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Value allocation: Upstream and downstream segments
Published on 01 Aug 16 by "TAXATION IN AUSTRALIA" JOURNAL ARTICLE
Value allocation is required in some tax and duty assessment circumstances in respect of integrated mining or gas to liquid projects. For those projects, the value allocation exercise typically involves an intermediate point dividing, in some way, the supply chain between the upstream segment and the downstream segment. What needs to be determined at such intermediate point for tax and duty purposes is usually the notional market value of a relevant mineral or feedstock gas and/or a notional arm’s length charge for access to the downstream infrastructure assets.
To illustrate how this valuation exercise is practically assessed, this article discusses the application of what is referred to as the netback method, which highlights the key principles underpinning the determination of an arm’s length access charge and the market value of a commodity at an intermediate point of the supply chain for an integrated mining project.
Author profile
Dr Hung Chu
Hung is a Director of Lonergan Edwards & Associates Limited. Dr Hung Chu completed his master degree in Finance and Banking (with Merit among the top 2% of graduates) from the University of Sydney and his doctoral degree in Finance from the University of Technology, Sydney (graduated on Chancellor's List for Exceptional Scholarly Achievement in PhD research). He has 12 years of experience in the provision of valuation services and numerous technical papers published in academic and practitioners' journals. - Current at 11 July 2019
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