Territory Resources Ltd v Secretary for Mineral Royalties (NT)
[2018] NTSC 12
•26 February 2018
CITATION: Territory Resources Ltd v Secretary for Mineral Royalties (NT) [2018] NTSC 12
PARTIES:TERRITORY RESOURCES LIMITED
(ACN 100 552 118)
v
SECRETARY APPOINTED PURSUANT TO SECTION 49AA OF THE MINERAL ROYALTY ACT (NT)
TITLE OF COURT: SUPREME COURT OF THE NORTHERN TERRITORY
JURISDICTION: SUPREME COURT exercising Territory jurisdiction in an appeal under s 115 of the Taxation Administration Act (NT)
FILE NO:LCA 22 of 2016 (21633643)
DELIVERED: 26 February 2018
HEARING DATES: 6 March 2017
JUDGMENT OF: Grant CJ
CATCHWORDS:
MINING – GENERAL MATTERS – MINERALS AND RIGHTS THERETO – TAXES AND DUTIES
Whether Mineral Royalty Act required costs of producing Port Stock to be taken into account as “operating costs” for purpose of calculating royalty only once Port Stock sold – “statutory construction must begin with a consideration of the text”, and that “statutory text must be considered in its context” – definition of “expended” informs the construction of “expenditure” – appellant could not assert that “operating costs” should be assessed on the “incurred” basis – costs of production “brought to account” as a “charge” when inventory is sold – decision of respondent confirmed.
Interpretation Act (NT) ss 3, 23, 62B.
Mineral Royalty Act (NT) ss 4, 4A, 4B, 9, 10, 11, 12, 18, 49AA.
Taxation Administration Act (NT) ss 107, 109, 112, 115, 116, 125, 126, 127.Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27, Ballarat Brewing Co Ltd v Federal Commissioner of Taxation (1951) 82 CLR 364, Commissioner of Taxes (SA) v Executor Trustee & Agency Company of South Australia Ltd (1938) 63 CLR 108, Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297, D & R Henderson (MFG) Pty Ltd v Collector of Customs (NSW) (1974) 48 ALJR 132, Federal Commissioner of Taxation v Consolidated Media Holdings Ltd (2012) 250 CLR 503, Graovac v Minister for Immigration and Multicultural Affairs (1999) 56 ALD 709, Herbert Adams Pty Ltd v Federal Commissioner of Taxation (1932) 47 CLR 222, North Flinders Mines Ltd v Conn (1995) 123 FLR 330, Philip Morris Ltd v Federal Commissioner of Taxation (1979) 38 FLR 383, Pilbara Infrastructure Pty Ltd v Australian Competition Tribunal [2011] FCAFC 58, QBE Insurance Group Ltd v Australian Securities Commission (1992) 38 FCR 270, Re Michael; Ex parte Epic Energy (WA) Nominees Pty Ltd (2002) 25 WAR 511, SZTAL v Minister for Immigration and Border Protection (2017) 91 ALJR 936, Thiess v Collector of Customs (2014) 250 CLR 664, Tickle Industries Pty Ltd v Hann & Richardson (1974) 130 CLR 321, Transport Accident Commission v Treloar [1992] 1 VR 447, Whitton v Falkiner (1915) 20 CLR 118, referred to.
Pearce & Geddes, Statutory Interpretation in Australia (LexisNexis, 8th ed, 2014).
REPRESENTATION:
Counsel:
Appellant:G Lynham
Respondent: D McGovern SC with S Kaur-Bains
Solicitors:
Appellant:Ward Keller
Respondent: Solicitor for the Northern Territory
Judgment category classification: B
Judgment ID Number: GRA1803
Number of pages: 41
IN THE SUPREME COURT
OF THE NORTHERN TERRITORY
OF AUSTRALIA
AT DARWINTerritory Resources Ltd v Secretary for
Mineral Royalties (NT) [2018] NTSC 12LCA 22 of 2016 (21633643)
BETWEEN:
TERRITORY RESOURCES LIMITED (ACN 100 552 118)
Appellant
AND:
SECRETARY APPOINTED PURSUANT TO SECTION 49AA OF THE MINERAL ROYALTY ACT (NT)
Respondent
CORAM: GRANT CJ
REASONS FOR JUDGMENT
(Delivered 26 February 2018)
This appeal is brought as of right under s 115 of the Taxation Administration Act (NT) (“TAA”). The original decision was made under s 10 of the Mineral Royalty Act (NT) (“MRA”). The appellant objected to that decision pursuant to s 109 of the TAA. In that objection the appellant bore the burden of establishing that the decision was wrong.[1]
The relevant “decision maker” for the purpose of the objection was the Secretary appointed pursuant to s 49AA of the MRA,[2] whom the parties agree is properly named as the respondent to these proceedings. The respondent disallowed the objection, from which there is an avenue of review to this court under s 115 of the TAA.
Nature and grounds of appeal
In this appeal also, the appellant bears the burden of establishing that the respondent’s decision on the objection was “wrong”.[3] In that endeavour, the appellant is not limited to the grounds on which the objection was made;[4] the decision maker’s response is similarly unfettered;[5] this court may admit any evidence that was not before the respondent when making the decision if satisfied the new evidence is material to the decision;[6] and the court’s dispositive powers extend to confirming or varying the decision, or substituting another decision that would have been available to the respondent.[7]
This is a statutory review by a superior court of a decision which is administrative in character. Given that the decision need only be “wrong” to warrant intervention, and that the court may admit new evidence and substitute its own decision if appropriate, it may be concluded that the review is not an appeal in the strict sense. Any intervention by this court is contingent on the appellant identifying some legal, factual or discretionary error in the respondent’s decision on the objection.
The grounds set out in the Notice of Appeal dated 20 September 2016 may be summarised as follows:
(a)The respondent erred in concluding that “deferred inventory costs” incurred by the appellant in relation to the production of minerals removed without sale and stockpiled at the Darwin Port (“Port Stock”) in the royalty year 1 July 2011 to 30 June 2012, and in the royalty period 1 July 2012 to 31 December 2012, were not “operating costs” as defined under s 4B of the MRA and therefore were to be disallowed for the purposes of calculating the appellant’s royalty liability under s 10 of the MRA for the royalty year or period in question.
(b)The respondent erred in concluding that deferred inventory costs incurred by the appellant in relation to the production of the Port Stock in the royalty year 1 July 2011 to 30 June 2012, and in the royalty period 1 July 2012 to 30 December 2012, were only claimable by the appellant when the Port Stock was sold and not when deferred inventory costs were entered into the appellant’s Balance Sheet.
(c)The respondent erred in concluding that deferred inventory costs were not “expenditure” within the meaning of appropriate accounting standards and therefore were not “expenditure” for the purposes of determining “operating costs” under s 4B of the MRA.
These grounds, although expressed differently, resolve to the same general contention. The contention is that regardless whether the mineral commodity was sold or removed without sale from the production unit in a royalty period, the costs incurred producing the commodity in that period constituted “operating costs” which could be subtracted from “gross realization” for the period in order to calculate net value for royalty purposes.
Background and relevant statutory provisions
The appellant’s subsidiary operated an open pit iron ore mine located near Pine Creek in the Northern Territory. Following the commencement of active operation the tenement owner gave notice of information required to be supplied under s 11 of the MRA.
The MRA permits the adoption of either the cash or accrual basis for the preparation of royalty returns. Section 4 of the MRA defines the term “accounting basis” as follows:
accounting basis, in relation to the accounts of a production unit for the purposes of this Act, means prepared under an historical cost assumption on either:
(a) a cash basis, where only amounts actually paid and received are brought to account; or
(b) an accrual basis, being accounts kept in accordance with generally accepted accounting principles on any approved basis (except a cash basis), including an incurred basis where amounts actually paid and received, together with pecuniary liabilities that have become due and revenues earned the amounts of which in either case are known or can be estimated with certainty, are brought to account,
and specified accounting basis means either a cash basis or an accrual basis, as elected by a royalty payer under section 11.
As suggested in the definition, s 11(1) of the MRA provides for that election in the following terms:
11 Information to be supplied
(1) Within 30 days after the date of active operation of a production unit or proposed production unit the responsible person for the production unit shall notify the Secretary in writing of that fact, and shall include in the notice:
(f)an election as to the accounting basis on which royalty returns will be prepared.
The notice provided by the tenement owner was registered as received by the respondent on 7 August 2007. That information included an election to adopt “accrual” as the accounting basis on which royalty returns would be prepared.
Section 11(2) of the MRA imposes a regulatory requirement on the responsible person to notify the Secretary in writing of changes in management, ownership and production. There is no requirement to notify the Secretary of any change in the election as to the accounting basis on which royalty returns will be prepared, and there is no express provision permitting the responsible person to vary the election once made.[8] In any event, the tenement owner lodged a further Notification of Information pursuant to s 11 of the MRA dated 8 April 2014 in which it again identified the “accruals basis” as the specified accounting basis. There is no suggestion that the appellant at any time elected to adopt a different accounting basis for the preparation of royalty returns.
In the course of the appellant’s operations ore was extracted, crushed into either lump or fine product, trucked off the lease to a nearby rail siding, and then transported approximately 200 kilometres by rail to the East Arm Port facility located near Darwin. The ore was then stockpiled at the port prior to sale. This is the Port Stock to which reference is made in the grounds of appeal.
The liability to make royalty payments in respect of minerals vested in the Territory body politic is created by s 9 of the MRA in the following terms:
9 Royalty
(1) There is payable under this Act to the Crown in right of the Territory a royalty in respect of all minerals vested in the Crown in right of the Territory obtained from a production unit in a royalty year.
(2) The holders of mining tenements that form part of a production unit are jointly and severally liable for the payment of royalty in respect of the production unit.
Section 10 of the MRA fixes the rate of royalty payable at 20% of the “net value” of a saleable mineral commodity sold, or removed from the production unit without sale, in a royalty year in the following terms:
10 Rate of royalty
(1) The royalty payable under section 9 is 20% of the net value of a saleable mineral commodity sold or removed without sale from a production unit in a royalty year, but where that net value is:
(a)$50,000 or less, the royalty payable is nil; or
(b)more than $50,000, the royalty otherwise payable is reduced by $10,000.
(2) For the purposes of subsection (1), the net value in a royalty year is calculated in accordance with the following formula:
GR – (OC + CRD + EEE + AD)
where:
GRis the gross realization from the production unit in the royalty year; and
OCis the operating costs of the production unit for the royalty year; and
CRD is the capital recognition deduction; and
EEEis any eligible exploration expenditure, if any; and
ADis the additional deduction, if any, under section 4CA.
….
Under that formula “gross realization” and “operating costs” are integers of net value.
Section 4A(1) of the MRA defines “gross realization”, so far as is relevant for these purposes, as a sum which includes “the gross values of saleable mineral commodities produced by the production unit in a royalty year that have been sold or removed without sale from that production unit”.
Section 4B(1) of the MRA defines “operating costs”, so far as is relevant for these purposes, in the following terms:
4B Interpretation of operating costs
(1) In this Act operating costs, in relation to a production unit in respect of a royalty year for the purposes of a deduction under section 10(2), means:
(a)expenditure which was reasonable in amount and which is directly attributable to, the production, or maintenance for the purposes of production, or the sale or marketing of the saleable mineral commodity of a production unit,
….
The section then goes on to stipulate a non-exhaustive listing of inclusions[9] and exclusions[10] from the general definition of “operating costs”. The term “expenditure” is not defined in the MRA beyond those inclusions and exclusions. However, the term “expended” is defined in s 4 of the MRA to mean:
(a) where the specified accounting basis of a production unit is a cash basis – amounts paid; and
(b) where the specified accounting basis of a production unit is an incurred basis – amounts incurred, being amounts paid and pecuniary liabilities that have become due the amounts of which are known or can be estimated with certainty; and
(c) where the specified accounting basis of a production unit is an accrual basis (other than an incurred basis) – charges brought to account.
In the respondent’s contention, both the definition of “expended” and accepted accounting precepts require that under the accrual basis of accounting expenditure must be brought to account in order to qualify as an operating cost in a royalty period, and so to be incorporated in the calculation of “net value” for royalty purposes. The term “charges brought to account” is not directly or derivatively defined in the MRA.
Section 12 of the MRA requires a royalty payer to deliver to the Secretary a detailed statement within three months after the expiration of a royalty year. That statement must contain or indicate, amongst other things, details of the quantity of a mineral commodity sold or removed without sale during the royalty year in question, and the value and the basis of valuation of a commodity sold or removed without sale during that period. Section 12(2) goes on to provide:
(2) A statement referred to in subsection (1) shall, in addition to the matters required under that subsection to be contained or indicated, contain:
(a)details of all expenditure claimed as eligible deductions in calculating net value under section 10(2); and
(b)by way of summary, a calculation of net value; and
(c)an estimate of the royalty payable.
In accordance with those provisions, the appellant delivered statements in relation to the 2011/12 royalty year and the royalty period from July to December 2012.
Section 18 of the MRA provides:
18 Assessment
From the statement required to be delivered under section 12, and from any other information in his or her possession, whether or not obtained under this Act, the Secretary shall make an assessment of the net value, and the royalty payable by the royalty payer, in respect of the royalty year to which that statement relates.
By letter dated 13 November 2014, a delegate of the Secretary advised the appellant that it was finalising the audit of the royalty returns for the relevant periods. The letter further advised that it was proposed to make adjustments to the royalty returns, described the nature of those adjustments and the basis for them, and invited any submission in relation to the proposed adjustments by 5 December 2014. The appellant provided a submission by letter dated 4 December 2014.
On 9 February 2015, assessments were issued to the appellant pursuant to s 10 of the MRA for the royalty periods ending 30 June 2012 and 31 December 2012. Those assessments adjusted the net value of the royalty for each of the relevant periods largely as foreshadowed in the letter dated 13 November 2014.
By letter dated 9 April 2015, the appellant lodged its objection to those assessments pursuant to s 109 of the TAA. By determination dated 19 May 2016, the delegate of the Secretary disallowed the objection and gave reasons for that disallowance. In essence, the respondent upheld the assessments issued on 9 February 2015. By that decision, the respondent determined to recognise production costs for stockpiled inventory as expenses only in the period when the inventory was sold. That determination was said to accord with generally accepted accounting principles.
As a consequence of that approach, the net value for the saleable mineral commodity for the 2011/12 royalty year was adjusted from a negative net value of $20,949,614 to a positive net value of $4,229,170 (that is, by $25,178,784). After taking into account the royalty threshold, the royalty liability for the royalty year was assessed to be $626,875.50 on a gross realization of $119,484,807.
In the application of the same principles, the net value for the saleable mineral commodity for the royalty period from 1 July to 31 December 2012 was adjusted from a negative net value of $55,281,013 to a negative net value of $39,746,203 (that is, by $15,534,809). There was, accordingly, no royalty liability for that royalty period on a gross realization of $55,213,018.14.
The net effect of the adjustments made by the respondent was an increase in royalties payable by the appellant in the year the minerals were produced but not sold, and a reduction in royalties payable by the appellant in the following royalty year. As there was no royalty payable in that following year, the negative net value – which incorporated those production costs – was able to be carried forward to offset any future royalty payable. In the present case, however, production at the mine has since ceased and the ability to carry forward negative net value now provides no utility or benefit to the appellant.[11]
Competing contentions on the objection
The reasoning underlying the respondent’s determination of the objection may be summarised briefly as follows.
The accrual basis of accounting is described in paragraph 22 of the Framework for the Preparation and Presentation of Financial Statements promulgated by the Australian Accounting Standards Board in the following terms:
In order to meet their objectives, financial statements are prepared on the accrual basis of accounting. Under this basis, the effects of transactions and other events are recognised when they occurred (and not as cash or its equivalent is received or paid) and they are recorded in the accounting records and report in the financial statements of the periods to which they relate. Financial statements prepared on the accrual basis inform users not only of past transactions involving the payment and receipt of cash but also of obligations to pay cash in the future and resources that represent cash to be received in the future. Hence, they provide the type of information about past transactions and other events that is most useful to users in making economic decisions.
The recognition of expenses under the accrual basis of accounting is described at paragraphs 94 to 98 of the Framework for the Preparation and Presentation of Financial Statements. So far as is relevant for this purpose, those paragraphs provide:
Recognition of Expenses
94 Expenses are recognised in the income statement when a decrease in future economic benefits related to a decrease in an asset or an increase of a liability has arisen that can be measured reliably. This means, in effect, that recognition of expenses occurs simultaneously with the recognition of an increase in liabilities or a decrease in assets (for example, the accrual of employee entitlements or the depreciation of equipment).
95 Expenses are recognised in the income statement on the basis of a direct association between the costs incurred and the earning of specific items of income. This process, commonly referred to as the matching of costs with revenues, involves the simultaneous or combined recognition of revenues and expenses that result directly and jointly from the same transactions or other events. For example, the various components of expense making up the cost of goods sold are recognised at the same time as the income derived from the sale of the goods. However, the application of the matching concept under this Framework does not allow the recognition of items in the balance sheet which do not meet the definition of assets or liabilities.
96 When economic benefits are expected to arise over several accounting periods and the association with income can only be broadly or indirectly determined, expenses are recognised in the income statement on the basis of systematic and rational allocation procedures. This is often necessary in recognising the expenses associated with the using up of assets such as property, plant, equipment, goodwill, patents and trademarks. In such cases, the expense is referred to as depreciation or amortisation. These allocation procedures are intended to recognise expenses in the accounting periods in which the economic benefits associated with these items are consumed or expire.
On the respondent’s approach to the objection, ordinary accrual basis accounting practice is to match the expenses relating to the creation of inventory to the time it is sold. That practice was said to be consistent with the Australian Accounting Standards, which provide relevantly:
When the inventories are sold, the carrying amount of those inventories shall be recognised as an expense in the period in which the related revenue is recognised.[12]
Accordingly, the period in which the revenue on sale is recognised is the point at which a charge or expenditure is “brought to account”, and, specifically, the point at which the production costs for stockpiled inventory are properly taken into account as “operating costs” in the calculation of net value for royalty purposes.
The respondent rejected the appellant’s contention that the expenses had been “brought to account” because they were initially recognised and recorded as expenses in the appellant’s Profit and Loss Statement and then as “deferred inventory costs” pending sale in the appellant’s Balance Sheet. The view taken by the respondent in that respect was, in effect, that the expenses incurred in producing the Port Stock were not brought to account as expenses deductible from income in arriving at net profit until such time as those expenses were matched with income from the sale of the stock. Prior to that time, that expenditure was properly reflected in the accounts as part of the asset comprised by the stockpiled inventory, rather than a profit and loss account expense.
For its part, the appellant contended, first, that the term “expenditure” appearing in the definition of “operating costs” was to be given its ordinary and natural meaning; and, secondly, that even if expenditure was required to be “brought to account” in order to be included in the calculation of net value, the expenses in question had been brought to account in the application of accounting principles generally accepted in the mining industry. In support of that contention the appellant made reference to Australian Accounting Standard AASB 1022 Accounting for Extractive Industries. Paragraph 6 of that standard had operated to define “brought to account” to mean “recognised in the accounts or group accounts, otherwise than by way of note”. In addition, paragraph 50 of that standard had made the following provision:
Inventories shall be brought to account at the earliest stage at which materials representing, or expected to be converted by further processing to, saleable product can be measured with reliability and the quantities of such materials can be determined by physical measurement or reliable estimate.
Although the appellant acknowledged that AASB 1022 was a pre-2005 standard, it was said to remain the proper statement of the governing principle. The appellant also sought to place reliance on the description of accrual accounting in paragraph 22 of the Framework for the Preparation and Presentation of Financial Statements. Particular reference was made to the process by which “the effects of transactions and other events are recognised when they occurred (and not as cash or its equivalent is received or paid) and they are recorded in the accounting records and report in the financial statements of the periods to which they relate”.
In the application of that description, the appellant drew attention to the fact that the value of the Port Stock was required to be included in the calculation of “gross realization” because it was a saleable mineral commodity which had been removed without sale from the production unit in the relevant royalty year. The consequence, in the appellant’s contention, was that it would be anomalous not to recognise the costs expended in the production of the Port Stock as “operating costs” in that same royalty year. As the appellant stated in its submissions on the objection:
The recognition of the gross value of the Darwin Port Stockpile as part of the gross realization disadvantages Territory Resources because it requires Territory Resources to pay royalties on iron ore which has not been sold. The [Secretary’s] denial of the properly incurred mining costs associated with the production of the Darwin Port Stockpile materially exacerbates this disadvantage by seeking to recognise the revenue from the iron ore (which Territory Resources accepts is correct) while not recognising at the same time the cost properly associated with being able to produce that revenue (which Territory Resources does not accept is correct), thereby artificially inflating (through timing and the failure to properly apply the accrual basis of accounting) the net value.
The above disadvantage is compounded for Territory Resources because the revenue has not been earned but the expense has been incurred, and yet material mineral royalties have been paid by Territory Resources on the basis that revenue has been earned and the expenses have not been incurred.
The appellant also drew attention to the fact that the definition of “expended” appearing in s 4 of the MRA contemplated that the accrual method might include accounting on an “incurred basis”. On that basis, an amount is expended when it is paid or when a pecuniary liability becomes due. The argument followed that the costs of producing the inventory which formed part of the gross realization in each relevant royalty period were either paid or had become due in the relevant royalty period, and so were both “expended” and “expenditure” in the relevant senses.
The proper approach to the interpretation exercise
It may be accepted that under generally accepted accounting principles what may be described as the standard accruals method of accounting involves bringing the costs of inventory to account as expenses in the profit and loss account only when the inventory is sold and its costs matched with income from the sale. However, the issue for determination in the present appeal is whether on its proper construction the MRA permitted or required the expenditures claimed by the appellant to be taken into account as “operating costs” for the purpose of calculating net value and royalties payable in the relevant periods.
As the plurality observed in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (footnotes omitted):[13]
This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text. The language which has actually been employed in the text of legislation is the surest guide to legislative intention. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy.
Although “statutory construction must begin with a consideration of the [statutory] text”, that “statutory text must be considered in its context” which may include legislative history and extrinsic materials.[14]
Legislative history and context
The MRA commenced with effect from 1 July 1982. It created a profit-based royalty system rather than one based on revenue or tonnage. As originally enacted, the net value in a royalty year meant, in essence, the value of a mineral commodity sold or removed without sale from a production unit, less eligible deductions for the royalty year.[15] The term “eligible deduction” was defined to mean the sum of seven specified categories of expenditure, including “eligible operating expenditure”.[16] The term “eligible operating expenditure” was defined in respect of a royalty year to mean, so far as is relevant for these purposes, “an amount paid, which in the opinion of the Secretary (a) was reasonably paid by the royalty payer; and (b) is directly attributable to the production, or maintenance for the purposes of production, of a mineral commodity”.[17]
The temporal requirement for qualification as “operating expenditure” was that the amount be “paid” in the royalty year, and the functional qualification was that it be directly attributable to the production of a mineral commodity or maintenance for that purpose. There was no provision for the election of accounting basis, and no definition of “expended”. The underlying scheme was to make royalty liability responsive to changes in costs and mineral prices (and operating costs), and to impose the liability to pay royalties only in years in which a mine was profitable. That is, when the revenues and removals derived from the production unit in that royalty year exceeded its expenditure in the sense of amounts actually paid.
The Mineral Royalty Amendment Act 1987[18] (“the 1987 amendment”) commenced with retrospective effect from 1 July 1986. It repealed the entirety of the existing interpretation section and substituted a new scheme. By that amendment the definitions of “accounting basis”, “expended”, “gross realization”, “net value” and “operating costs” were first incorporated into the MRA. Section 10 of the MRA as originally enacted was amended to include the formula for the calculation of net value incorporating the concepts of gross realization and operating costs. Section 11 of the MRA as originally enacted was repealed and a new provision inserted, which included the requirement to make an election as to the accounting basis on which royalty returns would be prepared.
The 1987 amendment was enacted following a review of the MRA. The Information Paper published in relation to the amendment included the following passages in the summary of proposals:
… the Northern Territory government proposes to amend the legislation by:
· Making the accounting basis of the Act optionally either a “paid” or an “incurred” basis for the calculation of royalty, with the provision that the basis must be consistent from year to year.
· Altering the definition of profit to that which accords with generally accepted accounting principles so as to permit industry to use project and income tax accounts for royalty purposes.[19]
The body of the Information Paper also contains a number of references to industry’s dissatisfaction with the unique definition of “profit” and the attendant requirement to keep separate books of account, and industry’s support of the proposal to allow costs to be deducted on either a “paid” or “incurred” basis. The Information Paper then makes the following substantive proposals:
Accounting Basis
The Act provides that the accounting basis is a “cash” or “paid basis”. There was unanimous support from the industry for the Department’s proposal in its discussion paper that the Act be changed to make it optional for a company to elect either a paid or an incurred basis for the calculation of royalty.
It is proposed, therefore, that the Act be amended to provide for a “once off” optional election to report on a “paid” or an “incurred” basis for the calculation of royalty.
Definition of Profit
Industry has recommended the simpler definition of profit and argues that the profit base should be “book” or “accounting” profits.
The Government recognises this argument and supports the industry view that the definition of profit as presently contained in the legislation is inadequate and that a simpler definition of profit should apply. It is agreed that for administrative efficiency and equity reasons the profit base should be “book” or “accounting” profits. Except where accounting treatment is specifically defined the definition of profit in the Act will be altered so that it accords with generally accepted accounting principles. These changes should permit industry to use project and income tax accounts for royalty purposes.[20]
Those proposals were also addressed in the second reading speech for the Mineral Royalty Amendment Bill 1987. Four observations may be made in relation to those proposals. First, the Information Paper only contemplated an election between the "paid" and "incurred" basis. The amendment as enacted provided for an election between the "cash" and "accrual" bases, with specific provision concerning the "incurred" basis (discussed further below). It is not clear from the second reading speech or the other extrinsic materials to which reference was made why that terminology was ultimately adopted. Secondly, the concept of “net value” introduced by the 1987 amendment is not uniformly representative of “book” or “accounting” profits because it calls to account for royalty purposes mineral commodities removed without sale in a royalty year. Thirdly, in that respect the 1987 amendment effected no change to the MRA as originally enacted in its treatment of revenues. Finally, the Information Paper expressly contemplated that although the definition of “profit” would be altered to accord with generally accepted accounting principles, the accounting treatment to be given to certain aspects of the formula might be specifically defined. The specific treatment given to gross values of saleable mineral commodities in the MRA is an example of that.
The significance of the “accounting basis”
Against that background, the starting point in the present exercise is the text of s 4B of the MRA, which, as already seen, defines “operating costs” relevantly to mean and include “expenditure which was reasonable in amount and which is directly attributable to, the production, or maintenance for the purposes of production, or the sale or marketing of the saleable mineral commodity of a production unit”. There is nothing in that definition, considered in isolation, which would exclude costs expended in the production of the saleable mineral commodity which was removed from the production unit but not sold in the royalty period in which the cost was incurred. All the formulation requires is that the expenditure be reasonable in amount and directly attributable to production, the maintenance of the production unit, or the sale or marketing of the mineral commodity produced by that production unit.[21]
Turning then to the definition of “accounting basis” in s 4 of the MRA, it contemplates that accounting on the accrual basis involves the keeping of accounts “in accordance with generally accepted accounting principles on any approved basis”. The term “approved” is defined in s 4 of the MRA to mean “approved by the Secretary either specifically or by the promulgation of guidelines under section 4E”. While the respondent has promulgated guidelines dealing with matters including Gross Realization, Operating Costs and Capital Recognition Deductions, those guidelines do not approve any standards, principles or basis purporting to govern the issue arising in this appeal. Nor has the respondent specifically approved any standards, principles or basis of that type.[22]
In the absence of an approval, the reference to generally accepted accounting principles in the definition of “accounting basis” cannot, of itself, govern the point at which a production cost is properly taken into account in the computation of royalties payable. This is not to say that generally accepted accounting principles do not inform the manner in which net value is calculated for a royalty year. The requirement that a royalty payer make an election as to the accounting basis that will be used in relation to the accounts of a production unit is directed to that calculation.
Most significantly, s 17 of the MRA requires a royalty payer to keep “proper books of account in accordance with generally accepted accounting principles and the specified accounting basis”. Amongst other things, those books are required to show in respect of the production unit “details … of sales, shipments, transfers and other disposals of a mineral commodity” and “the amount and particulars of each expenditure in each category of deduction”. That requirement comprehends not only the physical state in which the books are kept, but also the manner in which an item of expenditure incurred in the production of stockpiled inventory is properly recognised in the income statement.
That comprehension notwithstanding, there is a conceptual difficulty with the notion that generally accepted accounting principles concerning the accruals method govern the calculation of net value for the purpose of assessing the royalty payable in a royalty year. The respondent concedes, as it must, that the definition of “gross realization” in s 4A of the MRA requires the application of something other than generally accepted principles for accrual accounting. Under that definition, realization includes the gross value of saleable mineral commodities removed from the production unit before those commodities are sold. Thus, the value of the prospective sale transaction is potentially brought to account for the purpose of calculating the royalty liability in a period prior to the occurrence of the sale and prior to the matching of the revenue from that sale with the costs of producing the inventory sold.
There is at least some anomaly in a construction which would see the royalty payer bound by the election of the accruals method for the purpose of accounting for royalty liability, which would require expenditure to be calculated strictly in accordance with that method, but which would require the application of a different regime for the purpose of calculating revenues. The difficulty is attended by the fact that, as already seen, a plain reading of the definition of “operating costs” requires only that the expenditure was reasonable in amount and attributable to the production, sale or marketing of the mineral commodity in question. The question then becomes whether there is anything in the broader text of the MRA, when read in context, which would exclude the expenses incurred in producing the Port Stock from “operating costs” until the royalty period in which the Port Stock is sold.
The definition of “expended”
The term “expended” is defined in s 4 of the MRA to mean, where the specified accounting basis of a production unit is the accrual basis, “charges brought to account”. The first question which arises in this context is whether the definition of “expended” informs the construction of the term “expenditure” which appears in the definition of “operating costs”. The respondent seeks to apply the definition of the verb form in the construction of the noun form, which is not separately or specifically defined.
The correspondence between different grammatical forms of the same word is addressed specifically in s 23 of the Interpretation Act (NT), which provides:
Parts of speech and grammatical forms
In an Act, where a word or phrase is given a particular meaning, other parts of speech and grammatical forms of that word or phrase have corresponding meanings.
The reference in that provision to “other parts of speech” extends to a noun where the verb is defined.[23] The operation of the interpretive provision is subject to two qualifications. First, it must yield to the appearance of a contrary intention in the subject legislation.[24] Secondly, the defined meaning is to be followed unless it is clear that the derivative is being used in a different sense.[25] Those qualifications resolve to the same inquiry, and the onus is on the party asserting the proposition to show that the defined meaning has not been followed in relation to the use of a derivative.[26]
The operative consideration in determining whether the derivative is being used in a different sense to the defined term is whether they conform to the same basal concept in the operation of the MRA. The concept of “expended” has application for a number of purposes. It has a temporal significance for the purpose of determining when a production unit goes into “active operation”; when “eligible capital assets expenditure”, “eligible exploration expenditure” and “eligible research and development expenditure”[27] is incurred; and the point at which “cessation amounts” are incurred for the purpose of adjusting net royalty in a royalty year. Most significantly, the term “expended” also appears in the definition of “operating costs” to govern such matters as when and in what circumstances the costs of negotiating with landholders may be included in the calculation of net value, and the timeframe within which expenditures incurred prior to the commencement of production may be claimed as operating costs.
Having regard to the presumption of consistency, and the interaction in the MRA between the point at which an amount is “expended” and the concept of “expenditure”, the definition of the first term properly informs the construction of the second. Accepting that to be so, the question then becomes whether it was open to the appellant, for the royalty periods in question, to account for its expenditures using the “incurred basis”.
The incurred basis
As already seen, the term “expended” is defined in s 4 of the MRA to mean:
(b) where the specified accounting basis of a production unit is an incurred basis – amounts incurred, being amounts paid and pecuniary liabilities that have become due the amounts of which are known or can be estimated with certainty;
That is expressed elsewhere in the definition as a variation on, or alternative to, the accrual basis. That distinction is also reflected in the definition of “accounting basis”, which, as already seen, contemplates as a variation under the general rubric of “accrual basis” the adoption of “an incurred basis” involving bringing to account within the royalty period amounts actually paid and received and liabilities and revenues which are either known or can be estimated with certainty.
In its terms, the incurred basis would permit costs paid and liabilities incurred in a royalty year to be treated as “expended” in that royalty year, at least where the related revenues have been received, are known, or can be estimated with certainty in that same royalty year. If the appellant is permitted to claim “operating costs” on that basis for the royalty periods in question they may be offset against “gross realization” in the calculation of net value. That operation would avoid what is, in the appellant’s submission, an anomaly by which the royalty liability for those periods was calculated having regard to the gross value of the Port Stock (presumably based on estimation) without deducting the costs associated with the production of that inventory.
In aid of that contention, the appellant submits that the election of the accrual basis of accounting was in bald terms which permitted the adoption of the incurred basis. In the appellant’s submission, that flexibility would address the unfairness which would otherwise flow from rigid adherence to the “standard” accrual basis. That submission should not be accepted for the following reasons.
The only purpose for which the MRA expressly contemplates the use of the incurred basis of accounting is in the context of rehabilitation costs following the cessation of production. So far as rehabilitation expenses are concerned, s 10(5) of the MRA provides:
(5) Notwithstanding subsection (1), where:
(a) a production unit has ceased the production of a saleable mineral commodity; and
(b) after the cessation amounts have been expended on the rehabilitation of the tenement forming part of the production unit,
the royalty payer of the production unit may, after the rehabilitation of the tenement is completed, furnish the Secretary with a statement, verified in such manner as the Secretary may require, of the amounts expended.
Section 10(7) of the MRA provides in that respect:
(7) For the purposes of subsection (5):
(a) royalty does not include interest on royalty under section 42 or penal royalty under section 42A; and
(b) where the specified accounting basis of the production unit is an accrual basis, amounts expended shall be interpreted as if that accounting basis were an incurred basis as described in paragraph (b) of the definition of accounting basis in section 4.
The Information Paper leading to the 1987 amendment contained the following passage:
With respect to the eligibility of final rehabilitation costs and final payments of employee benefits, the industry argue that they are genuine costs and therefore should be addressed. The industry has argued that the audited provisions in the account should be accepted as the basis for allowing these deductions.[28]
That passage is consistent with the provisions which were subsequently enacted.[29] There is a faint statutory implication that the adoption of the incurred basis is limited to rehabilitation expenses.
Even leaving that implication aside, the election of the specified accounting basis to be adopted for the purpose of calculating royalties is a “one-off” election made at the time the production unit commences operation. It is common ground that the appellant elected to adopt the accrual basis. The incurred basis of accounting has features which are not contemplated by the standard accrual basis; most notably, that both amounts paid and received, and liabilities accrued and revenues earned which have not been paid or received but which are known or can be estimated with certainty, are brought to account.[30] The respondent submits that from the commencement of the operation of the production unit its accounts for royalty purposes consistently reflected the standard accrual basis rather than the incurred basis. The appellant does not contend otherwise.
The appellant’s elected accounting basis was the accrual basis. It kept its books and submitted its royalty returns in accordance with the standard accrual basis following the election. In those circumstances, it could not assert that “operating costs” should be assessed on the incurred basis for a particular royalty period for the purpose and with the effect of altering the basis on which net value had been calculated up to that point in time. To do so could, by way of example, result in a situation in which a royalty payer in the application of the standard accrual basis of accounting has not claimed production costs as “operating costs” in one royalty year, and is precluded from claiming those costs in accordance with the incurred basis in the subsequent royalty year because the liability has been neither paid nor accrued in that subsequent year.
The specified accounting basis for this production unit was a standard accrual basis rather than an incurred basis. Accepting that to be so, the question then becomes when costs incurred in the production of inventory are “charges brought to account” in the relevant sense.
The meaning of “charges brought to account”
As already seen, the term “expended” is defined in s 4 of the MRA to include:
(c) where the specified accounting basis of a production unit is an accrual basis (other than an incurred basis) – charges brought to account.
Each of the individual words in the phrase “charges brought to account” might be said to have a natural and ordinary meaning. It is clear from the context in which the words appear, however, that the composite phrase has a technical or commercial meaning in the accounting field.[31] So much is apparent from its relationship to the “specified accounting basis” and the accounting standards to which the parties have drawn attention. That meaning is the point at which expenses are properly recognised in the income statement and thereby “expended” in the relevant sense.
Particular regard will be paid to the meaning attributed to words in the accounting field when interpreting a statute dealing with financial affairs, and particularly where the context in which they appear suggests those words are being used in a technical sense.[32] Ultimately, however, the meaning to be attributed to the phrase is a matter of law rather than a matter of fact to be resolved by a preference for one body of opinion over another.[33]
In Commissioner of Taxes (SA) v Executor Trustee & Agency Company of South Australia Ltd,[34] Dixon J made the following observations concerning accounting on an accrual basis:
The courts have always regarded the ascertainment of income as governed by the principles recognized or followed in business and commerce, unless the legislature has itself made some specific provision affecting a particular matter or question. Familiar but striking examples of this necessary reliance upon commercial principles and general business understanding may be found in the case law dealing with expenditure laid out for the purpose of trade, with outgoings on account of capital, with capital profits, and with the question whether items should be taken into consideration for any given accounting period rather than for that which follows or perhaps for that which preceded. Speaking in reference to a fire insurance company, Viscount Haldane said in Sun Insurance Office v. Clark:—"It is plain that the question of what is or is not profit or gain must primarily be one of fact, and of fact to be ascertained by the tests applied in ordinary business. Questions of law can only arise when ... some express statutory direction applies and excludes ordinary commercial practice, or where, by reason of it being impracticable to ascertain the facts sufficiently, some presumption has to be invoked to fill the gap."[35]
….
Thus, in Lothian Chemical Co. Ltd. v. Rogers Lord Clyde says:—"It has been said times without number—it has been said repeatedly in this court—that in considering what is the true balance of profits and gains in the Income Tax Acts—and it is not less true of the Act of 1918 than of its predecessors—you deal in the main with ordinary principles of commercial accounting.[36]
….
The reasons which underlie the practice of estimating for taxation purposes the income from trade or manufacture by means of a commercial profit and loss account consist in the impracticability of computing income in any other way and in the adoption for fiscal purposes of recognized commercial principles. The computation of profits from manufacture and trading has always proceeded upon the principle that the profit may be contained in stock-in-trade and "outstandings."[37]
….
The distinction, if not opposition, between the mode of accounting sometimes called the accrual system and that based upon actual receipts and disbursements is widely known. The foundation of the accrual system is the view that the accounts should show at once the liabilities incurred and the revenue earned, independently of the date when payment is made or becomes due.[38]
While his Honour was there dealing with the interpretation of taxation statutes, those principles are equally applicable for these purposes. Where the legislation in question specifically allows an election of a particular accounting basis, and the accrual basis is chosen, generally accepted accounting principles are properly applied to determine the manner in which accounts are kept and the point at which expenses are properly recognised in the income statement and thereby “expended”.[39]
That enquiry resolves in this case to when a charge is “brought to account” in the application of generally accepted accounting principles. It may be accepted for the purposes of the enquiry that inventory is recognised prior to sale as a current asset on the balance sheet. The costs relating to the production of that inventory are recognised as part of that asset on the balance sheet, but not as a “charge” or “cost”. When the inventory is sold, the receipt is brought to account as revenue and the costs of producing that revenue are brought to account as an expense caused by the sale of the inventory.[40] Nor is there any notion under generally accepted accounting principles of a deemed sale and a corresponding matching of expenses to that deemed sale.[41]
The appellant does not contend otherwise, but relies instead on the notion that under this particular statutory scheme the expenditure in question could be, and was, “brought to account” in the relevant sense by its initial recording in the profit and loss statement before transfer to the balance sheet as a “deferred inventory cost” until such time as the inventory was sold.[42] While that was no doubt what the appellant’s account showed in the relevant royalty periods, that process is not properly characterised as bringing a charge, cost or expense to account under the accrual basis of accounting, or under the terms of the MRA.
This highlights the difficulty with the appellant’s advertence to paragraphs 6 and 50 of Australian Accounting Standard AASB 1022. While it might be accepted that in a general sense “brought to account” means “recognised in the accounts”, under the accrual basis the recognition of a production expense as a charge involves matching at the point of sale. Moreover, the manner in which inventory is recognised in the accounts is as an asset. Accordingly, it is no doubt “recognised in the accounts” at that point, but is not recognised as revenue or income until the point of sale.
The respondent also points to the legislative history and context which has been detailed above in support of a construction which would apply generally accepted accounting principles in determining the meaning of “charges brought to account”. Caution needs to be exercised in relation to the extent to and manner in which legislative history and context may inform the construction of the relevant provisions. Extrinsic material may only be used in interpreting a provision of an Act to confirm that the meaning of the provision is the ordinary meaning conveyed by its text; or to determine the meaning of the provision when it is ambiguous or obscure or when the ordinary meaning conveyed by its text leads to a manifestly absurd or unreasonable result.[43]
It cannot be said in the present case that there is an ordinary meaning conveyed by the term “brought to account” which would lead to an absurd or unreasonable result of the kind referred to in Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation.[44] The most that can be said about the legislative history and context in the present case is that to the extent the meaning of the term “brought to account” is obscure or technical in nature, the general purpose and policy of the provision as described in the extrinsic materials is consistent with the construction adopted by the respondent in making the determination on the objection.
Unjust or capricious result
Finally, it falls to determine whether that construction would produce an unjust or capricious result. If so, a court would be slow to attribute that intention to the legislature or that operation to the legislation, and would only do so if “the statutory language is intractable”.[45] A number of observations may be made in that respect.
First, the royalty payer may elect to adopt either the cash or the accrual method of accounting for royalty purposes. At the time that election is made the royalty payer must be taken to know both the generally accepted accounting principles which govern accounting on the accrual basis, and that the calculation of gross realisation for a royalty period includes both mineral commodity that is sold and mineral commodity that is removed from the production unit without sale. The scheme of the MRA clearly contemplates the imposition of a liability to pay royalties on unsold mineral commodities, and that result cannot be characterised as arbitrary or capricious in itself. That understanding would also include a facility on the part of the royalty payer to stockpile the mineral commodity on the mining tenements, rather than removing it from a production unit, if there was some concern about the value of that commodity being included in gross realization for a particular royalty year.
Secondly, the fact that the expenses incurred in the production of a mineral commodity cannot be taken into account for the calculation of net value in relation to unsold mineral commodity does not mean that the expenses are not brought to account in a royalty payer’s favour. The legislation does not operate such that value is determined solely and ultimately by reference to the price obtained or some attribution of value without the deduction of the direct costs incurred in turning the product into a saleable mineral commodity.[46] Those production costs will be taken into account in calculating net value in the royalty period in which the commodity is sold. If no royalty is payable in that period, those production costs are incorporated into negative net value and carried forward to offset future royalties payable.
It cannot be said that the operation of the legislation is unjust or capricious in this respect. The question is one of timing. In some years a royalty payer may pay royalty on the net value of unsold commodity which does not take into account production costs for that commodity, but those costs may be deducted from the gross realization figure in subsequent years. In making the election to adopt the accruals basis for the purpose of calculating net value, the royalty payer must also be taken to know that on cessation of mining activity there may be costs paid and liabilities incurred which will not be able to be set off against gross realization in previous years. There is no inequity or injustice if that is the objective legislative intention apparent from the operation of the scheme and from the time of election.
Thirdly, counsel for the respondent drew attention to the fact that a royalty payer derives an economic and administrative benefit from electing the accrual basis of accounting. This is because the same financial statements may be used for those purposes and for the purposes of taxation assessment and compliance with the Corporations Act, rather than having to maintain a separate set of accounts for royalty purposes. As has been seen, representations from industry led to the 1987 amendment to the MRA permitting the election of the accrual basis of accounting for royalty purposes. Although that matter does not inform the question of construction, it does go some way to addressing the appellant’s contention of unfairness.
Having regard to those considerations, it cannot be said that the construction adopted by the respondent produces an unjust or capricious result which requires the attribution of some other intention to the legislature. To the extent that production costs may not in some circumstances be set off to reduce royalty liability, the statutory language and scheme enacted by the legislature, although perhaps not intractable, yields that result.
Disposition
For those reasons, the decision made by the respondent dated 19 May 2016 is confirmed. The court will hear the parties in relation to the question of costs.
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[1] TAA, s 112.
[2] TAA, s 107.
[3] TAA, s 116.
[4] TAA, s 125(1).
[5] TAA, s 125(2).
[6] TAA, s 126.
[7] TAA, s 127.
[8]However, s 4F of the MRA permits a person to apply to the Secretary for his or her opinion in respect of a proposal to change the accounting basis. It is not suggested that any application of that type was made in the present case.
[9]The inclusions expressly recognise costs such as research and development expenditure, accounting fees, insurance premiums, payroll and office expenses, and fees, charges and rentals.
[10]The exclusions expressly exempt such matters as compensation paid for the use or disturbance of land, taxes on income or profits, royalty and interest payments, and particular types of employee and office expenses.
[11]Production at the mine ceased in 2016. No evidence was adduced concerning the treatment of the negative net value following 31 December 2012.
[12] Accounting Standard AASB 102 Inventories, made by the Australian Accounting Standards Board under s 334 of the Corporations Act 2001, [34] ('AASB 102’).
[13][2009] HCA 41; 239 CLR 27 at [47] per Hayne, Heydon, Crennan and Kiefel JJ.
[14]Thiess v Collector of Customs (2014) 250 CLR 664 at [22], citing Federal Commissioner of Taxation v Consolidated Media Holdings Ltd (2012) 250 CLR 503 at [39]. See also SZTAL v Minister for Immigration and Border Protection (2017) 91 ALJR 936 at [14], [35]-[40], [81] and [92].
[15]MRA, s 10(2) (as originally enacted).
[16]MRA, s 4 (as originally enacted).
[17] MRA, s 4 (as originally enacted).
[18] Act No 18 of 1987.
[19]Information Paper: Northern Territory Government Proposals to Amend the Mineral Royalty Act, Mines Division, Department of Mines and Energy, June 1986, 3.
[20]Ibid, 10.
[21]The guidelines promulgated by the Secretary pursuant to s 4E of the MRA in relation to Operating Costs replicate that formulation. See Royalty Guideline RG-MRA-005: Operating Costs issued 29 August 2011.
[22]It is not suggested by the respondent that either the original decision or the decision on objection constituted an approval in any relevant or material sense, or that notification of the election under s 11(1)(f) of the MRA involved any element of approval.
[23]Pearce & Geddes, Statutory Interpretation in Australia (LexisNexis, 8th ed, 2014) [6.66].
[24]Interpretation Act (NT), s 3(3).
[25]In Transport Accident Commission v Treloar [1992] 1 VR 447 at 464, it was considered that the meaning of "driver" was not to be derived from the definition of "driving" because it was a noun in its own right and not a part of speech of the defined term: Pearce & Geddes, op cit at [6.66]. Even in those circumstances, the definition will properly be taken into account in determining the meaning of the other term.
[26]See, for example, Graovac v Minister for Immigration and Multicultural Affairs (1999) 56 ALD 709 at [11].
[27]It may also be noted in this respect that "eligible research and development expenditure" is an express inclusion in the definition of "operating costs".
[28]Information Paper: Northern Territory Government Proposals to Amend the Mineral Royalty Act, Mines Division, Department of Mines and Energy, June 1986, 6.
[29]As already observed above, the Information Paper only contemplates an election between the "paid" and "incurred" basis. The amendment as enacted provided for an election between the "cash" and "accrual" basis, with specific provision concerning the "incurred" basis.
[30]See, definition of "accounting basis": MRA, s 4.
[31]As to the attribution of common commercial usage to terms appearing in revenue laws, see Pearce & Geddes, op cit at [4.15]-[4.19]; D & R Henderson (MFG) Pty Ltd v Collector of Customs (NSW) (1974) 48 ALJR 132 at 135; Herbert Adams Pty Ltd v Federal Commissioner of Taxation (1932) 47 CLR 222 at 227; Whitton v Falkiner (1915) 20 CLR 118 at 127. Although the imposition of a royalty might more properly be described as the exaction of a price rather than the imposition of a tax, the principle remains the same.
[32]QBE Insurance Group Ltd v Australian Securities Commission (1992) 38 FCR 270 at 288-9; Re Michael; Ex parte Epic Energy (WA) Nominees Pty Ltd [2002] WASCA 231; (2002) 25 WAR 511 at [107].
[33]Pilbara Infrastructure Pty Ltd v Australian Competition Tribunal [2011] FCAFC 58 at [60].
[34](1938) 63 CLR 108.
[35](1938) 63 CLR 108 at 152-3.
[36](1938) 63 CLR 108 at 154.
[37](1938) 63 CLR 108 at 155.
[38](1938) 63 CLR 108 at 156-7.
[39]See also, Ballarat Brewing Co Ltd v Federal Commissioner of Taxation (1951) 82 CLR 364 at 368, 370; Philip Morris Ltd v Federal Commissioner of Taxation (1979) 38 FLR 383.
[40]Revised Report of Mark Bryant dated 27 February 2017 at [42]-[45], contained at annexure MB-1 to the affidavit of Mark Bryant affirmed on 1 March 2017.
[41]Revised Report of Mark Bryant dated 27 February 2017 at [47]-[48].
[42]This argument is secondary to the appellant's principal argument that the term "expenditure" as it appears in the definition of "operating costs" should be given an expansive meaning to accord with the purpose of the legislation.
[43]Interpretation Act (NT), s 62B(1).
[44](1981) 147 CLR 297.
[45]Tickle Industries Pty Ltd v Hann & Richardson (1974) 130 CLR 321.
[46]Cf North Flinders Mines Ltd v Conn (1995) 123 FLR 330, in which the court observed at 341 that such a consequence would not be intended by the legislature. The relevant question in that context was the proper moment for assessing the value of mineral commodities removed from a production unit without sale. The answer to that question was at the point of removal because, in part, refining costs incurred outside the boundaries of the Northern Territory essential for the production of a saleable mineral commodity could otherwise never be set off against "gross realization".
2
21
3