This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at https://www.theguardian.com/australia-news/2018/nov/03/coalition-to-spring-unexpected-tax-hike-on-offshore-gas-industry
The article has changed 3 times. There is an RSS feed of changes available.
| Version 1 | Version 2 |
|---|---|
| Coalition to spring unexpected tax hike on offshore gas industry | Coalition to spring unexpected tax hike on offshore gas industry |
| (7 months later) | |
| The booming offshore gas industry will be hit with an unexpected tax hike after the Morrison government revealed plans to change the tax treatment for some existing oil and gas projects. | The booming offshore gas industry will be hit with an unexpected tax hike after the Morrison government revealed plans to change the tax treatment for some existing oil and gas projects. |
| Treasurer Josh Frydenberg says the government hopes to raise an extra $6bn in revenue over the next 10 years by changing the settings of the petroleum resource rent tax (PRRT). | Treasurer Josh Frydenberg says the government hopes to raise an extra $6bn in revenue over the next 10 years by changing the settings of the petroleum resource rent tax (PRRT). |
| He said tax changes are a response to recommendations from the Callaghan review of the PRRT regime, which was initiated in 2016 by former prime minister Malcolm Turnbull to address concerns that Australians were not being properly compensated for use of their natural resources by large oil and gas projects. | He said tax changes are a response to recommendations from the Callaghan review of the PRRT regime, which was initiated in 2016 by former prime minister Malcolm Turnbull to address concerns that Australians were not being properly compensated for use of their natural resources by large oil and gas projects. |
| The Callaghan review was released early last year after months of inquiries, and the government released its final response to the review on Friday afternoon. | The Callaghan review was released early last year after months of inquiries, and the government released its final response to the review on Friday afternoon. |
| But the Morrison government has taken the oil and gas industry by surprise by ignoring a key recommendation from the review that any changes to the PRRT should only impact new projects. | But the Morrison government has taken the oil and gas industry by surprise by ignoring a key recommendation from the review that any changes to the PRRT should only impact new projects. |
| Instead, the government plans to lower the PRRT’s excessively high “uplift rates” which oil and gas projects apply to deductions that are carried forward into future years, and which compound over the life of a project. | Instead, the government plans to lower the PRRT’s excessively high “uplift rates” which oil and gas projects apply to deductions that are carried forward into future years, and which compound over the life of a project. |
| It says “exploration expenditure” incurred by projects before 1 July 2019 will still be deducted at the current uplift rate of the long term bond rate (LTBR)+15 percentage points. But after 1 July 2019 the rate will fall to LTBR+5 percentage points. | It says “exploration expenditure” incurred by projects before 1 July 2019 will still be deducted at the current uplift rate of the long term bond rate (LTBR)+15 percentage points. But after 1 July 2019 the rate will fall to LTBR+5 percentage points. |
| It means existing projects that had been expecting to keep claiming high uplift rates for exploration expenditure will be forced to accept lower uplift rates from 1 July 2019. | It means existing projects that had been expecting to keep claiming high uplift rates for exploration expenditure will be forced to accept lower uplift rates from 1 July 2019. |
| The government says the change is necessary because the LTBR+15 rate is too expensive and allows profitable companies to accumulate tax credits at an exponential rate which helps them avoid ever paying the PRRT. | The government says the change is necessary because the LTBR+15 rate is too expensive and allows profitable companies to accumulate tax credits at an exponential rate which helps them avoid ever paying the PRRT. |
| Dr Malcolm Roberts, the chief executive of the Australian Petroleum Production & Exploration Association (Appea), said the government’s proposed changes to the treatment of exploration costs were “troubling”, given exploration has fallen to historic low levels. | Dr Malcolm Roberts, the chief executive of the Australian Petroleum Production & Exploration Association (Appea), said the government’s proposed changes to the treatment of exploration costs were “troubling”, given exploration has fallen to historic low levels. |
| “Attracting investment in natural gas and oil production has never been more important for Australia,” Roberts said in a statement. | “Attracting investment in natural gas and oil production has never been more important for Australia,” Roberts said in a statement. |
| “While Australia has attracted significant investment in liquefied natural gas (LNG) projects over the last decade and global demand for LNG continues to rise, future investment in Australia is far from guaranteed.” | “While Australia has attracted significant investment in liquefied natural gas (LNG) projects over the last decade and global demand for LNG continues to rise, future investment in Australia is far from guaranteed.” |
| Frydenberg said that was not the only change the government wanted to make to the PRRT regime. | Frydenberg said that was not the only change the government wanted to make to the PRRT regime. |
| He said onshore projects will be removed from the PRRT to prevent oil and gas companies transferring their exploration deductions to profitable offshore projects to reduce their PRRT payable. | He said onshore projects will be removed from the PRRT to prevent oil and gas companies transferring their exploration deductions to profitable offshore projects to reduce their PRRT payable. |
| He said the changes were necessary to modernise and protect the integrity of the PRRT. | He said the changes were necessary to modernise and protect the integrity of the PRRT. |
| “Since the PRRT was introduced in 1988 the nature of petroleum production has changed, shifting from crude oil and condensate to a more significant role for LNG,” he said. | “Since the PRRT was introduced in 1988 the nature of petroleum production has changed, shifting from crude oil and condensate to a more significant role for LNG,” he said. |
| “In fact, over the past 30 years, oil and condensate production has nearly halved, and gas production has increased over sevenfold. These changes will ensure production of our petroleum resources are taxed appropriately while continuing to support the development of our world leading LNG industry,” he said. | “In fact, over the past 30 years, oil and condensate production has nearly halved, and gas production has increased over sevenfold. These changes will ensure production of our petroleum resources are taxed appropriately while continuing to support the development of our world leading LNG industry,” he said. |
| Dr Diane Kraal from Monash University said she was “pretty pleased” with the government’s announcement, and welcomed the government’s decision to significantly lower the uplift rates for general and exploration expenditure. | Dr Diane Kraal from Monash University said she was “pretty pleased” with the government’s announcement, and welcomed the government’s decision to significantly lower the uplift rates for general and exploration expenditure. |
| She also welcomed the government’s decision to remove onshore projects from the PRRT regime. | She also welcomed the government’s decision to remove onshore projects from the PRRT regime. |
| The government’s changes, to be introduced from 1 July 2019, also include: | The government’s changes, to be introduced from 1 July 2019, also include: |
| Onshore projects removed from the PRRT regime: Since onshore projects were brought into the PRRT in 2012, no revenue has been collected and that was expected to remain unchanged into the future. In practice, it has been used to transfer exploration deductions to profitable offshore projects reducing PRRT payable. This change will simplify the system and strengthen its integrity. | Onshore projects removed from the PRRT regime: Since onshore projects were brought into the PRRT in 2012, no revenue has been collected and that was expected to remain unchanged into the future. In practice, it has been used to transfer exploration deductions to profitable offshore projects reducing PRRT payable. This change will simplify the system and strengthen its integrity. |
| Review of gas transfer pricing regulations: Treasury will commence a review into the regulations that determine the price of gas in integrated LNG projects for PRRT purposes. Treasury will consult closely with the industry and community. | Review of gas transfer pricing regulations: Treasury will commence a review into the regulations that determine the price of gas in integrated LNG projects for PRRT purposes. Treasury will consult closely with the industry and community. |
| Onshore projects removed from the PRRT regime: Since onshore projects were brought into the PRRT in 2012, no revenue has been collected and that was expected to remain unchanged into the future. In practice, it has been used to transfer exploration deductions to profitable offshore projects reducing PRRT payable. This change will simplify the system and strengthen its integrity. | Onshore projects removed from the PRRT regime: Since onshore projects were brought into the PRRT in 2012, no revenue has been collected and that was expected to remain unchanged into the future. In practice, it has been used to transfer exploration deductions to profitable offshore projects reducing PRRT payable. This change will simplify the system and strengthen its integrity. |
| Review of gas transfer pricing regulations: Treasury will commence a review into the regulations that determine the price of gas in integrated LNG projects for PRRT purposes. Treasury will consult closely with the industry and community. | Review of gas transfer pricing regulations: Treasury will commence a review into the regulations that determine the price of gas in integrated LNG projects for PRRT purposes. Treasury will consult closely with the industry and community. |
| Jason Ward, spokesperson for Tax Justice Network Australia, said it was positive that the government was finally proposing actual changes to the PRRT, but it was “very disappointing” that they didn’t go far enough. | Jason Ward, spokesperson for Tax Justice Network Australia, said it was positive that the government was finally proposing actual changes to the PRRT, but it was “very disappointing” that they didn’t go far enough. |
| “The Labor party’s silence on PRRT is also not helpful on pushing for meaningful and much needed reforms,” he said. “The fact remains that as Australia has become one of the world’s largest exporters of LNG, we are still giving it away for free for decades to the world’s largest multinational oil giants.” | “The Labor party’s silence on PRRT is also not helpful on pushing for meaningful and much needed reforms,” he said. “The fact remains that as Australia has become one of the world’s largest exporters of LNG, we are still giving it away for free for decades to the world’s largest multinational oil giants.” |
| Energy | Energy |
| Tax | Tax |
| Australian politics | Australian politics |
| Josh Frydenberg | Josh Frydenberg |
| Business | |
| Australian economy | Australian economy |
| news | news |
| Share on Facebook | Share on Facebook |
| Share on Twitter | Share on Twitter |
| Share via Email | Share via Email |
| Share on LinkedIn | Share on LinkedIn |
| Share on Pinterest | Share on Pinterest |
| Share on WhatsApp | Share on WhatsApp |
| Share on Messenger | Share on Messenger |
| Reuse this content | Reuse this content |