Federal budget: Labor to collect billions more in petroleum resource rent tax

Labor will cap deductions to collect $2.4bn more in petroleum resource rent tax over four years and boost community services by $4bn through fairer indexation of wage costs.

Under the changes to the PRRT, which have been under consideration since 2019, the Albanese government will accept a recommendation from Treasury to limit the proportion of PRRT assessable income that can be offset by deductions to 90%.

The change, to take effect from 1 July, will bring forward the date that liquefied natural gas projects are expected to pay PRRT. Under current rules, they are not expected to pay any significant amount until the 2030s.

The Grattan Institute estimates that changing the method of pricing for gas could raise up to $4bn a year and introducing a 10% commonwealth royalty on offshore gas a further $4bn.

The Greens want the government to eliminate $284bn of accumulated credits that allow gas companies to reduce their tax liability.

Forcing gas companies to start paying the tax from 1 July after new legislation and applying a 10% royalty to all offshore projects that are subject to the tax could raise $33.8bn over four years, according to Parliamentary Budget Office costings.

Under the indexation changes, Labor seeks to address government funding for services not keeping up with rising wage costs.