The Albanese government, especially Treasurer Jim Chalmers, has made much of allegedly toughening the Petroleum Resource Rent Tax (PRRT) on LNG projects since the change was revealed pre-budget last weekend.
Under the changes to the tax, the Albanese government accepted Treasury’s recommendation to limit the proportion of PRRT assessable income that can be offset by deductions to 90%.
The change starts July 1 this year and will effectively bring forward the date that liquefied natural gas projects are expected to pay PRRT. Under current rules, they are not expected to pay any significant amount until the 2030s.
Now the government gets money earlier than had been expected — which is being touted as a toughening and a crackdown on big gas. At least four existing LNG projects will start paying PRRT in July — Chevron’s Gorgon and Wheatstone projects and Woodside Energy’s Pluto venture in Western Australia, and Inpex Corporation’s Ichthys LNG venture in Darwin (Inpex is Japan’s biggest oil and gas producer).
The big spin was how much more money the reworked PRRT would bring in compared to previous years — $2.35 billion (rounded up in all the media reports to $2.4 billion) to a maximum of $2.850 billion in 2025-26 and then falling to $2.5 billion in 2026-27. Back in 2008-09 the PRRT rules were changed and the tax was forecast to take in $2.1 billion that year. But the latest toughening only gets an extra $250 million (in unadjusted dollars) 15 years later and that maximum of $2.86 billion in 25-26 is actually a little less when the $2.1 billion is adjusted for inflation and becomes $2.86 billion.
There is a simpler way of looking at what in effect is just a minor accounting fudge. Back in 2008-09 the value of Australia’s LNG exports was $10 billion. This year the latest resources and energy quarterly from the federal Department of Industry, released in late March, estimates the value will reach $91 billion by June 30 this year. That’s nine times the figure 15 years ago — and the claimed tax take hasn’t changed — or at best will be a whole $250 million more.
$2.35 billion is a much smaller proportion of $91 billion (2.5%) than $2.1 billion was of $10.086 billion back in 2008-09 (21%). In 2009-10 exports totalled 18.7 million tonnes. The latest resource quarterly says they totalled 83 million tonnes in 2021-22 and will end up around 88 million tonnes by June 30.
What this means is that the revenue from the reworked tax is lower in real terms than back in 2008-09 and a much smaller share of that vast increase in LNG production and export volumes than 15 years ago.
More a PR fiddle than a fudge when you think about it.
