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Resource Rent Royalty
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Resource Rent Royalty
The Barrow Island Royalty Variation Agreement Act 1982 was agreed between the producer, the State and the Commonwealth as an incentive for the continued maintenance of the wells on Barrow Island to ensure optimal recovery of oil.
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Understand Resource Rent Royalty
The resource rent royalty (RRR) replaced the well-head royalty and excise system that had previously applied.
RRR is a royalty based on a percentage of net cash flow. The key aspects are as follows:
- All allowable expenditure, both current and capital, is written off when incurred. However exploration costs incurred more than a year prior to the application of the RRR are not allowable
- Any excess of costs over revenues are carried forward and compounded at a ‘threshold’ rate
- Any excess income over the threshold rate is charged to RRR at the rate of 40 per cent
- RRR is a primary tax before income tax, and is deductible against that tax
- The revenue is shared 75 per cent to the Commonwealth, 25 per cent to the State
The higher Commonwealth share reflects the far larger proportion of Commonwealth entitlements under the prior royalty and excise regime.
By agreement between the Commonwealth and the State, the State maintains full responsibility for the administration of the RRR regime.
