Australia announces changes to the Petroleum Resource Rent Tax
The Australian government will introduce changes to the Petroleum Resource Rent Tax (PRRT) which would mean the offshore LNG industry pays more tax, treasurer Jim Chalmers said on May 7 in a statement.
He said that the changes “will provide industry and investors policy certainty to allow the sufficient supply of domestic gas, and will ensure Australia remains a reliable international energy supplier and investment partner.”
The changes respond to the Treasury Gas Transfer Pricing (GTP) Review, which Chalmers released, as well as recommendations in the earlier Callaghan Review.
The GTP Review was initiated by the previous government and restarted under the Albanese government, and its release follows extensive consultation since 2019, he said.
The government will act on the treasury’s key recommendation “to achieve a fairer return” from offshore LNG projects by introducing a cap on the use of deductions from July 1, 2023. Specifically, the change will limit the proportion of PRRT assessable income that can be offset by deductions to 90%.
This change will bring forward PRRT revenue from LNG projects. Chalmers said this will ensure a greater return to taxpayers from the offshore LNG industry, while limiting impacts on investment incentives and risks to future supply.
Both the Callaghan Review and the GTP Review noted that aspects of the PRRT are better suited to oil projects than LNG projects. The deductions cap helps address this issue and accounts for the particular circumstances and economics of LNG projects.
“Under the current rules, most LNG projects are not expected to pay any significant amounts of PRRT until the 2030s. The changes announced today address this issue,” Chalmers said.
The government will proceed with eight of 11 recommendations by the GTP Review as well as eight recommendations made by the Callaghan Review that were accepted but not implemented by the previous government. These will be progressed concurrently.
The Australian Petroleum Production & Exploration Association (Appea) in a separate statement said the changes to the PRRT would see more revenue collected earlier to address budget pressures.
Appea CEO Samantha McCulloch said: “The changes aim to get the balance right between the undeniable need for a strong gas sector to support reliable electricity and domestic manufacturing for decades to come and the need for a more sustainable national budget.”
“The announcement today will provide greater certainty for our industry to consider the future investment required to maintain both domestic and regional gas supply security for our customers,” she added.