Multinational companies who dig up Australia’s oil and gas will have to pay an extra $6 billion in taxes over the next decade.
Changes to the law will stop companies taking losses on unprofitable gas explorations and using them to reduce taxes on highly profitable operations.
But the gas and oil industry lobby warns lifting taxes could affect investment decisions.
Treasurer Josh Frydenberg announced the changes in response to the Callaghan Review of the Petroleum Resource Rent Tax, which has seen declining revenues even as Australia’s gas exports have significantly increased.
‘These changes will ensure production of our petroleum resources are taxed appropriately while continuing to support the development of our world leading LNG industry,’ Mr Frydenberg said in a statement on Friday.
Australia made $1.12 billion in PRRT revenue in 2017/18 and is on track to become the largest exporter of liquid natural gas, overtaking Qatar.
Under the Qatari system, companies pay tens of billions of dollars more in royalties each year.
The new PRRT changes will see an extra $6 billion come into the tax system over the next 10 years.
Under the changes, limits will be placed on excessive compounding of deductions for exploration.
Onshore projects will also be removed from the PRRT, despite only being brought into the scheme in 2012.
No revenue from onshore projects has been collected since 2012 and instead companies have used them to claim deductions against much more profitable offshore operations.
The changes will only apply to new projects that have not yet been granted a licence.
The Australian Petroleum Production and Exploration Association said attracting investment to the industry had never been more important.
‘Investors are always concerned when long-standing tax arrangements change,’ association chief executive Dr Malcolm Roberts said.
APPEA claims the PRRT delivers more money over the life of a project than a royalties system.
The PRRT has delivered $35 billion overall in tax revenue since 1987.
Shadow treasurer Chris Bowen said Labor will review the changes closely but the government has to show what work it has done to avoid negative impacts on the sector.