Treasurer Jim Chalmers has signalled the federal government will tighten the Petroleum Resource Rent Tax to bring in more revenue after Treasury completed a major review.
Treasurer Jim Chalmers has signalled the federal government will tighten the Petroleum Resource Rent Tax to bring in more revenue after Treasury completed a major review.
He said today the levy was not “up to scratch”.
“We've said for some time now that we want to make sure that the PRRT arrangements are up to scratch,” Dr Chalmers told a media conference.
“Clearly my predecessors had concerns that they were not and I have some concerns that they are not.
“The Australian community, I think, shares those concerns.”
The PRRT has typically raised just more than $1 billion per year but that jumped to about $1.6 billion last financial year and is projected to increase to $2.5 billion in the current financial year.
That reflects the soaring profits of oil and gas producers, who are benefiting from a surge in petroleum prices.
The levy has long been targeted as an opportunity for the federal government to raise more income from oil and gas producers.
Just last week, the left-leaning Grattan Institute proposed two tax changes.
It proposed a shift to ‘netback’ pricing of gas to raise at least $3 billion and introducing a 10 per cent Commonwealth royalty on offshore gas for a further $4 billion.
The Grattan report said that, under the current residual pricing method, exploration costs are excluded from the upstream price, capital costs were subject to a generous allowance, and then the subsequent estimate of ‘profit’ was arbitrarily halved between upstream and downstream, further lowering the upstream profits liable for PRRT.
Any changes would affect big LNG producers such as Woodside Energy, Chevron, Shell, Santos and ConocoPhillips.
The 40 per cent PRRT is levied on offshore oil and gas projects once they become cash-flow positive.
It has been argued that the PRRT rules are too generous because they allow producers to deduct project building costs and operating costs upfront.
Dr Chalmers noted today that the PRRT review commenced under his predecessors, Scott Morrison and Josh Frydenberg, before being paused during COVID.
He said it had included substantial consultation with industry.
Dr Chalmers declined to say if any changes would be included in next month’s budget.
“I'll engage in a consultative way with my colleagues and we will come to a view on it at some point,” he said.
“I'm not prepared to say yet whether that will be before or after the budget, we haven't decided that to be frank but we are working through it right now in a methodical way, considering the recommendations and suggestions and proposals that the Treasury have put to me.”
