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DT 6: Expenditure on petroleum mining assets
or “Rules for spending on petroleum mining assets”
You could also call this:

“Rules for tax treatment of money spent on exploratory oil and gas wells”

If you’re a petroleum miner, there are some special rules about how you can treat the money you spend on exploratory wells. An exploratory well is a well you drill to look for oil or gas.

If you spend money on an exploratory well, and then you start using that well to produce oil or gas for commercial reasons, the money you spent becomes income. This means you have to pay tax on it.

However, you don’t have to pay all the tax at once. The amount of money you spent on the exploratory well is treated as if you spent it on developing your petroleum business. This is called petroleum development expenditure.

This petroleum development expenditure is considered to have happened in the year you start commercial production from the well. You can then spread this cost over time, following the rules in section DT 5(2). This helps to reduce the amount of tax you have to pay all at once.

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Next up: DT 7B: Resuming commercial production: petroleum development expenditure

or “Rules for petroleum miners restarting production after a break”
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Part D Deductions
Petroleum mining expenditure

DT 7Exploratory well expenditure

  1. This section applies when—

  2. a petroleum miner incurs exploratory well expenditure; and
    1. the miner then uses the exploratory well for the commercial production of petroleum; and
      1. the exploratory well expenditure is then treated, under section CT 3 (Exploratory well used for commercial production), as income of the miner.

        1. An amount equal to the amount that is treated as income is treated as petroleum development expenditure—

        2. incurred by the petroleum miner in the income year in which commercial production from the well starts; and
          1. allocated as provided by section DT 5(2).

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            Notes
            • Section DT 7(2): replaced, on , by section 53(1) (and see section 53(2) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).