The Australian government made changes to the Petroleum Resource Rent Tax (PRRT) to increase the tax paid by the offshore LNG industry.
The move, announced by Treasurer Jim Chalmers in a pre-budget release, is expected to increase government revenue by $2.4 billion (Aus.) over the next 4 years.
In making the changes, the government will adopt eight of 11 recommendations from a Treasury Gas Transfer Pricing Review initiated by the former Coalition Government and revived under the current Labor Government, as well as eight recommendations in an earlier (Callaghan) review.
Changes include a move to limit the proportion of PRRT assessable income on LNG projects that can be offset by deductions to 90% from July 1, 2023.
The current legislation enables companies to claim 100% of reimbursable costs before any PRRT becomes liable.
In the past, PRRT, at a rate of 40%, came due only when offshore projects returned a positive cash flow. In practice, that means most LNG projects were not expected to pay any significant amount of PRRT until the 2030s.
Chalmers said that the change will bring forward PRRT revenue from LNG projects and ensure a greater return to taxpayers from the offshore LNG industry, while limiting impacts on investment incentives and risks to future supply.
The changes will not affect the Woodside Energy-operated North West Shelf project which operates under a separate royalty regime.
Both the Callaghan Review and the GTP Review noted that aspects of the PRRT are better suited to oil projects than LNG projects. The deductions cap will help address the issue and account for the particular circumstances and economics of LNG projects, the Treasurer said.
Chalmers said the government will consult on final design and implementation details for the deductions cap and on the draft GTP rules later this year. Consultation on other policy changes (recommendations from the Callaghan Review and antiavoidance rules) will occur in early 2024.
