Transfer to Purchaser of Benefit of Deduction
19.A11. Where, by virtue of section 122J (4), there is an amount of exploration or prospecting expenditure
which is not deductible in the year it was incurred, the taxpayer (vendor) may in effect transfer his
entitlement to a deduction by a notice under section 122B (1). A similar provision enables a corresponding
deduction to be transferred to the purchaser of a petroleum prospecting or mining right or information
(see section 124AB). Transfer under section 122B (or section 124AB) is available where the taxpayer sells
a mining or prospecting right or mining or prospecting information. The expenditure by the purchaser on
acquiring the mining or prospecting right or
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prospecting information will become allowable
capital expenditure of the purchaser to the extent of the amount nominated by the seller and the purchaser
in a notice given to the Commissioner.
19.A12. It appears that entitlement to deductions for expenditure on exploration or prospecting may be passed on under section 122B, notwithstanding that the expenditure was not incurred in relation to the area to which the mining or prospecting right or mining or prospecting information the subject of the sale relates. The purchaser will be entitled to deductions under section 122D in respect of what is (after the sale) his residual capital expenditure, even though deductions by the seller would have been indefinitely deferred pending his entry on prescribed mining operations.
19.A13. Exploration expenditure which is not the subject of a notice under section 122B or section 124AB remains available for deduction by the taxpayer who incurred it, notwithstanding that he has disposed of the information gained by the exploration operation or has disposed of his right to explore or mine in the area to which it relates. Section 122B was added in 1968 to rectify the discrimination in this regard between general mining and petroleum mining, to which the former section 124DE had applied since 1963.
19.A14. Both provisions enable a vendor to capitalise outgoings incurred by him in exploration and to transfer any accrued income tax benefit to a purchaser and for the latter to claim the benefit of such a deduction although the cost was not originally incurred by him.