We collect revenue to help fund government services, such as health, policing and education, for the benefit of the people of the Northern Territory. A key element of this is our compliance program, which ensures the integrity of the tax, royalty and benefit schemes that we administer. Our compliance approach aims to:
- encourage and assist clients to comply;
- detect and enforce compliance; and
- prosecute evasion and fraud.
We find that the vast bulk of Territory tax and royalty payers meet their obligations on time and in full. Our aim is to encourage and assist clients to comply and to use our compliance powers sparingly. We will use the full force of the law for those who choose not to engage with us and refuse to comply with their taxation or royalty obligations.
Encourage and assist clients to comply
We have a range of information and tools available on our website to ensure clients understand their obligations and the benefits they are entitled to. These include:
- forms, factsheets and publications;
- tax and duties calculators;
- online services for easy lodgement and payment; and
- links to payroll tax seminars, videos and webinars.
We also provide telephone and email support to assist clients across all our tax, royalty and benefits schemes. Seminars are held in Darwin and regional centres as required to inform businesses, solicitors, accountants and professional advisors of changes and issues relating to the legislation we administer. If we think that you may not have complied with your obligations, we will generally inform you and seek your feedback before taking serious compliance action.
Detect and enforce compliance
Our compliance program focuses on areas identified as having a high risk of non-compliance, with audit and investigation projects focusing on:
- identifying and contacting individuals or businesses not currently registered within the tax system, but who are most likely to have a liability;
- identifying clients who may have understated their tax and royalty liabilities through an audit program;
- identifying clients who do not satisfy the eligibility requirements of the First Home Owner Grant;
- prosecuting serious breaches of the legislation; and
- ensuring clients with an obligation to lodge returns do so in a timely manner.
Cases for audit and investigation are selected from a number of different sources. These include:
- voluntary and anonymous disclosures reported to the Territory Revenue Office;
- validation and exception reporting to identify anomalies with information presented by clients;
- referrals from other agencies; and
- verifying our records against third party information to identify potential cases of non-compliance.
For more information on the investigation process, read the Investigation Process brochure .
Information exchange with the Australian Taxation Office and Revenue Offices
We regularly exchange information with the Australian Taxation Office (ATO) and other Revenue Offices in accordance with the Memorandum of Understanding signed by the ATO and all State and Territory revenue offices. We use shared information and data including:
- BAS and Income Tax return data to identify those businesses that should be registered for payroll tax;
- matching business wages and salaries data from the ATO to identify variances for payroll tax;
- matching fringe benefits tax data to identify variances for payroll tax;
- using Income Tax data to identify when properties have been rented out by recipients of the First Home Owner Grant;
- comparing levels of wages declared by employers to different States and Territories; and
- identify discrepancies in property related sales for duties purposes.
The ATO uses our information to:
- identify businesses who should be registered for pay as you go withholding tax; and
- identify discrepancies in property related sales to income tax, goods and services tax, fringe benefits tax and capital gains tax.
If you have State and Territory tax liabilities, you may also have federal tax and superannuation liabilities. For example, if you need to lodge a payroll tax return you will also need to withhold tax from payments to employees and provide superannuation. You should check your federal tax and superannuation obligations by visiting the ATO website.
Prosecuting evasions and fraud
As the administrator of tax, mineral royalty and benefits schemes, we protect honest taxpayers, royalty payers and benefit scheme recipients from those seeking to abuse the system (by failing to pay mandated taxes or royalties, or claiming benefits to which they are not otherwise entitled, thus shifting heavier burdens to honest taxpayers and royalty payers). In appropriate cases where taxpayers, royalty payers or benefit scheme recipients have contravened a provision of a statute, we may institute prosecutions. We will use the least interventionist form of regulation that will deliver and improve compliance.
Prosecutions are part of that overall strategy, as demonstrated by the diagram below:
Concept adapted from I Ayres and J Braithwaite, Responsive Regulation: Transcending the Deregulation Debate (Oxford University Press, 1992)
In choosing to commence a prosecution action, we will act in an independent, professional and effective manner which:
- maintains and promotes community confidence in the integrity, neutrality and effectiveness of the revenue and home owner assistance schemes;
- promotes our overall objective of improving compliance with revenue and benefits schemes;
- improves the transparency of the decision making process;
- ensures consistency of treatment of alleged offenders;
- is fair and just to both the alleged offender and the community; and
- is sensitive to the needs of witnesses and to the interests of the community on whose behalf we act.
We are prepared to prosecute all types of offences (whether serious or less serious offences).
Voluntary and anonymous disclosures
We encourage clients to make voluntary disclosures if they find they have understated their liability. When a voluntary disclosure is made a reduced level of penalties are imposed compared to those cases where the understatement is identified as a result of our action. For payroll tax voluntary disclosures, employers can use the Payroll Tax Voluntary Disclosure Form . For more details on how we apply interest and penalties, see our Interest and Penalties page. We also investigate anonymous disclosures from members of the public. Confidentiality is assured and we welcome any information about non-compliance relating to the tax, royalty and benefits schemes we administer. Anonymous disclosures can be reported to us.
We use a number of compliance strategies within each of the tax, royalty and benefit schemes we administer. We aim to complete our audits and investigations with the highest possible standards of integrity and least inconvenience to our clients. Our Investigation Process brochure provides clients with information about the audit and investigation process, their rights and obligations and avenues of appeal if they are dissatisfied with an assessment of liability.
- Payroll tax
- First Home Owner Grant
- Mineral and petroleum royalties
Our duties compliance program focuses on individual transactions and Conveyance By Return (CBR) clients who assess documents. Initiatives to ensure duties compliance may include:
- identifying transactions liable for landholder duty
- auditing CBR clients to ensure the accuracy of assessments and that their systems and procedures adhere to our directions
- identifying transactions where duty has not been paid or underpaid
- reviewing high value property transfers
- identifying and investigating transactions where the correct value has not been used to calculate duty payable
- reviewing and investigating sale of business transactions where third party information indicates that the correct duty has not been paid
- reviewing entitlement to exemptions and concessions, including corporate reconstructions.
Payroll tax compliance activities focus on identifying and contacting liable employers who have failed to register with us for payroll tax purposes and auditing registered clients who appear to have understated their wages. Initiatives to ensure payroll tax compliance may include:
- contacting unregistered employers where information available to us suggests they are liable for payroll tax
- investigating businesses where information available to us indicates taxable wages have been understated
- identifying and contacting employer groups that are claiming the benefit of multiple thresholds by failing to declare they belong to a group for payroll tax purposes
- reviewing high value refund requests
- contacting and reviewing employers who fail to declare payments to contractors that are liable for payroll tax
- following up employers who fail to lodge their monthly and/or annual returns on time.
Common errors for payroll tax include:
- failing to register when total liable wages exceed the Northern Territory threshold
- failing to include all liable wages in the total wages calculation, including superannuation and taxable fringe benefits
- incorrectly classifying employees as independent contractors - in certain cases 'contractors' may be considered to be 'employees' under the Act
- incorrectly listing group status, including failing to register a related entity such as:
- holding subsidiary relationships (mandatory grouping)
- common control relationships (common shareholders/directors/beneficiaries or any combination of these)
- common use of employees
- failing to declare interstate wages
- incorrectly claiming an exemption for certain wages.
First Home Owner Grant
Compliance activities ensure first home buyers benefiting from the First Home Owner Grant (FHOG) scheme satisfy the eligibility criteria. All first home buyers who receive the FHOG are matched against information held by third parties and may be requested to verify that they have met the eligibility criteria, including the residence requirement. Applicants who are not eligible for the FHOG are required to repay the grant back to us, which may include penalty and/or interest. FHOG applicants who provide false or misleading statements may be prosecuted.
Initiatives to ensure first home benefits compliance may include:
- identifying and investigating applicants who fail to meet the residence requirements
- verifying information provided by clients against third party data to identify undeclared spouses, prior ownership, understated duty amounts and inconsistencies between property transfers and FHOG applications
- investigating anonymous disclosures reported to the Territory Revenue Office.
Common errors for the FHOG include:
- applying for FHOG when purchasing an investment property that is to be leased
- failing to advise us when circumstances change and the applicant cannot meet the residence requirement timeframes
- incorrectly applying the residency requirements, for example:
- leaving the FHOG property vacant (not leased) for 6 months
- renovating the FHOG property while using another residence to cook, shower, sleep etc
- living in the FHOG property for a period of less than 6 months
- failing to disclose a de facto partner/spouse
- failing to disclose that the applicant, or their de facto partner/spouse has received a prior grant or had a prior relevant interest in residential property
- failing to disclose previous names, including previous married name(s)
- purchasing the FHOG property in a child’s name, with the consideration for the property paid by parents.
Mineral and petroleum royalties
The Northern Territory’s mineral and petroleum royalty regimes operate on the principle of voluntary compliance. Each royalty payer is responsible for paying the correct amount of royalties (including provisional royalties) imposed by the statutory or regulatory framework that governs the royalty regimes. We are responsible for administering and enforcing those regimes.
- ensure that all royalty payers pay the correct amount of royalties
- promote a level playing field for all Northern Territory mining, petroleum and other businesses or projects
- royalty payers to understand how royalties apply to their mining or petroleum business or project.
Any royalty payer - including major, national or junior companies and individual or small scale miners - could be audited. Royalty payers may be chosen for an audit based on a special audit project, legislated program, risk-based selection or referral from another tax or royalty audit. Royalty payers based outside the Northern Territory that conduct mining or petroleum production in the Northern Territory could also be audited. The Mineral Royalty Overview and NT Petroleum Royalty Overview specify the obligations of royalty payers and cover administrative details such as the reporting of royalty obligations and the conduct of audits.
This page provides specific information about what to expect during your mineral or petroleum royalty audit. This information is provided to help you understand the audit process and answer some questions you may have. It also provides you with information about of your rights and obligations during an audit.
Understanding your mineral or petroleum royalty audits
The Territory Revenue Office (TRO) is responsible for the administration, compliance and enforcement of the Northern Territory mineral and petroleum regimes. In discharging that responsibility, the TRO is committed to the standards and values outlined in the TRO’s Taxpayer and Royalty Payer Charter .
The TRO devotes considerable time and effort to assisting royalty payers to comply with their obligations so we can help those willing to comply.
The primary goal of the TRO’s compliance activities is to improve overall compliance with the royalty laws and instil confidence in the Northern Territory community that the administration of the royalty regimes is fair and reasonable. The audit program plays an important role in clarifying the law and educating royalty payers about how to comply with their obligations.
The following provides specific information about what to expect during your mineral or petroleum royalty audit. This information is provided to help you understand the audit process and answer some questions you may have. It also provides you with information about of your rights and obligations during an audit.
What is an audit?
An audit is a formal examination of your records by a TRO officer to ensure that you are correctly accounting for and paying royalties, according to the royalty laws, that are due to the Northern Territory Government.
An audit can also assist you to understand the statutory and regulatory framework for the administration and collection of mineral and petroleum royalties. An audit can be conducted for an annual or periodic royalty return or when other issues may arise in relation to your petroleum agreement, the Mineral Royalty Act (MRA), or Agreement Ratification Act or Agreement Act (which refers to the MRA with or without modification) that applies to your mining project.
Further information is available on the TRO's Compliance page.
Why does the TRO conduct royalty audits?
The Northern Territory’s mineral and petroleum royalty regimes operate on the principle of voluntary compliance. Each royalty payer is responsible for paying the correct amount of royalties (including provisional royalties) imposed by the statutory and regulatory framework that governs those regimes. The TRO is charged with the responsibility to administer and enforce those regimes.
Payment of royalties is a condition of a Mineral Lease or a Petroleum Licence and failure to pay royalties is a breach of the lease or licence which can result in cancellation of the relevant title. The TRO conducts royalty audits to confirm the amount of royalty payable and identify and collect unpaid or underpaid royalties.
The Northern Territory’s royalty regime encourages present and future exploration and development of mineral and petroleum resources. At the same time, the regime compensates the Northern Territory community for allowing the private extraction of the Northern Territory’s non-renewable resources.
Royalty revenue is used to support important government programs and services, such as education, health care, social services and infrastructure. Audits help ensure that all royalty payers pay the correct amount of royalty and promote a level playing field for all Northern Territory mining, petroleum and other businesses or projects.
Royalty audits also help you understand how to apply the royalty rules to your mining or petroleum business or project.
Any royalty payer – including major, national or junior companies and individual or small scale miners – can be audited at any time. Royalty payers may be chosen for an audit based on any of the following reasons:
- a special audit project (to target specific problems or issues in legislation);
- a legislated program;
- risk-based selection (including industry trend analysis);
- dob-ins or tip-offs;
- follow-up of information received from a variety of sources;
- random selection for routine verification and coverage of royalty revenue base; or
- referral from another royalty or tax audit.
Royalty payers whose businesses are predominantly based outside the Northern Territory, but conduct mining or petroleum production in the Northern Territory, are also audited.
Under the MRA and the Petroleum Act, for the purposes of the administration and enforcement of the royalty schemes established under those Acts, an auditor is permitted to, amongst other things:
- gain access to the production unit/licence area or premises where records are kept;
- inspect, examine, make and retain copies of documents or records;
- inspect or take stock of a mineral commodity;test a device referred to in section 84(5) of the Petroleum Act and make and retain records associated with or produced by the device;require a company representative to produce records; and
- require a company representative to answer questions and provide information.
The authorised audit officer is permitted to carry out these actions to confirm you have met your obligations as a royalty payer. It is important to note that this authority is carried out with a strict commercial-in-confidence policy and all your records will be protected accordingly.
What does an auditor look for?
When an audit is conducted, the auditors are primarily verifying that you:
- calculated the correct amount of royalties on:
- in the case of the MRA, the extraction and removal of a saleable mineral commodity from a production unit (RG-MRA-002: Production Unit ) in a royalty year;
- in the case of the Petroleum Act 1984 (NT), the recovery of petroleum at the wellhead;
- have kept and maintained proper books of account in accordance with the generally accepted accounting principles and the specified accounting basis for royalty purposes;
- have documentation to fully support the value of a saleable mineral commodity or petroleum and eligible expenditure;
- declared and paid the correct provisional and residual royalties; and
- any other relevant matters that affect the calculation and payment of royalties.
The timeframe of an audit
Generally, an audit covers up to a five-year period. The audit period can change according to individual circumstances. There are however, no time limits on how far back you may be audited if you intentionally or recklessly evade or avoid the payment of royalties.
There is no set time limit on how long an audit may take. This depends on:
- the size and complexity of your business;
- the standard of your records; and
- your cooperation.
We will provide an estimate of the timeframe for completion of the audit at the commencement of the audit. If there is a need for an extension, this will be discussed with you.
Record keeping requirements
Royalty payers are required to maintain proper and accurate records relating to minerals (including petroleum) recovered and which substantiate details contained in royalty returns. The records are to be kept at the production unit/licence area or at some other place in Australia as agreed between the royalty payer and the Commissioner of Territory Revenue/Mineral Royalty Secretary.
The records relating to minerals (including petroleum) recovered must be kept (in English language) for a period of seven years after the information is created by, or comes into the possession or custody of, the royalty payer.
Records for inspection
The Commissioner of Territory Revenue/Mineral Royalty Secretary or any TRO auditor is to have access to accounts, books, documents and other records relating to the production unit/licence area, when a request is made in writing.
The auditors can inspect any of your records in both paper and electronic format.
Typically, the auditor will review some or all of your:
- financial statements, including notes to the accounts (audited or unaudited, whichever are available);
- end of year management reports (which contain information such as production volumes and values or Key Performance Indicators);
- trial balance or relevant cost centre reports;sales contracts together with an explanation of the terms of the sales arrangements and the individual client’s files;
- an electronic copy of the taxation depreciation schedule and fixed asset register for the production unit, along with a separate schedule of additions and disposals for the relevant year;
- a transaction list supporting any eligible exploration expenditure incurred on a mining tenement that forms part of the production unit (and not on an exploration licence);
- a description of any material operational or reporting changes affecting the royalty calculation;
- explanations for significant fluctuations in the royalty calculation in comparison to previous years (such as exchange rate impacts, changes to contract values or a material increase in operating cost items);
- information evidencing the quantity and value of commodities (including petroleum) produced;
- working files for the royalty returns;a list of expenditure claimed;
- an explanation for any increase/decrease of expenditure in comparison with the amounts claimed in the previous royalty return;
- other relevant expenditure information; and
- any other relevant information which may facilitate the audit of the royalty return.
For both parties benefit, the royalty payer should ensure that adequate and efficient record keeping systems and procedures are maintained to allow for the audit to be carried out in a fast and effective way.
What happens when you are selected for an audit?
In most cases auditors will:
- write, telephone or visit you to let you know that an audit will be conducted;
- explain the process and the scope of the audit;
- specify the records to be produced for inspection;
- give you a reasonable period of time to assemble those records for either:
- submission for desk audit; or
- arranging a time and place to interview the production unit’s representative/s; and
- confirm arrangements in writing.
All audits are conducted by an authorised TRO officer/s.
During an audit, the auditor will conduct interviews and make enquiries to establish compliance with the relevant royalty law and examine and test some of your internal financial records.
How should you prepare for an audit?
The TRO endeavours to carry out an audit with minimal impact and disruption to your business activities. Full cooperation with the TRO will lessen any potential inconvenience to you or your business.
To minimise delays you should ensure:
- that the records the auditor has requested are ready for examination when required; and
- our representative has knowledge of and access to the appropriate financial documents relating to the audit as well as the calculation of royalty.
What are your obligations?
During the audit, you are required to:
- disclose any known discrepancies, errors and undeclared royalty liabilities, royalty assessments or audits;
- provide the auditor reasonable assistance and facilities during the audit;
- provide complete and honest answers and explanations to questions; and
- provide prompt, full and free access to all relevant information, records, documents, data and systems as required by the audit officer.
What are your rights?
The TRO will conduct audits with respect to your rights. If an audit is to be conducted, you have the right to:
- ask for a reasonable amount of time to produce your records;
- negotiate the time and place for the audit with the auditors; and
- receive written confirmation of these arrangements.
During an audit, you have the right to:
- view the auditors’ identification and authority;
- expect the auditors to be professional and courteous;
- involve a professional representative(s) in the process;
- ask how long the audit will take;
- expect your affairs to be treated with strict confidentiality; and
- be given the opportunity to explain the reasons for any irregularities, discrepancies, decisions, etc.
At the end of the audit, you have the right to:
- receive an explanation of the results or findings;
- be given an opportunity to discuss any aspect of the findings with the auditors;
- ask the auditors about the royalty assessment calculated by the audit;
- ask for advice about the objection and appeal process; and
- discuss any aspect of the audit with either the auditor/s or their manager.
What happens after an audit?
At the end of every field audit you will receive written advice of the outcome of the audit and any proposed action that may be taken.
In some cases, the audit officer may meet with you or your representative for an exit interview. This meeting is used to:
- inform the royalty payer of the audit results and ensure your understanding of the audit assessment;
- explain any issues that may have arisen from the audit;
- address any issues you have regarding the appropriate compliance measures or clarify any aspect of the audit procedures that you are unfamiliar with in order to create a more efficient audit process in the future;
- explain the assessment process (for both refund and underpayment of royalty); and
- explain the objection and appeal process and ensure that you understand your rights with regard to the assessment.
What happens if the audit finds an underpayment or overpayment of royalty?
Overpayment of royalty
MRA – where the sum of payments exceeds the assessment of royalty payable, a credit is owed to the royalty payer. The credit may be settled in one of two ways:
- an offset of the amount overpaid against the royalty payer’s future royalty (or royalty equivalent) liability provided the liability arises within two months of the date on which the overpayment was first identified by the Secretary; or
- a refund of the overpayment to the royalty payer.
Petroleum Act and Agreement Acts – while there is no legislative provision regarding an overpayment, the TRO’s current administrative practice is substantially similar to the position described above in respect of the MRA.
Underpayment of royalty
It is in the interests of royalty payers to ensure that a realistic estimate of the provisional payments is made.
MRA – imposes a penalty where the combined six monthly provisional payments are less than 80 per cent of the assessment of royalty payable. Further information on the calculations of the additional royalty to be paid can be found in the MRA Overview | MRA Overview document. The additional royalty may be remitted in full or in part if the royalty payer demonstrates that he/she did not deliberately, recklessly or negligently avoid or underestimate their royalty liability.
The Petroleum Act – interest is chargeable for the late payment of royalties (see below).
Late payment of royalties
MRA – royalties not paid by the due date incur an interest charge. The annual interest rate under the MRA is based on the average monthly yield on ninety day bank accepted bills, published by the Reserve Bank of Australia for the month of May in the financial year immediately preceding the relevant year, plus 7 per cent.
Interest charges apply in all cases. The MRA does not confer discretion on the Secretary to remit interest even in exceptional circumstances.
The Petroleum Act – imposes an interest charge of 0.33 per cent per day on the difference between the provisional payment and the amount assessed by the Commissioner of Territory Revenue. The Petroleum Act only allows interest to be waived in limited circumstances.
Review and appeal process
The process to be followed by mineral royalty payers who wish to dispute an assessment (including a default assessment) is established in Part 11 of the Taxation Administration Act 2007 (NT) (the TAA).
- The MRA process is, as follows:
- First, a royalty payer must lodge a written objection to the assessment within 60 days of the assessment being issued. The objection is determined by a TRO business unit that is organisationally separate to the business unit which issued the royalty assessment;
- secondly, if the royalty payer is dissatisfied with the objection decision, the royalty payer may under section 115 of the TAA, lodge an appeal to either:
- the Taxation and Royalty Appeals Tribunal under Division 4 of Part 11 of the TAA by lodging a notice of appeal with the Registrar of the Local Court; or
- lodge an appeal to the Supreme Court under Division 4 of Part 11 of the TAA by filing a notice of appeal in the Registry of the Supreme Court.
- The process to be followed petroleum producers who wish to dispute an assessment (including an amended assessment) under the Petroleum Act coupled with terms of the petroleum agreement is, as follows:
- In the event that the Petroleum Agreement contains a dispute resolution mechanism - an assessment may be challenged in accordance with the agreed voluntary procedures and processes detailed in the Agreement. Usually the agreed procedures and process are the same or substantially similar to the objection process under the MRA (outlined above); or
- if there is no dispute resolution mechanism included in the Petroleum Agreement, bring an action for judicial review in the Northern Territory Supreme Court.
An appeal must be commenced within 60 days after the date of issue of the objection decision.
The Commissioner of Territory Revenue has issued a non-legally binding Guideline regarding the review and appeal processes/procedures under Part 11 of the TAA (Guideline CG-GEN-003: Objections and Appeals Policy ).
An objection or appeal does not affect the liability to pay an outstanding amount of royalty, penalty royalty or interest by the due date.
Information is collected by the Commissioner of Territory Revenue/Mineral Royalty Secretary or any auditors for the sole purpose of administering and enforcing the MRA or the royalty provisions of the Petroleum Act. The information will be appropriately protected at all times and not be released to any person except insofar as it is required or authorised by law.
Last updated: 02 November 2017
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