Royalty audit information

Royalty payers (including major, national or junior companies and individual or small-scale miners) may be chosen for an audit based on any of the following:

• a special audit project (to target specific problems or issues in legislation)
• 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
• referral from another royalty or tax audit.

Royalty payers whose business is predominantly based outside the NT but conducts mining or petroleum production in the NT, are also audited.

In most cases auditors will:

• write, telephone or visit to let you know that an audit will be conducted
• explain the process and 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
  • arranging a time and place to interview the production unit’s representative/s
• confirm arrangements in writing.

All audits are conducted by TRO officers authorised under the relevant legislation to conduct an audit.

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.

TRO endeavours to carry out an audit with minimal impact and disruption to your business activities. Full cooperation with TRO will lessen any potential inconvenience to you or your business. To minimise delays you should ensure:

• records the auditor has requested are ready for examination
• your representative has knowledge of and access to the appropriate financial documents relating to the audit as well as the calculation of royalty.

What auditors examine during an audit

Auditors are primarily verifying that you:

• calculated the correct amount of royalties on:
  • in the case of the Mineral Royalties Act 2024 (MRA24), the extraction of a mineral from a mining operation
  • in the case of the Mineral Royalty Act 1982 (MRA82), the extraction and removal of a saleable mineral commodity from a production unit (RG-MRA-002: Production Unit PDF (181.4 KB)) in a royalty year
  • in the case of the Petroleum Royalty Act 2023 (PRA), the recovery of petroleum at the wellhead
• have kept and maintained proper books of account in accordance with the generally accepted accounting principles and specified accounting basis for royalty purposes
• have documents to fully support the value of a saleable mineral commodity or petroleum and eligible expenditure
• declared and paid the correct provisional and residual royalties
• can support any other relevant matters that affect the calculation and payment of royalties.

Record-keeping requirements

Royalty payers are required to maintain proper and accurate records relating to minerals/petroleum recovered and that 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/petroleum recovered must be kept (in English) for a period of 7 years after the information is created by or comes into the possession or custody of the royalty payer.

Audit period

Generally, an audit covers up to a 5-year period, although can change according to individual circumstances. However, there is no time limit on how far back you may be audited if you intentionally or recklessly evade or avoid paying 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
• your cooperation.

We will provide an estimate of the timeframe to complete the audit once the audit commences. If there is a need for an extension, this will be discussed with you.

In general, auditors have the ability to:

• access 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
• require a company representative to produce records, answer questions and provide information.

The auditor is permitted to carry out these actions to confirm you have met your obligations as a royalty payer. It is important to note this authority is carried out with a strict commercial-in-confidence policy and all your records will be protected accordingly.

Your obligations

During the audit, you are obliged 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
• provide prompt, full and free access to all relevant information, records, documents, data and systems as required by the auditor.

Your rights

TRO will conduct audits with respect to your rights. 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
• 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
• be given the opportunity to explain the reasons for any irregularities, discrepancies or decisions.

At the end of the audit, you have the right to:

• receive an explanation of the results or findings
• 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
• discuss any aspect of the audit with either the auditors or their manager.

At the end of the audit, you will receive written advice of the outcome and any proposed action to be taken.

In some cases, the auditor 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 understanding of the audit assessment
• explain any issues that may have arisen from the audit
• address any issues regarding appropriate compliance measures or clarify audit procedures for more efficient future audit processes
• explain the assessment process (for both refund and underpayment of royalty)
• explain the objection and appeal process and ensure you understand your rights regarding the assessment.

Overpayment of royalty

Where payments exceed the assessment of royalty payable, a credit is owed to the royalty payer. The credit may be settled with a refund of the overpayment to the royalty payer or by applying the credit to a future liability.

Mineral Royalty Act 2024 and Petroleum Royalty Act 2023 – the royalty payer may elect to offset the overpayment against a future liability.

Mineral Royalty Act 1982 – the Secretary may offset the amount overpaid against the royalty payer’s future royalty (or royalty equivalent) liability provided the liability arises within 2 months of the date the overpayment was first identified by the Secretary.

Underpayment of royalty

It is in the interests of royalty payers to ensure a realistic estimate of the provisional/instalment payment is made.

Mineral Royalty Act 2024 and Petroleum Royalty Act 2023 – interest and penalty tax are chargeable for the late payment of royalties (see below).

Mineral Royalty Act 1982 – imposes a penalty where the combined 6-monthly provisional payments are less than 80% of the assessment of royalty payable. Further information on the calculations of the additional royalty to be paid can be found in the Mineral Royalty Act 1982 overview document. The additional royalty may be remitted in full or part if the royalty payer demonstrates they did not deliberately, recklessly or negligently avoid or underestimate their royalty liability.

Late payment of royalties

Mineral Royalty Act 1982 – royalties not paid by the due date incur an interest charge. The annual interest rate under the Act is based on the average monthly yield on 90-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%.

Interest charges apply in all cases. The Mineral Royalty Act 1982 does not confer discretion on the Secretary to remit interest even in exceptional circumstances.

Mineral Royalty Act 2024 and Petroleum Royalty Act 2023 – the Taxation Administration Act 2007 applies, which imposes interest and penalty tax on late payments and underpayments (Commissioner's guideline: Interest and penalty tax DOCX (740.4 KB)).

To dispute an assessment, including a default assessment:

• lodge a written objection to the assessment within 60 days of the assessment being issued. The objection is determined by a different TRO business unit than the one that issued the royalty assessment
• if you are dissatisfied with the objection decision, lodge an appeal to either:
  • the NT Civil and Administrative Tribunal under Division 4 of Part 11 of the TAA by lodging a notice of appeal with the Registrar of the Local Court
  • the Supreme Court under Division 5 of Part 11 of the TAA by filing a notice of appeal in the Registry of the Supreme Court.

An appeal must commence within 60 days of the date of the objection decision.

The Commissioner of Territory Revenue has issued a non-legally binding guideline regarding the review and appeal process and procedures under Part 11 of the TAA (Objections and appeals policy DOCX (707.5 KB)).

An objection or appeal does not affect the liability to pay an outstanding amount of royalty, penalty royalty or interest by the due date.