House of Representatives
Treasury Laws Amendment (Tax Accountability and Fairness) Bill 2023
Explanatory Memorandum
(Circulated by authority of the Assistant Treasurer and Minister for Financial Services, the Hon Stephen Jones MP)Throughout this report, a reference to 'GTP Regulation', 'GTP rules', or 'GTP arrangements' is a reference to the Petroleum Resource Rent Tax Assessment Regulation 2015 .
https://www.ato.gov.au and, Taxation statistics 2019-20 Table 5: GST and other taxes - Petroleum resource rent tax, Selected items: 1999-2000 to 2020-21 financial years.
The practical and administrative difficulties submitted by industry are outlined in Part 7.2 of this Review that discusses combination of PRRT Projects.
The Australian community may nonetheless benefit from company tax payments, jobs and energy supply otherwise provided by such projects.
It is also relevant to the determination of a PRRT liability for gas-to-electricity projects.
Although the North West Shelf project had been exporting LNG to Japan since 1989, it was not subject to the PRRT given its pre-existing royalty arrangements.
It was also to apply to all integrated gas-to-electricity projects.
Report available at Petroleum Resource R...~https://treasury.gov.au/consultation/c2019-t364690.
Dr Diane Kraal, Submission to the GTP Review, p. 7.
Department of Industry, Science and Resources, Resources and Energy Quarterly - December 2022 .
Department of Industry, Science and Resources, Resources and Energy Quarterly - December 2022 .
Queensland Curtis LNG (QCLNG), Gladstone LNG (GLNG) and Australia Pacific LNG (APLNG).
See Callaghan Review, p. 23.
Department of Industry, Science and Resources, Resources and Energy Quarterly - September 2016 .
See Callaghan Review, p. 5.
Under the WA domestic gas reservation policy, gas equivalent to 15 per cent of LNG produced to supply the global LNG market must be reserved for WA consumers, which complements supply from domestic-only projects using the WA gas pipeline network. The Karratha Gas Plant, part of the NWS project, has been producing domestic gas for WA since 1984. Gorgon started supplying DMO quantities in 2016, Pluto in 2018 and Wheatstone in 2019. Because the Ichthys LNG facility is in the Northern Territory, it does not contribute to WA's overall LNG production capacity and, for that reason, does not contribute to WA's domestic gas supply. Similarly, Prelude is not subject to DMO obligations to the WA domestic gas market as it is a floating LNG facility located offshore in Commonwealth waters.
Australian Energy Market Operator, WA Gas Statement of Opportunities , December 2022.
APPEA, Submission to the GTP Review, p. 30.
See: https://www.woodside.com/docs/default-source/asx-announcements/2022/processing-of-pluto-gas-starts-at-north-west-shelf.pdf
See: https://www.mediastatements.wa.gov.au/Pages/McGowan/2020/12/WA-Government-reaches-agreement-on-job-creating-domestic-gas-project.aspx
Australian Energy Market Operator, WA Gas Statement of Opportunities , December 2022.
Wood Mackenzie Scarborough Asset Report.
Department of Industry, Science and Resources, Resources and Energy Quarterly - September 2021 .
Department of Industry, Science and Resources, Resources and Energy Quarterly - December 2022 - historical data , using source: ABS, Labour Force, Australia, cat. no. 6291.0, Canberra.
Department of Industry, Science and Resources, Resources and Energy Quarterly - December 2022 - historical data , using source: ABS, Labour Force, Australia, cat. no. 6291.0, Canberra.
Treasury calculation using source: Australian Competition and Consumer Commission, Gas inquiry 2017-30, LNG netback price series https://www.accc.gov.au
International Energy Agency, World Energy Outlook 2022 (windows.net) p. 370.
https://www.bp.com/en/global/corporate/energy-economics/energy-outlook/natural-gas.html
International Energy Agency, World Energy Outlook 2022 (windows.net) p. 25.
Tax Justice Network - Australia, Submission to the GTP Review, p. 1.
Professor Richard Eccleston and Mr Lachlan Johnson, Submission to the GTP Review, p. 1.
The Australia Institute, Submission to the GTP Review, p. 2.
See, for example, the Callaghan Review pp. 9 and 32,
Dr Diane Kraal, Submission to the GTP Review, p. 7.
The Australia Institute, Submission to the GTP Review, p. 2.
Dr Diane Kraal, Submission to the GTP Review, p. 2, 6 and 7.
Tax Justice Network - Australia, Submission to the GTP Review, p. 8.
Tax Justice Network - Australia, Submission to the GTP Review, p. 7.
Professor Richard Eccleston and Mr Lachlan Johnson, Submission to the GTP Review, p. 1.
Mr Wayne Mayo, Submission (2019), p. 4-5.
Tax Justice Network - Australia, Submission to the GTP Review, p. 1.
Mr Chris Hood - Submission to the GTP Review.
APPEA, Submission to the GTP Review, p. 7.
APPEA, Submission to the GTP Review, p. 20.
APPEA, Submission to the GTP Review, p. 23.
PwC, Submission to the GTP Review, p. 10.
MIMI, Submission to the GTP Review, p. 2.
Shell, Submission to the GTP Review, p. 2.
Woodside, Submission to the GTP Review, p. 3.
Arthur Andersen Report, p. 23-5, as referenced in the APPEA Submission to the GTP Review, p. 20.
MIMI, Submission to the GTP Review, p. 3.
APPEA, Submission to the GTP Review, p. 22.
MIMI, Submission to the GTP Review, p. 3.
APPEA, Submission to the GTP Review, p. 82 (referencing a 2019 Wood Mackenzie paper).
MIMI Submission to the GTP Review, p. 3.
Tax Justice Network - Australia, Submission to the GTP Review, p. 1.
APPEA, Submission to the GTP Review, p. 30-1.
Woodside, Submission to the GTP Review, p. 7.
APPEA, Submission to the GTP Review, p. 9.
MIMI, Submission to the GTP Review, p. 3.
Woodside, Submission to the GTP Review, p. 10.
PwC, Submission to the GTP Review, p. 6.
KPMG, Submission to the GTP Review, p. 3.
See, for example, KPMG, Submission to the GTP Review, p. 3.
See, for example, Chevron Submission to the GTP Review, p. 2-4.
The ATO addresses aggressive tax planning involving transfer mispricing of commodity exports to related party hubs. Where appropriate, it has adjusted prior year income tax returns and agreed acceptable pricing for future years.
As noted in chapter 3, the netback price is adopted under the current settings when it falls below the cost-plus price. In this case, there are no residual profits.
PwC, Submission to the GTP Review, p 9-10.
While uplift rates were reduced in 2019 in response to the Callaghan Review, much of the pre-existing deductions for the LNG industry had already matured to substantial sums.
The Scarborough project also includes an expansion of the Pluto LNG facility, or Pluto 2.
See https://www.ato.gov.au. For 2019 20, the net PRRT gap is estimated to be $13 million (1.3%). The ATO identified that the main drivers of the gap related to the inherent complexities of the PRRT system.
Tax Justice Network - Australia, Submission to the GTP Review, p.9
Professor Richard Eccleston and Mr Lachlan Johnson, Institute for the Study of Social Change, Submission to the GTP Review, p.2
Dr Diane Kraal, Submission to the GTP Review, p.14.
APPEA, Submission to the GTP Review, p. 41-42.
Tolling arrangements can be complex arrangements depending on the ownership structure of the entities involved. There are circumstances where the tolling arrangements will include other payments in addition to a tolling fee. The design of provisions in the regulations should consider incorporating a broad definition of a tolling payment.
https://www.industry.gov.au/sites/default/files/issue-of-combination-certificates-guideline.pdf
Chevron, Submission to the GTP Review, p 3.
A key feature of transitioning the NWS project into PRRT in 2012 was a starting base amount that is carried forward and uplifted at LTBR plus 5 percentage points. The starting base effectively acts as a tax shield against PRRT, partly reflecting significant past and ongoing royalty and excise payments.
https://www.industry.gov.au/publications/resources-and-energy-quarterly-march-2023
As Chart 8.1 shows, in recent years Brent has consistently traded at a small premium to WTI.
See https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/energy-economics/energy-outlook/bp-energy-outlook-2023.pdf
Note: The PRRT receipts impacts of changes to the Gas Transfer Pricing regime in this chapter are presented in gross terms and do not consider the estimated reduction in company income tax payable resulting from higher PRRT receipts. PRRT payments are deductible for company income tax purposes. Therefore, an increase in PRRT receipts is expected to be partially offset by a decrease in company income tax receipts, as additional company income tax deductions become available.
Note: The PRRT receipts impacts of changes to the PRRT regime as a result of the deductions cap in this chapter are presented in gross terms and do not consider the estimated reduction in company income tax payable resulting from higher PRRT receipts. PRRT payments are deductible for company income tax purposes. Therefore, an increase in PRRT receipts is expected to be partially offset by a decrease in company income tax receipts, as additional company income tax deductions become available.
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