Government Models 25% Gas Export Tax as Crossbench Demands Action

CANBERRA — The federal government is considering a 25% tax on gas exports as crossbench senators pressure the prime minister to redirect what they call 'wartime profits' to Australians struggling with energy costs.

The Prime Minister's department has asked Treasury to model the effects of placing a flat 25% levy on gas exports, ABC News reported on Friday. Treasury is also examining changes to the petroleum resource rent tax and corporate income tax settings.

The modelling sets up a political fight as parliament returns next week, with independent senator David Pocock and the Greens demanding action while the gas industry warns the tax would damage investment and energy security.

Crossbench position

Pocock said it appeared the government was caving to pressure from crossbenchers and communities across the country.

Australians are already paying more on petrol and we shouldn't be paying more on beer excise than the government gets for petroleum resource rent tax.

— Senator David Pocock

According to the mid-year economic and fiscal outlook, tobacco excise is forecast to raise $5.45 billion in 2025-26. Spirits and beer excises are expected to bring in $3.4 billion and $2.7 billion respectively. The petroleum resource rent tax is expected to raise $1.5 billion.

Greens leader Larissa Waters wrote to the prime minister on Thursday offering the minor party's support to pass legislation in the upcoming sitting fortnight. Waters said the revenue could fund cost of living relief.

Industry response

Australian Energy Producers, the industry's peak body, said a 25% levy would come at the worst possible time for the economy and energy security.

Imposing higher taxes on Australian gas producers would stop investment in new gas supply, leading to gas shortfalls, higher energy prices, and the closure of Australian industries that rely on reliable and affordable gas.

— Samantha McCulloch, CEO, Australian Energy Producers

The Chamber of Minerals and Energy WA said the proposed tax would undermine Australia's reputation as a stable place to invest and damage living standards for future generations.

Government position

Resources Minister Madeleine King told parliament earlier this month that steeper taxes would discourage investment in new supply needed for the transition to net zero.

Energy Minister Chris Bowen did not rule out the consideration when asked on Friday. He said the treasurer had made clear that tax reform was on the government's agenda.

Shadow Treasurer Tim Wilson said it would be next-level denial to think additional taxes were the answer to a fuel and energy crisis.

Revenue estimates

A report by the Australia Institute estimated that a 25% tax on gas exports would have raised approximately $17 billion annually since 2022, based on pre-Iran war price levels.

The gas industry has benefited from rising international prices following attacks on gas infrastructure in the Persian Gulf. Iranian strikes on the Qatari gas hub Ras Laffan reportedly damaged facilities producing 17% of QatarEnergy's LNG export capacity. The company said repairs would take three to five years.

What happens next

Parliament returns next week. The government has not committed to introducing legislation on gas export taxes, but the crossbench has the numbers to create pressure if the issue comes to a vote.

The political calculation involves balancing voter concern about energy costs against industry warnings about investment and supply. Both major parties have historically been reluctant to impose export taxes on resources.

Historical context

Australia has largely avoided export taxes on resources, unlike some other resource-rich nations. The petroleum resource rent tax was designed as a profits-based tax that kicks in after companies recover their capital costs, but critics argue the structure allows companies to defer payments indefinitely through complex accounting.

The Rudd government's 2010 attempt to introduce a super-profits tax on mining faced fierce industry opposition and contributed to political instability. The eventual minerals resource rent tax was a compromise that raised less revenue than originally projected.

The current debate echoes those earlier fights, but with the added pressure of a global energy crisis that has made fuel costs a central concern for voters.