$6b tax hike on oil, gas

New royalties for the next decade

CHANGES to taxes on Australia’s big oil and gas mining projects will rake in an extra $6 billion over the next 10 years.

Federal Treasurer Josh Frydenberg announced the changes yesterday in response to the Callaghan Review of the Petroleum Resource Rent Tax, which has seen declining revenues even as Australia’s gas exports have significantly increased.

“These changes will ensure production of our petroleum resources are taxed appropriately while continuing to sup- port the development of our world leading LNG industry,” Mr Frydenberg said.

Australia is set to become the largest exporter of liquid natural gas in the world, but under the original PRRT, the Government was seeing tax revenues decline.

That’s because gas projects take longer to make a profit and have more deductions that can be claimed, so companies could make large losses on paper even as they were exporting lots of gas at high prices.

Australia made $1.12 billion in PRRT revenue in 2017-18, meaning the changes will increase that by another half.

In comparison, Qatar exports a similar amount of gas but collects tens of billions of dollars a year in royalties.

Under the changes, limits will be placed on how much excessive compounding re- sources companies can use on deductions for exploration.

Onshore projects will also be removed from the PRRT, after they were only brought into the scheme in 2012.

No revenue from onshore projects has been collected since 2012, and instead companies have used them to claim deductions against much more profitable offshore operations.

Australia has been going through a gas development boom, but much of the gas has been sent offshore while household energy prices rose.

A review of gas transfer pricing regulations will also look at the rules determining the price of gas in integrated projects. That review is expected to recommend ways for the Government to source more revenue.

“The new uplift rates and removal of onshore projects are expected to raise $6 billion over the next decade, to 2028-29,” Mr Frydenberg said.

The changes take effect from July 1 next year.