The Right 25%: A Public-Interest Model for Pricing Australia's Gas

Ad valorem royalties are nominally tied to sales but in practice rely on producer-reported pricing, opaque marketing hubs and intra-group transactions that suppress the effective base. Profit-based taxes — the PRRT being the working Australian example — apply only after a long ladder of deductible costs, capex uplifts and carry-forward losses are extinguished. Both instruments are mathematically defensible and politically convenient, but they have repeatedly failed the only test that matters in public asset stewardship: do they collect a fair share before the asset is gone.

The PRRT collected functionally nothing for the LNG export industry across multiple peak-price years. Royalties on volume can be raised but typically lag international benchmarks. The result is that Australia exports finite public resources at terms the public would never agree to if presented plainly.

Physical extraction volume × published benchmark price × 25%. Non-deductible. No exemptions. No phasing. The benchmark is whichever published index the Treasurer designates by regulation for each commodity class. Volume is measured at the wellhead, minehead or equivalent custody-transfer point under existing measurement law.

The arithmetic is the point. A public-interest tax must be one the public can compute and verify against published numbers. The 25% rate is set high enough to capture a fair share without exceeding regimes that have demonstrably not deterred investment in comparable jurisdictions.

Sovereign risk: Benchmark-indexed regimes are common in peer jurisdictions. Stable, transparent rules are themselves a form of risk reduction.

Investment chilling: The Australian Petroleum Production & Exploration Association repeatedly raised the same objection to the original PRRT design and to subsequent state royalty adjustments. Capacity expanded in both cases.

Cycle volatility: Indexing to published benchmark prices is the entire point; revenue tracks the cycle without producer self-reporting being the only signal.

Constitutional: A non-deductible production-based levy is a long-settled species of Commonwealth/state instrument and well within the existing framework.

This report is published for consideration — by parliamentarians, treasury officials, journalists, researchers and the public. It is not a recommendation in the regulatory sense. It is a clearly drafted alternative to the present settings that the Australian public should be able to weigh.

Interactive revenue estimates and source data referenced in this report are available on request to researchers and parliamentary staff.