30 November 2016

Turnbull Government Review of Petroleum Resource Rent Tax

The Turnbull Government is continuing to deliver on its commitment to ensure greater integrity of Australia’s tax system.

To help better protect Australia’s revenue base and ensure that companies are paying the right amount of tax on their activities in Australia the Government will conduct a review into the operation of the Petroleum Resource Rent Tax (PRRT), crude oil excise and associated Commonwealth royalties.

The review will be led by independent expert Michael Callaghan AM, with the support of Commonwealth Treasury. The review team will report back to the Government by April 2017 on recommendations for reform of the PRRT.

The review will advise the Government to what extent the tax is operating as it was originally intended, and shall address the reasons for the rapid decline of Australian PRRT revenues. The Government will then refer to these findings and recommendations to reform the PRRT.

The integrity of Australia’s tax base is paramount. This Government is committed to ensuring that Australia’s taxes are working as intended and companies pay  the right amount of tax.

We will ensure that the PRRT provides an equitable return to the Australian community from the recovery of petroleum resources without discouraging investment in exploration and development that is vital to the industry.

The Government welcomes the recognition and support to date from the industry on the potential for reform to the PRRT and we look forward to working with the industry on how we can ensure this important tax measure is working in the way it was intended.

The Government is building on the success of the Multinational Anti-Avoidance Law and the recently drafted Diverted Profits Tax legislation. We will continue to ensure that the Australian tax system remains fit for purpose and that all individuals and companies, especially foreign multinationals, pay the right amount of tax.

The Terms of Reference for the review are attached.


Terms of Reference

Purpose of the review

The integrity of Australia’s tax base is paramount. The Government is committed to ensuring that Australia’s taxes are working as intended and companies pay their fair share of tax.

The review will advise the Government to what extent Commonwealth oil and gas taxes and royalties such as the Petroleum Resource Rent Tax (PRRT) are operating as intended having regard to the need to ensure they provide an equitable return to the Australian community from the extraction and sale of these resources without discouraging investment in exploration and development.

Terms of reference

  1. The review will have regard to the need to provide an appropriate return to the community on Australia’s finite oil and gas resources while supporting the development of those resources, including industry exploration, investment and growth.
  2. The review will examine the design and operation of the PRRT, crude oil excise and associated Commonwealth royalties that apply to the onshore and offshore oil and gas industry, having regard to economic conditions in the industry and trends over time.
  3. The review will also consider the impact of previous policy decisions on Commonwealth revenue.
  4. Drawing on international experience, the review will make recommendations to the Government on future tax and royalty arrangements having regard to revenue adequacy, efficiency, equity, complexity, regulatory costs and the impact on the industry generally.
  5. The review will also examine other related matters.

Process

The review will be led by independent expert Michael Callaghan AM, with the support of a Secretariat within Commonwealth Treasury.

The review will invite submissions from the public and report back to the Government by April 2017 with its recommendations.