Changes to the Petroleum Resource Rent Tax (PRRT) announced by the Federal Government last week would see more revenue collected earlier to address Budget pressures, according to the Australian Petroleum Production & Exploration Association (APPEA).
Cap deductions will see the PRRT collect an additional $2.4 billion over four years.
APPEA Chief Executive 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 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.
“PRRT revenues are already at their highest level ever, forecast to deliver revenue of more than $11 billion over the forward estimates.
“The PRRT changes are forecast to deliver an additional $2.4 billion over the forward estimates at current forecast commodity prices.”
Monash University business law and taxation expert Dr Diane Kraal, who was quoted numerous times in the Treasury’s Petroleum Resource Rent Tax: Review of Gas Transfer Pricing Arrangements Final Report, said the Treasurer’s pre-Budget media release about offshore LNG projects and the introduction of a 90 per cent cap on the use of deductions from 1 July 2023 was welcome but did not go far enough.
Dr Kraal explained: ““The anticipated $2.4 billion of extra PRRT revenue is insufficient and the budget’s proposed change to the PRRT will hardly make any difference to tax collections.
“The Treasurer’s proposed PRRT changes will make the PRRT more complex, for very little extra tax revenue.
“The PRRT should be repealed and a royalty system should be re-introduced, as is the case in Queensland.
“The gas industry needs to pay its fair share of PRRT to fix its carbon emissions – currently 9.8 per cent of carbon emissions in Australia are mainly from gas production.
“According to the Treasurer, the proposed changes will limit the proportion of PRRT assessable income that can be offset by deductions and ‘increase tax receipts by $2.4 billion over the forward estimates’.
“The Treasurer’s anticipated extra revenue from the PRRT changes will not even come close to covering the build-up of deductions.
“For instance, the latest ATO statistics for 2019-20 reveal ‘carried forward deductions’ for the PRRT are already at $282 billion.
“Other ATO statistics for 2020-21 show that, apart from the producers of gas from Bass Strait in Victoria, no other large offshore producer of gas is paying any significant PRRT, if at all.”
