Australian Treasurer urges parliament to back petroleum tax changes

The Labor government will need the support of minor parties in the Senate

SYDNEY (Reuters) - Australian Treasurer Jim Chalmers urged minor political parties on Sunday (May 7) to back proposed changes to the Petroleum Resource Rent Tax (PRRT) paid by the offshore LNG industry, as the industry's lobby group welcomed the move.

The government estimates the changes, which would hike tax paid by the industry, will lift revenue by A$2.4 billion (US$1.6 billion) over the next four fiscal years.It comes as Australia, which has 10 LNG plants run by companies including Woodside, Chevron, Santos, Japan's Inpex, ConocoPhillips and Shell, vies with Qatar and the United States as top global LNG supplier.

Asked about potential opposition to the PRRT changes from minor party senators, Chalmers told Sky News television: "I’d encourage the parliament to support this."

The Labor government will need the support of minor parties in the Senate, where it is in a minority, to push the reform through.

Speaking ahead of Tuesday's 2023/24 federal budget release, Chalmers said the changes balanced getting "more revenue sooner to fund our cost of living package" while protecting "investment, and supply, and our international relationships".

Under the changes, the government will adopt most recommendations of a Treasury review - initiated by the previous conservative government - of gas transfer pricing rules, including limiting how much PRRT assessable income on LNG projects can be offset by deductions to 90 per cent, from Jul 1. 

It also plans to equalise the treatment of notional upstream and downstream entities so losses will be split evenly rather than attributed entirely to the upstream entity.

Australia's gas industry lobby group, the Australian Petroleum Production and Exploration Association, said in a statement that the proposals accounted for the "undeniable need" for a strong gas sector and "a more sustainable national budget".

However, the chief executive of Woodside Energy Group urged the government last month not to change the tax, saying "over-reaching" on tax reform could undercut future revenue and hamper investment needed to boost supply.

A spokesperson for Woodside was not immediately available for comment on the proposed changes announced on Saturday.