Australia isn’t getting a fair share of tax on gas exports. Queensland has shown how to raise the bar

Prime Minister Anthony Albanese has promised no new taxes on Australia’s gas exports in next month’s federal budget, saying the government “will not undermine existing contracts”. Questioned further, he said future gas tax changes aren’t being contemplated either.

That hasn’t stopped the growing calls for higher taxes on gas exporters, with an unusual coalition of the Greens, One Nation, independent Senator David Pocock and others arguing the industry has been paying far too little for too long.

Responding to those criticisms, the oil and gas industry has pointed out it is among Australia’s highest corporate taxpayers.

That’s true: the Australian Tax Office reported late last year that oil and gas companies paid A$10.4 billion in company tax in 2023–24, or 10.9% of the total corporate tax levied in that year.

But it’s also true that Australia doesn’t get as much back for gas extracted offshore and sold overseas as you might think – especially when gas prices are high.

If the federal government is willing to rethink gas taxes in future, Queensland’s Liberal National government has already shown there’s another way to get a better return for natural resources.

How Queensland got more for less gas

The Petroleum Resource Rent Tax (PRRT) is a federal tax first set up in 1988, used to make companies pay to extract a finite natural resource owned by the Australian people.

Since then, gas has grown to become Australia’s third biggest export earner, worth more than $67 billion in 2024.

Gas extracted from Commonwealth waters accounted for 70% of Australia’s liquefied natural gas (LNG) exports in 2024–25, while Queensland shipped the remaining 30% from within the state.

Yet surprisingly, gas and oil exporters actually paid less tax on the gas and oil extracted from the larger areas under the federal government’s control in 2024–25. The federal government received $1.42 billion in PRRT, while the Queensland government was paid $1.69 billion in petroleum royalties, including gas converted into LNG.

How much more Queensland is earning for gas

Queensland taxes its gas, oil, coal and other natural resources extracted within the state using royalty payments. For oil and gas, when prices are low, companies pay less; when prices rise, the companies pay more.

My colleague, industry analyst Josh Runciman, has shown that when global prices soared over recent years, such as after Russia invaded Ukraine, Queensland actually did a better job of getting a fairer share of those higher profits than the federal government. As his submission to the current Senate inquiry on gas taxes said:

From [financial year] 2018–19 to 2023–24, PRRT payments per gigajoule (GJ) of sale gas ranged from A$0.21–AU$0.41, well below royalties in Queensland, which were A$0.19–AU$1.57/GJ of gas over the same period. Queensland’s royalty revenues increased materially in years where LNG exporters earned windfall profits.

Tinkering with the PRRT hasn’t worked

Gas advocates point out that oil and gas companies have invested hundreds of billions of dollars in setting up Australia’s gas industry, without such large direct contributions from government. For instance, the Gorgon LNG project off Western Australia’s coast cost more than $50 billion alone.

That’s in contrast to some other countries, such as Norway, where the government took on more of the upfront costs and risks to get the gas industry going.

That’s why some – including the prime minister – argue Australia shouldn’t change its approach on gas taxes. On Wednesday, Albanese said:

Australians also have every right to expect a fair return for our country’s resources. And that’s why we reformed the Petroleum Resource Rent Tax.

Two years ago, Labor acknowledged the PRRT needed to “deliver a fairer return to the Australian community”. Labor’s reforms were meant to bring in a further $2.4 billion over the following five years.

But even since then, expected PRRT revenue has been continually revised down, as last December’s official mid-year budget update noted:

Petroleum resource rent tax receipts have been revised down by $0.5 billion in 2025–26 and by $2.5 billion over the four years to 2027–28.

Reforms to the PRRT are yet to translate into significant change. It’s time to consider other options.

How coal royalties offer a model for gas

Four years ago, in the face of strong opposition, the Queensland government changed how it taxed coal.

Like former Reserve Bank deputy governor Stephen Grenville, I believe Queensland’s approach on coal royalties is worth considering as a future replacement for the PRRT.

When the average price of coal is very low, at $100 or less a tonne, companies are charged just 7% of its value. But as prices rise, so does the royalty. If the price of coal is above $300 a tonne, companies pay up to 40% on those super profits.

Of course, a royalty-based approach is not the only option the federal government could consider. As the table below shows, there are pros and cons to other options too, particularly the widely-supported tax on gas profits.