
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