Chapter 7 of 7
How to fix it
A menu of reform options, each with what it might raise and the case against.
$5.6bPBO estimate for an 80% cap, to 2033–34
The proposal getting the attention is a 25% tax on the value of gas exports. It comes first below. The other five options repair the PRRT itself; most could work alongside an export tax, and several could start sooner.
The proposal on the table
Option 1 of 6
A 25% gas export tax
ProposalA flat tax of 25% on the value of LNG exports, paid from the first cargo whatever a project's costs or deductions. The Australia Institute proposes it in place of the PRRT, with no deductions or uplift.
About $17b a year Australia Institute estimate, the figure used by Senator David Pocock and the ourgas.com.au campaign. Some earlier reports quoted $12.5b a year. Not costed by the Parliamentary Budget Office as far as we have found.
Case for
Simple, hard to avoid, and pays from the first cargo. No deductions, no uplift, no transfer-pricing arguments: Australians share the value of every export, every year.
Case against
It taxes revenue rather than profit, so it bites hardest when prices fall and can make marginal projects unviable. Industry argues it would deter investment and break existing contracts. If it replaces the PRRT, the profit-based tax goes too; if it sits alongside, the PRRT's own problems remain.
Option 2 of 6
Lower the deductions cap to 80% or below
ProposalThe 2023 cap lets big LNG projects use deductions against at most 90% of their PRRT receipts each year. An 80% cap doubles the minimum taxable share from 10% to 20% of receipts, so the minimum PRRT rises from 4% to 8% of receipts. A 70% cap would make it 12%.
About $5.6b to 2033–34 Parliamentary Budget Office costing, August 2023, requested by the Australian Greens. Assumed an oil price of about US$84 a barrel; the result moves with oil and LNG prices.
Case for
Builds on a mechanism already in law and already working: the 90% cap forced about $552m of PRRT in 2024–25. Simple to legislate and to administer.
Case against
Industry argues it changes the terms projects were approved under and brings tax forward rather than raising new revenue over a project's life. Deductions are deferred, not cancelled.
Option 3 of 6
End uplift once a project starts producing
ProposalUnused deductions currently grow every year by uplift (the long-term bond rate plus 5 percentage points for general expenditure). This option keeps uplift during construction but stops it once a project produces, so the deduction pool stops snowballing while a project is earning.
Not yet costed No published costing found yet. Ask the PBO for one before quoting a figure.
Case for
Uplift exists to compensate for waiting. Once a project is selling gas, the case for growing its deductions faster than inflation is weak. It targets the mechanism that let the pool reach $336b at its peak.
Case against
Industry argues uplift is part of the risk-reward balance that justified investment, and that changing it for existing projects hurts Australia's reputation for stable tax settings.
Option 4 of 6
Fairer gas transfer pricing
Under reviewFor integrated LNG projects, PRRT applies to gas at a notional price before liquefaction. The rules set that price by a formula that can push profit into the downstream plant, outside PRRT. This option tightens the formula.
Not yet costed No published costing found yet. Ask the PBO for one before quoting a figure. Treasury's 2023 Gas Transfer Pricing Review considered these rules.
Case for
Puts the tax point closer to where the value is really made. Addresses a known weakness without changing the PRRT rate.
Case against
Technically complex, and industry argues the current formula fairly rewards investment in the liquefaction plant.
Option 5 of 6
Publish each project’s PRRT every year
ProposalThe ATO would publish, for each petroleum project, the PRRT paid and the carried-forward deduction balance each year. At present the public sees totals for the whole industry and some entity-level figures, not project-by-project balances.
None directly A transparency measure. Its value is that voters and parliament can see which projects pay and when they are likely to start.
Case for
Australians can't judge a tax they can't see. Costs little and helps every other reform be judged on evidence.
Case against
Companies argue project-level figures are commercially sensitive.
Option 6 of 6
An offshore royalty
ProposalOnshore and state-water projects pay state royalties. Most offshore projects (the North West Shelf is the main exception) pay no royalty, only PRRT and company tax, and PRRT pays nothing until costs and uplift are recovered. A royalty on the value of production would pay from the first cargo.
Not yet costed No published costing found yet. Ask the PBO for one before quoting a figure.
Case for
Guarantees a return to the owners of the resource every year, whatever a project's deductions.
Case against
A royalty taxes revenue, not profit, so it can make marginal projects unviable. Avoiding that was the reason PRRT replaced royalties for most offshore projects.
What you can do
Ask your MP four questions#
It takes two minutes. Questions demand a reply, and every reply puts the PRRT back on the agenda in Canberra.
Take action