Government Let Gas Companies Lead the Way on Changes to Petroleum Tax: Greens

Greens Treasury spokesperson Senator Nick McKim and Senator Dorinda Cox have alleged that the federal government is letting the gas industry lead the way on its proposed changes to the Petroleum Resource Rent Tax (PRRT), accusing the government of simply appeasing the gas industry.

PRRT is a profits-based tax that only taxes profits of petroleum projects above a specified rate of return. It is paid when a petroleum project’s total assessable receipts exceed the total deductible expenditure level set by the federal government.

The federal government changes will now place a cap on tax deductions from July 1, the changes will see LNG companies now only able to offset by deductions 90 percent of their tax-assessable income.

The Albanese government’s changes to the PRRT are expected to bring in $2.4 billion (US$1.6 billion) over the forward estimates.

“Labor’s changes to the PRRT have been designed by the gas industry,” McKim said.

“The government considered two models that would likely have brought in more revenue and discouraged more gas development.”

Meanwhile, Senator Cox called for more transparency around resource policy.

“We all heard Woodside’s Meg O’Neill warn the government about tax ‘overreach’ during her Press Club address, but [Treasurer] Jim Chalmers must have pretty short arms if this is considered overreach,” she said.

“Australian taxpayers expect transparency and integrity in parliament, not the insidiousness of state capture becoming standard practice.

“Considering there’s $284 billion in unclaimed tax deductions that gas giants have accumulated under the PRRT, the Treasurer prying only $3 billion from them is a pitiful drop in the ocean.”

Woodside Energy Chief Executive Meg O’Neill told the National Press Club last month that compounding regulatory interventions, including the possibility of lifting or altering the petroleum resource rent tax, risked future investment, energy security, and future revenue.

“We need confidence in stable regulatory outcomes, or we risk choking our energy industry, impacting both domestic and international supply,” she said.

“This concerns our regional partners, who depend on current Australian gas projects to help them meet their decarbonisation commitments and to keep the lights on in Asian mega-cities.”

“We urge the government, in any changes to the tax framework, to consider the long-term and preserve Australia’s ability to attract the next generation of investment, jobs and energy supply,” she said. “Overreaching now could risk undermining future revenue.”

Review Argued For Earlier Tax Revenue

The changes to PRRT were a key recommendation of the Morrison government’s Treasury Gas Transfer Pricing (GTP) Review (pdf), which argued that the “existing GTP Regulation resulted in a structural undervaluation of gas at the PRRT taxing point for integrated LNG projects, particularly when resource prices are high.”

“Modifying the existing ‘safe harbour’ transfer pricing method—the ‘Residual Pricing Method’ (RPM)—to ensure gas is more fairly priced at the PRRT taxing point for integrated LNG projects would address this under-valuation,” the department said.

The cap will also bring forward tax revenue from LNG projects, most of which are not expected to pay significant amounts of petroleum resource rent tax until the 2030s under current rules.

“These sensible changes see the offshore LNG industry pay more tax sooner,” Chalmers said in a statement on May 7.

“They also deliver a fairer return to the Australian people from the resources they own, provide certainty to industry and ensure Australia remains a reliable trade and investment partner.”

Additionally, he said that the government’s changes were supported by the gas industry.

“The reason why we’ve been able to get an element of agreement from the industry is because we worked with them, we worked closely with them, we consulted them to work out how could we get more revenue for Australians from their resources sooner, to help fund our cost-of-living package and other priorities in a Budget, but in a way which recognises we want to see investment, we want to see supply, and we want to make sure that we honour our international commitments,” he said.

Prime Minister Pushes Back on Greens Party Criticism

However, Prime Minister Anthony Albanese has pushed back on the criticism saying the Greens are not supportive of the resources sector.

“The Greens, of course, are people who don’t support that industry. They want to, they’d be quite happy to shut it down. We want to support that industry,” Albanese said.

“The gas industry is an important industry for Australia, for our national interest. And that’s why we worked with APPEA and with individual companies as well on this modest change, which provides for a bring forward of taxation revenue, which would have been in later years; we’re bringing that forward so it’s available, which is appropriate.”

The prime minister said he would make no apologies for working through the issue with the industry and called upon the Coalition to support the changes.