Petroleum Resource Rent Tax Reforms
Cook AP
Author
The PRRT reforms close loopholes that allowed offshore gas giants to avoid paying tax, delivering an additional $2.4 billion to fund essential services while ensuring Australians receive a fairer share from the exploitation of their natural resources.
The Albanese Government's reforms to the PRRT address longstanding issues that have allowed offshore gas companies to pay minimal tax despite extracting a ton of value from Australia's natural resources. Implemented from July 2023, the centrepiece of the reform is a cap on deductions, limiting the proportion of PRRT assessable income that can be offset by deductions to 90 percent. This addresses a key design flaw in the PRRT system that was better suited to oil projects than LNG projects and meant most LNG projects were not expected to pay significant amounts of PRRT until the 2030s.
The changes respond to recommendations from both the Treasury Gas Transfer Pricing Review and the earlier Callaghan Review, following extensive consultation since 2019. The reforms include modernising the rules to cover new business models such as tolling arrangements and increasing the integrity of the rules. Beyond the deductions cap, the government is implementing 8 of 11 recommendations from the Gas Transfer Pricing Review and 8 recommendations from the Callaghan Review that were accepted but not implemented by the previous government.
Key points:
PRRT reforms will increase tax receipts by $2.4 billion over the forward estimates
Limits deductions to 90% of assessable income, bringing forward PRRT revenue
Addresses tax design flaws that allowed LNG projects to minimise tax payments
Modernises rules to cover new business models and increases integrity
Ensures Australians receive a fairer return from their natural resources while maintaining investment certainty
[1] https://jimchalmers.org/latest-news/media-releases/changes-to-the-petroleum-resource-rent-tax/
[2] https://www.legislation.gov.au/F2024L00964/latest/text
[3] https://www.austaxpolicy.com/wp-content/uploads/2023/05/tf27_upload.pdf
[4] https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/media-releases/implementing-reforms-petroleum-resource-rent-tax
[5] https://www.theguardian.com/australia-news/2023/apr/15/changes-to-petroleum-resource-rent-tax-estimated-to-net-australian-government-945bn