National

Pressure to fix gas tax raising less revenue than beer

Mar 3, 2026

An LNG (Liquefied natural gas) ship in Darwin — A Senate motion will be introduced to examine the share of profits from offshore LNG projects. -AAP Image

Labor faces a push for a parliament inquiry into Australia's underperforming gas tax amid growing calls to make fossil fuel multinationals pay a larger share.

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As Treasurer Jim Chalmers mulls tax reform to make the economy more productive and fairer for younger generations ahead of the May budget, unions, crossbenchers and lobby groups are turning up the heat on the petroleum resource rent tax (PRRT).

Independent Senator David Pocock will on Tuesday introduce a motion into the Senate to launch an inquiry into why the tax, which is designed to take a share of windfall profits on offshore liquefied natural gas (LNG) projects, recoups less revenue than beer taxes.

Economist Chris Richardson backed the push for an inquiry.

When it was initially devised, the tax was "world-leading", Mr Richardson told AAP.

But because the way the tax was designed to target oil revenues, when Australia's export mix became more LNG-dominated, the rules baked into the tax allowed companies to make overly generous deductions, he said.

"We made a mistake in the economics as we set it up and, as it changed from oil to gas, that mistake became a fatal mistake," he added.

In a Senate estimates hearing in February, Treasury officials confirmed that the PRRT revenue for this financial year is expected to raise $1.5 billion, less than the $2.7 billion forecast to be raised from beer.

"We get one chance to capture the benefits of the LNG boom and invest in the things Australians need most: housing, health, education," he said in a statement.

"Currently we are squandering what Norway has turned into a $3 trillion sovereign wealth fund."

Union groups have called for the treasurer to revisit the PRRT, after modest changes last term failed to materially increase revenues.

The Australian Workers Union urged Dr Chalmers to tighten up deductions limits, while the Australian Council of Trade Unions wants a 25 per cent tax on all gas export revenue to replace the PRRT, which has been backed by left-leaning think tank the Australia Institute.

However, Mr Richardson said the PRRT was a great tax but being poorly applied.

Business Council of Australia chief executive Bran Black said strengthening the PRRT would increase the tax burden on businesses and could deter investment.

But as the PRRT taxes just unearned income - what policy wonks call "economic rent" - in theory it should not disincentivise investment, Mr Richardson said.

Finance Minister Katy Gallagher responded to Senator Pocock's questioning in Senate estimates by saying the government had made changes to the PRRT and was looking at other reform areas like reducing superannuation tax concessions.

The oil and gas lobby has pointed out that the PRRT is only one way the industry contributes to the economy and paid a record $21.9 billion in taxes and royalties in 2024/25.