Australia’s
Gas Tax Story

Petroleum resources are administered by Australian governments on behalf of the public. Companies receive exploration and production rights under legislation; owning a company or an LNG plant does not mean the company originally owned the gas underground.

The public-policy question is what Australians receive when a finite resource is depleted and sold.

The industry can legitimately count company tax, payroll tax and other payments in its economic contribution. But company tax is the ordinary tax expected of profitable businesses. It is not, by itself, a specific payment for acquiring a publicly owned raw material.

Royalties, excise and PRRT answer a different question: what additional return does the public receive for extraction of the petroleum resource?

PRRT is not charged directly on export sales. It applies at 40% to a project’s taxable PRRT profit after eligible deductions. Large development expenditure, transferred exploration deductions, starting bases and uplifted unused deductions can postpone taxable profit.

The latest actual result in the chart below is $1.420 billion for 2024–25. The $1.4 billion figure for 2025–26 is a Budget estimate.

Gas is discovered, appraised, developed and transported to a processing facility. Water and impurities are removed, the gas is chilled into LNG, loaded onto ships and sold under long-term contracts or into spot markets.

Japan, China, Korea and other customers may sign contracts lasting decades. Export revenue must cover production, transport, liquefaction, financing and marketing before accounting profit or PRRT profit is calculated.

Uplift is annual growth applied to specified unused PRRT deductions. It is not a refundable tax credit and the government does not hand the company cash. Instead, the available deduction becomes larger while carried forward.

Because the growth compounds, old expenditure can become substantially larger before it is used. Rates and time limits differ by expenditure class and when the spending occurred.

Yes. Company accounting profit and PRRT taxable profit are calculated differently. A company can report profit to shareholders while a petroleum project still has enough PRRT deductions to eliminate its taxable PRRT profit.

That does not automatically prove avoidance or illegality. It demonstrates why the deduction rules determine when the 40% headline rate actually applies.

For covered offshore LNG projects, the cap generally limits deductions used in a year to 90% of assessable PRRT receipts. At least 10% can therefore remain exposed to the 40% PRRT rate—a possible floor of roughly 4% of assessable receipts.

The unused deductions are delayed rather than deleted. They remain available in later years under the statutory rules. The cap is a real reform, but it does not extinguish the accumulated pool.

Multinational LNG groups may use related extraction, processing, marketing and sales entities in different jurisdictions, including Singapore. These arrangements are not automatically unlawful, and Australian transfer-pricing rules require related-party dealings to be supportable.

The documented problem is more specific: Treasury found that the former PRRT gas-transfer-pricing formula structurally undervalued gas at the Australian taxing point, particularly when prices were high. That could allocate too little value to the upstream Australian resource before later processing and marketing profits were recognised.

Options include stopping uplift after first production, limiting uplift to inflation or the bond rate, placing a time limit on uplift, lowering the deductions cap, introducing a production royalty or export levy, tightening related-party pricing, or creating direct public ownership.

Each option changes investment risk and government revenue differently. The political choice is how much risk the public should absorb and how long it should wait for payment.