Reworked Petroleum Resource Rent Tax Raises $4 Billion Less Than First Thought

The federal government’s major overhaul of the Petroleum Resource Rent Tax (PRRT) is now forecast to generate $4 billion less revenue than originally projected when the reforms were announced two years ago. Treasurer Jim Chalmers introduced amendments to the PRRT in 2023 with the explicit goal of ensuring that offshore liquefied natural gas (LNG) projects “pay more tax, sooner.” Yet the recently released federal budget revisions paint a very different picture: offshore petroleum projects are now expected to contribute just over half the revenue initially forecast. A growing chorus of independent members of parliament (MPs) and industry commentators are calling for a fresh review of the PRRT to recapture lost revenue and close loopholes that appear to have undermined the original intent of the reforms.

Background: PRRT Prior to 2023 Reforms
When the PRRT was introduced in 1987, it was designed to capture super‐profits on large offshore oil and gas projects operating in Australian waters. Rather than taxing companies on a fixed percentage of their revenue, the rent tax calculates when a project becomes “cash flow positive” by deducting all allowable project expenditures—exploration, development, interest, and depreciation—until the accumulated costs are fully recovered. Only then does a 40 percent tax apply to the project’s taxable profit.

In practice, LNG facilities incur enormous upfront costs—often tens of billions of dollars—before they ever produce a saleable product. For decades, many major offshore gas fields remained in a position where total deductible expenses exceeded taxable revenue, meaning that no PRRT was triggered. A protracted review of the PRRT under the Morrison government (2018–2022) concluded that the tax framework needed updating, particularly because the original legislation had been drafted with oil production in mind rather than the capital‐intensive LNG projects that dominate the modern market.

The 2023 PRRT Reforms
In last year’s federal budget, Treasurer Chalmers announced a suite of PRRT amendments aimed at ensuring greater immediate revenue capture from Australia’s expanding LNG sector. Key elements of the reform included:

• Reducing Unapplied Deductions: Introducing a mechanism to claw back some of the deductions that LNG projects carried forward, thereby accelerating the point at which a project becomes cash‐flow positive.
• Crude Oil and Condensate Threshold Changes: Adjusting the thresholds for different classes of projects so that condensate production no longer benefits from the same low‐tax treatment as crude oil.
• Extended Look‐Back Rules: Implementing rules to limit the ability of new projects to “defer” tax indefinitely by carrying forward old losses from unrelated ventures.

The government touted these changes as delivering an additional $2.4 billion in PRRT receipts over the four years spanning 2023–24 to 2026–27. At the time, the Treasury’s forward estimates pointed to $10.8 billion in total PRRT revenue being collected across those same four years—a substantial uplift over historical norms.

Revised Forecasts and the $4 Billion Shortfall
Just days before the 2025 federal election was called, the government released updated budget figures that drastically revised its PRRT projections downward. Instead of the $10.8 billion envisaged in the 2023 budget, the latest estimate trimmed the four‐year total to $6.3 billion—$4.5 billion less than first anticipated.

Moreover, in nearly every financial year covered by the reform period, the PRRT haul is now predicted to fall below the amount originally forecast for the legacy system, prior to any changes. In other words, even with the reform in place, LNG and other offshore projects are now expected to pay less PRRT each year than they would have if the original pre‐2023 rules had continued.

Why the Gap Emerged
Multiple factors have contributed to the smaller‐than‐expected PRRT take:

1. Commodity Price Volatility: PRRT windfalls correlate strongly with global oil and gas prices. While 2022 saw record high prices following Russia’s invasion of Ukraine—pushing the PRRT take to nearly $2 billion for that year—prices have since softened. Weaker LNG contract prices and a cooling global energy market have caused downstream revenue shortfalls.
2. High Carry‐Forward Deductions: Despite tightening the look‐back rules, many existing offshore facilities still possess large pools of carried‐forward deductions. These carry‐forward amounts continue to offset taxable profits more quickly than anticipated, deferring PRRT obligations even under the new rules.
3. Project Delays and Cost Overruns: Several large‐scale LNG expansions, such as Woodside’s Browse development and Santos’ Barossa project, have encountered both delays and cost overruns. Unexpected capital expenditures reduce taxable profits and push back the date at which a facility becomes PRRT‐eligible.
4. Design Weaknesses in the Reform Package: Critics argue that the government’s chosen approach was the “weakest” of the options presented by Treasury. By scratching away only a fraction of the carried‐forward losses and retaining a broad array of deductions, the reforms did not significantly shrink the window during which LNG projects could remain in loss territory.

Political Reactions
In the wake of the downward revision, a number of independent MPs have pressed for an immediate review of the PRRT to recoup lost revenue and ensure greater accountability from the offshore petroleum sector.

Senator David Pocock (Independent, ACT)
“It is an absolute rort,” Senator David Pocock told reporters. “Last parliament, Labor chose the weakest option when reforming the PRRT, and now we are getting less money for our own gas. We’re one of the world’s biggest LNG exporters yet we’ve collected not a single cent of PRRT from our offshore facilities. These companies have been taking the piss.”

Senator Pocock highlighted that Australia is effectively paying international market prices for domestically‐produced gas, even as the largest offshore producers enjoy near‐zero PRRT obligations. “Australia’s gas is disappearing overseas, and ordinary Australians are being short‐changed,” he added. “We need to revisit the PRRT now, not later.”

MP Zali Steggall (Independent, Warringah)
Fellow independent MP Zali Steggall similarly called for a more ambitious approach. “The PRRT overhaul was a long‐overdue fix, but it only scratched the surface. Treasury proposed options that would have required at least 20 percent of LNG revenue to be PRRT‐eligible—roughly double what Labor adopted. At a time of record‐high profits, it’s iniquitous that the largest energy projects pay so little tax.”

Steggall urged the government to leverage the upcoming budget process and renegotiate the carve‐outs for LNG companies, relishing the chance to extract a larger share of resource rents. “If we truly want budget repair and fair contributions, we cannot solely target individual endeavour; all taxes must be on the table—especially on these sectors enjoying an enormous windfall.”

Treasurer Jim Chalmers (Labor, Rankin)
To date, Treasurer Jim Chalmers has not publicly responded to the updated PRRT forecasts. However, government sources indicate that Chalmers will continue to defend last term’s PRRT changes as “vital steps” in long‐term tax reform. In recent speeches, Chalmers emphasized that PRRT receipts are inherently volatile, driven by global energy markets and that the reforms “locked in a sustainable revenue base” for the future, despite short‐term fluctuations.

Industry Perspective
Offshore oil and gas producers have welcomed the PRRT amendments as a necessary concession to maintain social licence. A spokesperson for the North West Shelf Project—Australia’s largest LNG development, now extended to 2070—observed, “The amended PRRT provides us with greater certainty around tax obligations. While we believe all resource projects should be taxed fairly, Australia must remain a competitive destination for capital investment.”

Woodside Energy, the operator behind Browse and other gas fields, released a statement noting that “the PRRT changes were already the most stringent in a generation.” The company characterized the $6.3 billion forecast as “in line with long‐term commodity price cycles” and reiterated that any sudden spike in global gas prices would feed directly into higher PRRT receipts.

Conversely, some analysts warn that the current headroom for new offshore projects is much narrower following the PRRT reforms. “Expanding Browse or sanctioning new Victorian offshore basins will require careful cost‐benefit analysis,” said Dr. Amelia Rosario, energy economist at the Grattan Institute. “Investors view PRRT as a material risk—any further tightening of the tax regime could deter future offshore development and harm Australia’s export profile.”

Revenue Fluctuations and Historical Context
Since its inception, the PRRT has never generated continuous annual revenue. A‐series offshore oil projects paid small amounts in the late 1980s and early 1990s before entering extended loss phases. From 2000–2010, most legacy fields hovered below the PRRT threshold, with minimal revenue collected. It was only after LNG mega‐projects—particularly Gorgon, Wheatstone, and Ichthys—came online in the 2010s that PRRT receipts began to climb.

The policy inflection point arrived in 2021–22, when elevated oil prices (exceeding US $100 per barrel) in the wake of Russia’s war in Ukraine propelled the PRRT take to almost $2 billion. Yet, as clearly evidenced by the recent downgrade, any gap between projected and actual revenue largely emanates from rapid changes in commodity markets and ongoing, substantial expense write-offs from LNG operators.

Upcoming Project Approvals and Their Implications
Two major decisions loom that will directly influence future PRRT collections:

1. North West Shelf Extension to 2070
   Last year, the federal government granted a 40-year extension for the North West Shelf Project, currently operated by Woodside. The field has already produced over 20 trillion cubic feet of gas since 1984 and underpins Australia’s position as the world’s second-largest LNG exporter. Extending production to 2070 secures continued export revenue but postpones PRRT collections, as the extension enables the project to reclassify depreciation schedules and carry-forward losses into the new life-of-asset framework.
2. Browse Gas Field Sanction Decision
   Woodside’s Browse development—an $8 billion investment poised to add 11.4 million tonnes per annum of LNG exports—has completed its final Environmental Impact Statement and is now under federal assessment. Approval is expected by late 2025. Should Browse receive final investment decision (FID), the PRRT revenue profile will depend on the final capital cost and associated projected revenues. Even then, heavy initial deductions may postpone significant PRRT payments until the late 2030s or 2040s, depending on global LNG prices.

Broader Energy Policy Considerations
The ongoing debate around PRRT must be viewed alongside Australia’s broader energy policy. As the world moves toward net zero emissions, Australia’s economic reliance on fossil fuel exports faces mounting pressure. The Albanese government, keen to demonstrate climate leadership, has simultaneously championed gas as a “transition fuel” while expanding renewables through rooftop solar grants and large-scale wind and solar auctions. Critics argue this dual strategy weakens Australia’s climate commitments and perpetuates a dependency on volatile resource rents.

Independent MPs like Senator Pocock and MP Steggall have therefore tied calls for PRRT reform to more robust climate policy. “If renewable generation capacity is growing, why are we underwriting LNG export expansions with lax tax policy?” Senator Pocock asked. “The logical answer is that the gas barons lobby fiercely, and the government capitulates to secure local jobs. But that approach gambles long-term climate and fiscal sustainability.”

The Case for Further PRRT Reform
Calls for revisiting the current PRRT structure have centered on several “equity and efficacy” arguments:

• Reinstate a Higher Revenue Sharing Percentage: Treasury originally recommended that at least 20 percent of LNG revenue remain catchable under PRRT. By lowering that floor to roughly 10 percent during the 2023 reforms, the government conceded a larger share of resource rents to producers. Restoring the 20 percent figure—or imposing a flat supplementary levy on LNG profits—could recoup billions without crippling project economics.
• Sunset Provisions on Carry-Forward Deductions: A proposal is emerging to cap carry-forward losses at a maximum number of years (for instance, 15 or 20) from the date of first incurring them. This would prevent indefinite rollover of deductions and trigger PRRT sooner, as original fields would face faster compression of their cost bases.
• Linking PRRT Rates to Profitability Tiers: Instead of a flat 40 percent tax on post-deduction profits, a tiered system could apply a higher rate (e.g., 50 percent) on “super-profits” when global oil or LNG prices exceed a designated threshold (e.g., US $80 per barrel). This “progressive”—similar to income tax—structure would ensure that producers pay extra during price “windfalls” while maintaining competitiveness when prices dip.
• Direct Revenue Reinvestment Guarantees: To build social licence, any incremental PRRT revenue above baseline forecasts could be ring-fenced for community benefits—such as grants to regional development, renewable energy transition funds, or indigenous economic partnerships in resource-rich areas. This would signal to the public that gas exports deliver broader national dividends, rather than solely enriching shareholders.

Independent MPs’ Push for a New Review
Several crossbenchers are drafting early parliamentary notices to demand a substantive PRRT review within the first 100 days of the next term, should Labor remain in government. Their proposals include commissioning an independent expert panel—comprising economists, climate scholars, and community leaders—to assess whether the PRRT is fit for purpose in an era of rapidly changing energy markets and climate imperatives.

Independent MP Kylea Tink (North Sydney) has publicly stated her intention to introduce a private member’s bill requiring a “PRRT Parliamentary Committee” to examine the tax’s design, industry compliance, and global best practice. “Australia cannot be held hostage to a tax regime that is both underperforming and misaligned with our climate goals,” she told reporters in Canberra. “The next government must empower Parliament to scrutinize and amend the PRRT on a bipartisan basis.”

What the Opposition Has to Say
The Coalition opposition—now led by Opposition Leader Peter Dutton—has seized on the PRRT shortfall as evidence that Labor’s “mismanagement” of the energy sector has weakened Australia’s competitive edge. Shadow Treasurer Angus Taylor has demanded that Labor reverse “punitive taxes” on gas and oil firms to “restore confidence in investment.” He pointed to the disappointing PRRT returns as proof that Labor’s reforms have “choked off future projects” rather than raising revenue.

However, environmental groups counter that the Coalition’s rhetoric amounts to a call for further fossil fuel subsidies. They point out that between 2017 and 2022, consecutive Coalition governments granted more than $13 billion in direct and indirect support to gas and petroleum firms. “Now, the very industry they protected is complaining about paying its fair share,” said Anna Rose, spokesperson for The Australia Institute’s climate and energy program. “If the Opposition genuinely wants more revenue, it should support tighter PRRT rules and a windfall profits levy.”

Community and State Government Positions
State governments with significant gas operations have adopted a more nuanced stance. Western Australia—which hosts the lion’s share of offshore LNG production—has signaled cautious optimism about the PRRT reforms. Energy Minister Bill Johnston acknowledged the shortfall but emphasized that WA’s royalties from onshore and state‐controlled offshore projects remain a separate and robust revenue stream.

Queensland, which also benefits indirectly from cross‐border gas flows and employment, has called for a balanced approach. “We support fair national taxation that ensures long‐term investment in our gas basins,” said Queensland Treasurer Cameron Dick. “But we do not want overly onerous changes that might see capital flee to the U.S. Gulf of Mexico or the Middle East. The right balance is achievable.”

Comparisons to Global Resource Rent Regimes
Australia is not alone in grappling with how best to tax super-profits from natural resources. Several countries operate “resource rent taxes” or “windfall taxes” on oil and gas firms:

• Norway: Its sovereign wealth fund—built on petroleum revenues—imposes a marginal tax on oil and gas profits that can exceed 78 percent. The fund has grown to more than US $1.5 trillion, providing a model of intergenerational saving and transparency.
• Canada (Alberta): When oil prices briefly surged above US $100 per barrel in 2008, the Alberta government introduced a temporary “Alberta Resource Surcharge,” raising the corporate tax rate on oil profits to 36 percent (from 29 percent). This surcharge was removed when prices normalized, illustrating a price‐responsive mechanism.
• United Kingdom: The UK North Sea oil fields pay a Supplementary Charge on top of the 19 percent corporate tax, effectively taxing up to 50 percent on traditional oil projects. However, in recent years, the UK has introduced investment allowances to incentivize decommissioning and exploration.
• United States: Federal profit sharing on offshore production is largely confined to lease bonus bids, rents, and royalties (12.5 percent of the value). Some proposed “windfall profit taxes” on shale gas or increased royalties have been debated but never fully enacted.

By comparison, Australia’s PRRT—at a single rate of 40 percent—remains somewhat lighter than Norway’s or the UK’s combined rates, especially given the breadth of deductions permitted under the existing law. Critics argue that Australia’s position as a leading global LNG exporter warrants a more aggressive approach.

Looking Ahead: Options for Reform
Given the $4 billion shortfall, next steps may include:

1. Interim Review Team (IRT): Form an IRT—comprising Treasury officials, economists, and carbon transition experts—to deliver findings on PRRT performance within six months.
2. Interim Windfall Profits Tax (IWPT): Introduce a temporary levy on offshore LNG profits whenever quarterly spot LNG prices exceed a set benchmark (e.g., US $80 per MMBtu), lasting until the inherent price shock subsides.
3. Strengthened Look-Back Provisions: Amend legislation to eliminate indefinite carry-forward of deductions by setting a 20-year sunset on all capital and exploration write-offs for PRRT purposes.
4. Progressive PRRT Rates: Create tiered tax brackets so that taxable profits from $0 to $5 billion pay 40 percent, $5 billion to $10 billion pay 45 percent, and profits above $10 billion are taxed at 50 percent.
5. Revenue Allocation Guarantee: Mandate that any incremental PRRT revenue above a base threshold be diverted to an Energy Transition Fund, financing renewables in regional communities affected by declining gas employment.

Each of these measures carries trade-offs. Tighter rules could raise short-term receipts but risk reducing investment appetite for billion-dollar offshore projects. Conversely, softer changes may safeguard future development but further underdeliver against community expectations of resource rent fairness.

Conclusion
When Treasurer Chalmers embarked on PRRT reform two years ago, the stated ambition was clear: to ensure that an LNG boom did not pass Australians by, and that the offshore energy sector should provide a fair share of its super-profits back to the public. Today’s revised forecasts—just $6.3 billion over four years instead of $10.8 billion—represent a disappointing outcome for many who believed the 2023 amendments would be a game-changer.

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Independent MPs such as Senator David Pocock and MP Zali Steggall have underscored the need for a more robust overhaul—one that eliminates loopholes, closes tax avoidance pathways, and restores community confidence that Australia’s world-class gas resources are working for, not against, the national interest. As new LNG fields approach development approval and commodity markets remain unpredictable, the government faces a critical decision: revisit the PRRT now to capture a broader share of resource rents, or risk perpetuating a system in which major gas exporters enjoy minimal tax burdens even as local consumers and state budgets feel the squeeze.

In the months ahead, industry stakeholders, crossbenchers, state treasuries, and economic experts will continue to debate the appropriate balance between fostering investment and securing resource rents. For the electorate—especially regional constituencies tied to the offshore gas supply chain—the outcome of this policy review will carry significant implications for future budgets, energy security, and climate transition funding.

The new government, whomever it may be, must weigh this policy challenge with transparency and urgency. The long-term health of Australia’s economic and environmental landscape depends as much on getting resource tax policy right as it does on managing commodity price cycles. Revisiting the PRRT now, rather than later, may be the key to ensuring that Australia’s offshore gas riches genuinely serve the nation’s future rather than quietly slip into the shadows of past promises.