Labor is considering a tax increase on gas companies benefiting from the global energy crisis, though exporters caution it could jeopardize future energy security. The potential tax has garnered support from unions, the Greens, crossbenchers, and One Nation, increasing pressure on the government to address calls for tax reform.
Gas Tax Debate Intensifies as Government Models Options
The Department of Prime Minister and Cabinet has requested Treasury to model “new levy options” to tax windfall profits from gas and thermal coal companies before the federal budget in May, according to the ABC. The department argued that energy producers “should not benefit from high international prices at the expense of domestic customers.”
Energy Minister Chris Bowen did not dismiss the possibility of a windfall tax on gas revenue or changes to the Petroleum Resources Rent Tax (PRRT) when questioned about the modelling. He stated that tax reform is a matter for Treasurer Jim Chalmers, whom he expects is “working through potential options.”
“The budget will be delivered in May, and I will not be commenting on cabinet processes today, tomorrow or any time before budget day,” Bowen said. “And the budget will be delivered by the treasurer, not by the energy minister.”
Broad Support to End Gas ‘Rip-Off’
A tax increase on gas has support across the political spectrum, with One Nation recently announcing a policy to charge the industry royalties. Greens leader senator Larissa Waters welcomed the government’s move to assess potential tax changes and indicated her party would support substantial reform.
“The time for tweaking has long passed,” she said.
Larissa Waters says her party will support gas tax legislation if it is brought before parliament.
(AAP: Mick Tsikas)
ACT independent senator David Pocock, who has advocated for strengthening the PRRT, said it was “encouraging” that Labor was modelling options. He stated the government may be “caving to the pressure” from himself, other crossbenchers, and Australians to tax gas companies making wartime profits.
The Greens and Senator Pocock have proposed a flat 25 per cent tax on all gas exports, a proposal also supported by the Australian Council of Trade Unions (ACTU) last year.
David Pocock has joined members of the crossbench to call for a 25 per cent tax hike on gas profits. (ABC News: Matt Roberts)
The Australia Institute estimates a 25% tax could raise approximately $17 billion annually. Currently, the government collects around $1.5 billion annually through the PRRT, which Senator Pocock has labelled a “rip-off.”
Gas Companies Warn of Investment, Security Risk
The gas industry reports paying $21.9 billion in taxes and royalties in 2024-25. Shell Australia country chair Cecile Wake stated that energy security depends on continued investment in supply and warned that any additional tax proposal would “undermine investment and erode energy security.”
“Doing so would be short-sighted and opportunistic, particularly when the domestic gas market is well-supplied, and domestic gas prices remain materially below international pricing,” she said. “Imposing a levy on LNG exports at this time would send the worst possible signals for investment in gas supply for the local market and to our regional trading partners, who need us more than ever, and who provide critical fuels to Australia.”
Coalition Says Gas Tax Will Hurt Fuel Sector
The Coalition has also criticised the idea, with Shadow Treasurer Tim Wilson describing it as “next level denial” to believe new taxes are the answer to the fuel and energy crisis. He stated they would “only freeze investment and stall private sector job growth.”
Shadow Resources Minister Susan McDonald also warned a new tax would create uncertainty for the gas industry.
Susan McDonald said an extra tax on gas would create greater uncertainty. (ABC News: Jane Bardon)
Australian Energy Producers chief executive Samantha McCulloch said it would be the “worst possible time” to impose a new retrospective tax on gas, potentially leading to gas shortfalls, higher energy prices, and the closure of Australian industries.
Ms McCulloch also noted the Middle East conflict has highlighted Australia’s “co-dependency” on regional neighbours for energy and food security. “Australia’s reliable gas supply to the region underpins the energy security of key trade partners, and in turn Australia depends on the imported fuels and other essential imports from the region,” she said.
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