Esso Australia Resources Pty Ltd v Federal Commissioner of Taxation

Esso Australia Resources Pty Ltd and BHP Billiton Petroleum (Australia) Pty Ltd (collectively referred to as "Esso") contested the Federal Commissioner of Taxation's assessment of their petroleum receipts for tax purposes. The dispute centred on whether the assessable petroleum receipts should be determined by the net sale price of gas or liquefied petroleum gas (LPG) or at the initial stage of the production process when hydrocarbons met the technical definition of sales gas or LPG. The case also examined the timing of the "shortfall payments" from previous years and whether they were taxable in the year they were made or when the "Make Up Gas" was taken. Additionally, the court considered whether a variation of the sales agreement to increase the maximum quantity of gas to be delivered on a given day constituted consideration for the sale of gas.

The court had to decide whether the assessable petroleum receipts should be determined by the net sale price of gas or LPG or at the initial production stage. The court also needed to determine the timing of the "shortfall payments" and whether they constituted consideration for the gas sold. Furthermore, the court had to decide whether a variation of the sales agreement to increase the maximum quantity of gas to be delivered on a given day constituted consideration for the sale of gas.

The court found that a single petroleum project existed for the purposes of the Act, and the product produced from the petroleum recovered in Bass Strait was sales gas, which was a marketable petroleum commodity. The court ruled that Section 24(c) of the Act did not apply, and the consideration receivable, less expenses payable by Esso in relation to the sale of the gas, constituted the assessable petroleum receipts. The court also found that the "shortfall payments" should be treated as consideration receivable for the gas supplied in the relevant year. Additionally, the court concluded that a variation of the sales agreement to increase the maximum quantity of gas to be delivered on a given day did not constitute consideration for the sale of gas.

The court ordered the parties to confer and file minutes of any further orders, including orders as to costs, by 4:00 pm on 20 December 2011. In the event of disagreement, the parties were required to file and serve written submissions as to the contentions of the parties.