Beware the Coalition of voices wanting to tax our future energy security

Beware the Coalition of voices wanting to tax our future energy security

We live in genuinely interesting times when political movements such as One Nation, the Australian Greens and left-leaning Independents align on tax and energy policy.

The origins of this populist alliance can be traced to the decision by Anthony Albanese and his loyal troop of Labor Senators to give life to an Australian Greens proposal for a Senate inquiry into the taxation of gas exports.

The central premise of the Senate inquiry was quickly exposed.

What was presented as an examination of gas taxation too often became an argument for taxing gas harder, discouraging investment and advancing an anti-gas agenda dressed up as fiscal reform.

The clearest evidence did not come from industry but from activist submissions.

Greenpeace told the committee that the “need to end the fossil fuel chokehold” had never been clearer, and the Australian Conservation Foundation suggested Australia “won’t be extracting gas for much longer” if climate targets are to be met.

Those statements cut through the rhetoric.

For some participants, taxation was never the end goal — it was the mechanism to diminish a critical industry.

Many of the core claims underpinning the debate also struggled when tested against the evidence.

The frequently repeated assertion that gas companies are not paying tax is contradicted by the facts presented to the inquiry.

According to Australian Energy Producers, the oil and gas industry contributed $21.9 billion in taxes and royalties in 2024–25 and remains Australia’s second-largest corporate taxpayer.

Corporate income tax paid by oil and gas companies reached $10.4 billion in 2023–24.

The Australian Taxation Office also directly challenged claims of widespread tax avoidance.

Its evidence showed large corporate groups, including oil and gas producers, pay more than 94 per cent of tax legally owed at lodgement, rising to 96 per cent following compliance activity.

For the Petroleum Resource Rent Tax (PRRT), compliance exceeds 97 per cent.

That is not evidence of a system being systematically gamed, it is evidence of a tax framework operating broadly as intended.

Even Prime Minister Anthony Albanese rejected claims that Australian gas is being exported “tax free”.

Much of the misunderstanding stems from figures presented without commercial context.

Gas projects are among the most capital-intensive investments in the global economy.

They require enormous upfront expenditure — often tens of billions of dollars — with investment horizons stretching across decades and during early project phases, companies carry forward losses and deduct capital expenditure under long-standing tax principles until projects recover costs and begin generating taxable profits.

The PRRT was deliberately designed around that reality.

It taxes profits once high-risk projects recover substantial upfront investment.

That is not a loophole, it is how the system was intended to operate.

The inquiry heard practical examples of how this works.

ConocoPhillips pointed to its Australia Pacific LNG project, which in a single year paid $1.189 billion in federal company tax and $728 million in Queensland royalties — an effective tax rate of 44 per cent.

Claims that companies are “paying no tax” often rely on selective readings of data that ignore project life cycles, joint ventures, royalties and the broader taxation framework.

Nor is it credible to suggest Australia’s gas tax system has been left untouched.

The PRRT has been reviewed six times since 2008 and amended five times, including significant reforms in 2023 and 2024 aimed at bringing forward additional revenue.

The Treasury expects gas companies will pay $8.3 billion in PRRT over the next five years.

Yet scarcely had those changes been bedded down before industry was hauled back into another politically charged tax debate.

Woodside, Chevron, INPEX and Santos all delivered essentially the same warning: investors made multibillion-dollar decisions in good faith under existing rules, and continual reopening of the tax regime damages Australia’s competitiveness.

INPEX described the 2023 reforms as a handshake moment — a signal that the industry could put its pen down on PRRT reform.

Instead, the debate restarted almost immediately.

Chevron warned that repeated reviews create fiscal instability; Woodside stated plainly that the PRRT works, and Santos cautioned against retrospective changes.

These are not abstract concerns.

Gas projects compete for globally mobile capital.

Investors look for jurisdictions offering consistency, predictability and confidence that the rules will not be rewritten after investment decisions have been made.

That is why proposals canvassed during the inquiry — particularly a flat 25 per cent export levy — should concern Australians.

Wood Mackenzie’s analysis found such a measure could push effective tax rates above 80 per cent, reduce project value by up to 94 per cent and jeopardise future production, investment and government revenue.

You do not maximise tax receipts by making projects uninvestable - you strengthen public returns by attracting capital, approving projects, producing more gas and maintaining international competitiveness.

The comparisons often drawn on Norway also collapse under closer examination.

Norway does not merely impose higher tax rates and walk away - the Norwegian state co-invests alongside industry and shares project risk, while Australia relies overwhelmingly on private capital.

You cannot import Norway’s tax settings while rejecting Norway’s investment model.

The inquiry also exposed a broader question: what message Australia is sending to investors and trading partners at a period of heightened geopolitical and energy uncertainty.

Gas is not simply an export commodity – it underpins electricity reliability, manufacturing, mining, industrial production and regional economies.

It sustains thousands of jobs and delivers billions in public revenue.

Regional communities understand this reality – in places like Onslow, the sector has delivered jobs, infrastructure, local procurement opportunities and long-term community investment.

Australia’s LNG industry also anchors critical strategic relationships.

Countries such as Japan and South Korea rely heavily on Australian LNG for their energy security, while Australia depends on key partners for essential fuel imports.

That interdependence matters.

Japan’s intervention during the inquiry should therefore be taken seriously, with Ambassador Kazuhiro Suzuki making clear that surprise tax changes would be viewed as a damaging signal and that investors would look elsewhere.

No serious observer argues the gas industry should be beyond scrutiny.

But scrutiny must be grounded in evidence, not ideology.

Among the misinformation and myth-representation the inquiry did however give expression to a genuine Australia-wide sentiment that gas producers should not overlook.

Australians do want to be satisfied they are receiving a fair return from resource extraction and for that reason alone this debate will not easily disappear.

This is a serious debate worth having and one that should be informed by economics and not a politically driven campaign to tax an industry to its death.

*Published in The Spectator Australia, 27 May 2026