Ben Opie and Kurt Burrows examine the Government's PRRT report, which recommends stability for existing projects, and a refreshed regime for new projects.
Today, the Treasurer, Scott Morrison, announced the release of the report of the review into the operation of the Petroleum Resource Rent Tax (PRRT), crude oil excise and associated Commonwealth royalties. The report has been released on the same day that various oil and gas companies and related lobby/industry groups are appearing before the Economics Reference Committee into Corporate Tax Avoidance in Perth with the discussion largely focused on the operation of the PRRT regime.
The Treasurer has confirmed that the recommendations will be subject to further consultation, and that any proposed amendments will not form part of the 2017 Federal Budget.
The report confirms that PRRT should continue to be the preferred and primary form of taxation of petroleum resources going forward, however it needs to be updated for the current state of the Australian petroleum industry. This is a totally appropriate outcome.
Recent suggestions of a flat royalty on production have been dismissed in the report due to concerns that this would discourage investment and leave gas in the ground.
The industry argued that it is inevitable that it will take time before many of the projects start making profits and pay PRRT, especially as many of these projects have only recently commenced production or are still being developed. The report’s substantive recommendations are consistent with investors’ submissions that any substantive change made to the current regime should only impact new projects.
The suggestions made for new projects include:
The report outlines that if the above changes were made to existing projects, it would represent a significant departure from the arrangements under which there has been very large investment to date. Key recommendations for changes to the PRRT regime in relation to existing projects are mainly administrative, and include:
These recommendations will ultimately be considered by the Government in conjunction with any recommendations resulting from the Economics Reference Committee and there will be a further opportunity for consultation.
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