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Income tax: can a claim be made under section 124ADG in the current year if the taxpayer has no petroleum field but has acquired a permit interest with a valid section 124AB notice transferring an expenditure balance? The expenditure (section 124AB) qualifies as allowable expenditure under section 124AA.

Preamble

No a claim cannot be made under section 124ADG in the current year where no petroleum field exists. Subsection 124ADG(3) requires a comparison to be made between 10 years, reducing for the number of years a deduction has already been claimed, and the estimated life of the field or proposed field.

Where there is no field or proposed field, there is no basis on which to allow a deduction.

Subsection 124ADG(8) denies a deduction for capital expenditure on property where the properties have been used for the purpose of carrying on prescribed petroleum operations have ceased.

Similarly, a deduction under section 124AH for exploration or prospecting expenditure is only available where the taxpayer carries on or proposed to carry on prescribed petroleum operations or carry on a business of exploring or prospecting for petroleum.

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