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Govt reveals PRRT changes

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Photo by Bloomberg

8th May 2023

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

     

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PERTH (miningweekly.com) – Federal Treasurer Jim Chalmers has announced changes to the Petroleum Resource Rent Tax (PRRT), saying it will deliver a fairer return to the Australian community from their natural resources.

These changes will mean the offshore liquefied natural gas (LNG) industry pays more tax, sooner, 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.

Chalmers said in a statement that the government would act on 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, and will ensure a greater return to taxpayers from the offshore LNG industry, while limiting impacts on investment incentives and risks to future supply.

The changes respond to the Treasury Gas Transfer Pricing (GTP) Review as well as recommendations in the earlier Callaghan Review.

The GTP Review highlighted other shortcomings of the PRRT as it applied to the current LNG industry and identified areas where it could be improved and updated, Callahan said.

He noted that the government would 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.

This package, which includes integrity reforms, is expected to increase tax receipts by A$2.4-billion over the forward estimates.

The government will consult on final design and implementation details for the deductions cap and on the draft GTP rules later this year, and consultation on other policy changes will occur in early 2024.

The Australian Petroleum Production & Exploration Association (Appea) said the changes to the PRRT would see more revenue collected earlier to address Budget pressures.

“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,” Appea CEO Samantha McCulloch said.

“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.

“Our investments support tens of thousands of Australian workers and deliver substantial economic benefits to communities across Australia.

“PRRT revenues are already at their highest level ever, forecast to deliver revenue of more than A$11-billion over the forward estimates. The PRRT changes are forecast to deliver an additional A$2.4-billion over the forward estimates at current forecast commodity prices.”

McCulloch said this outcome also closed out the long-running Callaghan Review, informed by public consultation, and would ensure the ongoing efficiency and administration of the PRRT regime.

She said that a bipartisan approach would be needed to provide certainty for future investment and Appea called on the government to work constructively and cooperatively with the opposition.

“Australia has also been a reliable energy-producing nation for energy-consuming countries in the Asia region for more than half a century,” McCulloch said.

“We cannot and must not walk away from this role, which is the foundation of our strategic ties throughout the Asia Pacific. It has also been the foundation of decades of prosperity for Australians.

“Gas is going to be a critical part of the global energy mix for decades. If Australia does not invest in new gas supplies, the slack will be taken up by others, costing Australian jobs and prosperity. The US has recognised the danger of this and is growing both its gas industry and its carbon capture and storage industry.”

Edited by Creamer Media Reporter

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