Treasurer Jim Chalmers quashes push by Greens, crossbench senators to double tax take on offshore gas

The Federal Government has rejected a push by crossbench senators to double revenue raised via the overhauled petroleum resources rent tax, which will affect a number of offshore projects in WA. Treasurer Jim Chalmers said the Government would not bow to pressure from an alliance of the Greens and independent senators David Pocock, Jacqui Lambie and Tammy Tyrrell to trim the cap on how much income companies can offset through deductions from 90 to 80 per cent. Changes to the PRRT were announced earlier this year with tax deductions on income generated from offshore projects capped at 90 per cent. The reforms are expected to raise an additional $2.4 billion in tax revenue over the next four years. Dr Chalmers said the Government had chosen the recommendations released by Treasury, which were described as resulting from a “methodical and considered process”. “We intend to legislate the change that we announced in the Budget,” Dr Chalmers said. “We chose the option that gives the biggest return to Australians sooner out of the three options that we were presented.” The proposal by the Greens and crossbench senators would have hit gas companies with an addition $2.6b tax hit and impacted projects such as Woodside’s Pluto and Chevron’s Gorgon and Wheatstone facilities. Shell’s Prelude joint venture will also be subjected to the proposed changes, as would Santos’ offshore projects. The oil and gas industry has reluctantly accepted the changes while warning ongoing interventions in the gas sector — such as price caps — would risk future investment in Australia. Labor’s intervention has already sparked concern from a number of nations, like Japan and South Korea, which greatly rely on Australian LNG as their main energy source. Dr Chalmers said gas remained crucial to the country’s transition to net zero and would assist in the conversion to “cleaner and cheaper” energy. “We need to ensure that we can supply gas to our people and we can honour our international obligations,” he said. “We have to recognise as well that, for the time being, gas will have a role to play in that, and so what we’ve been able to do here is to get more tax from offshore LNG sooner to help fund our priorities, whether it’s bulk billing in Medicare or cost-of-living help for Australians doing it tough.” The PRRT, which applies to offshore projects when they become cash flow positive, was designed to acknowledge the huge capital investment needed to kickstart new facilities. Changes to the PRRT were first looked at by the previous Government with the existing model having been criticised for providing little tax revenue. It’s understood the Coalition will vote in favour of Labor’s changes if the Government commits to streamlining project approval processes.