Taxes Consolidation Act 1997 section 696A

Treatment of certain disposals

Section 696A provides that changes in petroleum licence interests at the pre-production stage, approved by the Minister for Communications, Energy and Natural Resources, will not give rise to chargeable gains where their sole purpose is the furtherance of exploration, delineation or development of a licensed area.

• A disposal or exchange of an interest in a licensed area made on or after 14 January 1985 may be exempt from CGT where the Minister is satisfied it is solely for the proper exploration, delineation or development of any licensed area.
• Where disposal proceeds are wholly and exclusively applied to petroleum exploration or development activities within the relevant period, the disponer may claim to have the disposal treated as giving rise to no gain and no loss, but the consideration cannot be deducted on any subsequent disposal of the resulting asset.
• An exchange of licence interests may be treated as involving no disposal or acquisition, with the new interest regarded as the same asset as the old interest, but special rules apply where additional consideration is received or given as part of the exchange.
• The relevant period for reinvestment of consideration runs from 12 months before to 3 years after the disposal, though the Minister may extend this period where reasonable having regard to the proper exploration, delineation or development of a licensed area.