Shell Energy Holdings Australia Limited v Commissioner of Taxation [2021] FCA 496

TAXATION - appeal against objection decision of Commissioner of Taxation - where applicant party to joint venture agreements in relation to natural gas project - where participants in project held statutory titles which conferred authority to explore for petroleum - where applicant increased its proportional interest in each of statutory titles through purchase of additional proportional interest pursuant to Asset Exchange Agreement - whether applicant entitled to tax deduction under s 40-80 of Income Tax Assessment Act 1997 (Cth) for cost of acquiring additional proportional interest - consideration of nature of intangible assets comprising additional proportional interest - finding that deduction can be claimed in relation to additional proportional interest in some statutory titles.

TAXATION - whether first use of additional proportional interest for exploration for petroleum - whether activities undertaken by applicant as part of project required use of authority to explore conferred by statutory titles - consideration of meaning of first use - consideration of meaning of exploration - finding that additional proportional interest was first used for exploration in relation to some statutory titles.

TAXATION - consideration of when applicant first held additional proportional interest for purposes of Division 40 - consideration of provisions of Asset Exchange Agreement as to when dealing would take effect - whether provisions could operate retrospectively after dealings approved and registered.

TAXATION - whether s 40-77 of Income Tax (Transitional Provisions) Act 1997 (Cth) disapplies Division 40 to the additional proportional interest - where s 40-77 disapplies Division 40 to mining, quarrying or prospecting right held before certain date - where s 40-77 disapplies Division 40 in circumstances where taxpayer held right before certain date and starts to hold new right after date which relates to same area - where offshore areas covered by statutory titles had been subject of earlier titles held by applicant - finding that Division 40 not disapplied by s 40-77.

CONSTITUTIONAL LAW - whether rights and title vested in each State by Coastal Waters (State Title) Act 1980 (Cth) prohibit exploration or exploitation of natural resources - consideration of breadth of authority to explore conferred by statutory titles - consideration of extent of activities requiring permission from the Commonwealth or relevant State.

Full decision here