Reforming PRRT
Ending deceptive industry gaming mechanisms
Parliament legislated a 40% tax on offshore petroleum super-profits in 1987. From the gas projects that now dominate the regime, it has barely ever been collected. The rate was never repealed — it was made unreachable.
The number that was never meant to arrive
In 1987 the Parliament struck a clear bargain: when an offshore petroleum project earns more than a fair return on its costs, the public takes forty per cent of the surplus. Nearly four decades later, that forty per cent has barely been collected from the liquefied natural gas projects that now dominate the regime. The figure was never repealed. It was simply engineered out of reach.
The 2023 and 2024 reforms did not repair this. The deductions cap they introduced guarantees a minimum payment of roughly four per cent of a project's assessable receipts once it begins to bite — and even that applies to a number the industry retains wide latitude to suppress. The deductions denied by the cap are not cancelled. They are carried forward indefinitely and continue to compound. The reform installs a floor beneath a number that has already been shrunk, and calls the job done. It brings the legislated forty per cent no closer; it quietly concedes that forty per cent will never come, and substitutes a token in its place.
The distortion has never been the rate. Forty per cent of a genuine super-profit is a settled and reasonable bargain — one the industry itself accepted. The distortion lies entirely in the calculation of the profit to which the rate is applied. Two mechanisms do the work. The first defers the tax indefinitely, compounding deductions faster than any project can exhaust them. The second shrinks the taxable base before the rate is ever applied, by attributing the value of the resource to the parts of the operation the tax cannot reach. Both are questions of measurement, not of principle.
A common-sense repair requires no existing contract or arrangement to be torn up. It requires the one thing the regime has always lacked: an honest, independent measurement of what the resource is actually worth. An independent resources valuation body — setting a transparent reference price at the point of extraction, applied uniformly to gas, to coal, to oil, to every commodity drawn from public ground — removes the discretion that makes the gaming possible. It alters nothing about the deal that was struck. It simply stops one party to that deal from marking its own homework.
Honour the forty per cent the Parliament passed. Measure the resource honestly. Leave the contracts intact. This is not a radical reform. It is overdue arithmetic.
SOCii — Independent policy research
What the public actually collects
The deferral engine
Capital is written off immediately, then any unused deduction is uplifted — compounded year after year at the bond rate plus five to fifteen points. The deduction pool grows faster than receipts can ever erode it, so the threshold for paying tax recedes into the distance.
The crossover that never comes
The vanishing base
PRRT reaches only the upstreamvalue — gas at the wellhead. By attributing most of an integrated project's value to liquefaction and shipping, which sit outside the tax, the base the rate applies to is shrunk before a single percentage point is calculated.
40% of a deliberately small number
The split between upstream and downstream is set by the producer's own transfer-pricing method. The smaller the upstream slice, the smaller the base — and 40% of a base the operator itself defines is a figure the operator effectively controls.
A floor, not a fix
40% × 10% of receipts = ~4%
The cap deems a taxable profit of 10% of assessable receipts once it applies — from the later of seven years after first production or July 2023. Taxed at 40%, that is roughly four per cent of an already transfer-priced base. The deductions it denies are not extinguished: they are uplifted and carried forward indefinitely, so the deferral engine keeps running underneath the floor. The cap does not move a project toward the legislated 40% — it concedes the 40% is unreachable and collects a token instead.
Make the profit calculus honest
Eliminate game-ability at its two sources — the receding threshold and the shrinking base — while leaving the rate, the ownership, and every existing contract untouched. One reform does the structural work.
Set the price of the resource, not the producer
An independent statutory body sets a transparent reference (norm) price at the point of extraction for every commodity drawn from public ground. The taxable base becomes the resource valued at that reference price — not at an internal figure the producer reports to itself. This removes the discretion that powers the vanishing base, in a single move, and it is a reform to measurement, not to the bargain: no rate changes, no contract is reopened, no arrangement is invalidated. Norway has set crude prices this way for decades; it has simply never been done for Australian gas.
Real spend, not opportunity cost
Deductions are limited to genuine, verified outlay, recovered at nominal value. End the uplift margins above the bond rate that compound a real cost into a phantom one. Existing accumulated pools are honoured — but an honest base consumes them far faster.
A reachable threshold
With no runaway compounding, receipts cross the cost pool on a simple payback timeline. The point at which the 40% engages stops receding — and actually arrives within the life of the project.
Honour the legislated 40%
No new rate is invented. The original 40% applies to an honestly-measured profit. The public collects the share Parliament already passed — an effective 40/60 split of real super-profit.
One method, every resource
The same independent valuation governs coal, oil and gas alike. Uniform, transparent, free of bespoke per-project deals — and far harder to challenge than a retrospective change, because it reopens nothing.
It already works elsewhere
The objection is always that a real public take will deter investment. Norway is the standing refutation: a harder split, an administered price, losses refunded in cash — and one of the most actively developed petroleum basins on earth.
- Producer-defined upstream base
- Uplift compounds the threshold away
- Cap delivers a ~4% token
- Board-set norm price for the base
- Immediate expensing, no uplift
- Loss value refunded in cash
Measure the resource honestly.Honour the 40% Parliament passed.Leave every contract intact.