Reworked Petroleum Resource and Rent Tax raising $4 billion less than first thought
The tax on oil and gas profits is expected to raise $4 billion less than the government forecasted when it first announced a rework of the tax in 2023.
Last year Treasurer Jim Chalmers amended the Petroleum Resource Rent Tax, which applies to offshore petroleum projects including the recently extended North West Shelf, in a measure the government said would raise an additional $2.4 billion over the four years from the 2023 financial year.
Mr Chalmers said the changes would mean “offshore LNG industry pays more tax, sooner”.
In that year’s budget the forecast was that $10.8 billion would be raised over those four years — but the federal budget handed down just days before the election was called reveals the government now expects to raise just $6.3 billion over that same period.
It is also now forecasted to raise less each year than what was expected before the government’s plans to rework the PRRT.
Pocock says PRRT entities ‘taking the piss’
The government’s amendments to the PRRT came after a Morrison-era review of the tax found it needed to be updated, in part because it was designed for oil but liquid-natural gas now dominates.
Mr Chalmers has previously said from the PRRT’s inception in the 1980s to 2024, not a cent of Petroleum Resource Rent Tax had been paid on LNG facilities.
That is because, under the PRRT, tax only becomes payable once projects become cash flow positive, meaning all expenditure has been deducted, and LNG facilities have a large number of up-front costs.
But independent senator David Pocock said the government had picked the weakest option put forward by Treasury, and now that appeared to be failing to deliver.
“This is an absolute rort,” Senator Pocock said.
“In the last parliament Labor looked at PRRT, they had a range of options, and they went with the very weakest one and got that through with the Greens.
“We are now getting less for our gas and still not a single cent of PRRT from offshore LNG, we are the second biggest exporter in the world, it is a total scam on Australians.
“We’re paying international prices for our own gas, and I think one of the shifts in this last election was finally the Coalition came out and said, ‘Well actually we don’t have a gas shortage, we have a gas export problem,’ these companies have been taking the piss.”
Senator Pocock said the PRRT must be revisited.
David Pocock says more than enough gas is available for Australians but it is being sold overseas. (ABC News: Monte Bovill)
The federal government is deepening its investment in gas, having recently approved the extension of the North West Shelf by 40 years to 2070.
A further decision on whether to approve Woodside’s proposal to open up the Browse gas field, which could produce an additional 11.4 million tonnes each year largely for export, also sits under assessment.
The amount raised from the PRRT fluctuates with oil prices, and revenue raised in previous years has closely followed price fluctuations.
The high-water mark for tax paid through the PRRT was just under $2 billion in 2021-22, which the Australian Tax Office said reflected increased profitability due to higher oil prices caused by Russia’s invasion of Ukraine in that year.
But despite the government expecting to raise significantly more than that in the years since, it has not done so and is no longer projecting it will do so.
Mr Chalmers told the ABC’s Radio National Breakfast it was “not unusual” for PRRT revenue projections to “bounce around”.
“It is based on expectations of production but also on the oil price, and the oil price is especially volatile… It was actually revised up in the last budget,” he said, restating his confidence that the tax changes would still see more money collected and sooner than under previous arrangements.
Jim Chalmers had said changes to the PRRT would raise an additional $2.4 billion over four years. (ABC News: Matt Roberts)
Independent MP Zali Steggall said the government has the opportunity to be more ambitious.
“I don’t accept that that was difficult reform to achieve, it was a long overdue loophole that needed to be closed for the sector,” Ms Steggall said.
“It was a bare minimum of what needed to be achieved.
“I think the treasurer had a lot of lobbying from the fossil fuel and gas sector in particular.”
Ms Steggall said Treasury put forward as one option that at least 20 per cent of LNG revenue remain eligible for PRRT, about double the amount the government ultimately adopted.
She said looking at that would be a good starting point for revisiting the PRRT.
“At a time of record profits, I think that would be a much more equitable outcome for the Australian people,” Ms Steggall said.
“You can’t on one hand talk about budget repair and needing to increase revenue but only target individual endeavour … all tax has to be on the table.”
