By Samantha Hepburn
Over the last decade, Australia has become one of the world’s largest exporters of liquefied natural gas.
But while the gas is extracted from beneath Australian soils, the profits go almost entirely to large multinational companies. Research suggests gas companies have made roughly $A149 billion from exports in just four years. Only a small percentage of this profit has been taxed.
That’s why some politicians, think tanks and environmental groups are pushing for a 25 percent tax on gas exports.
Modelling by the Australia Institute suggests this tax could raise up to $17 billion a year and potentially lower domestic fuel prices by incentivising producers to sell more gas into the Australian market.
How is gas currently taxed?
Currently, Australia’s main tax on gas exports is the Petroleum Resource Rent Tax.
Profits made by companies running oil and gas projects are taxed at up to 40 percent. At present, this tax mainly applies to offshore producers.
While this sounds good, the tax is less effective in practice. Energy companies have access to generous tax deductions as well as “uplifts”, which allow companies to use the losses from one year to offset the amount of tax they pay the next year. The rationale for allowing uplifts was to incentivise companies to invest in Australian oil and gas projects by letting them recover costs.
The problem is this system allows oil and gas companies to pay little, if any, tax on their profits. As a result, economists and policy analysts have argued this tax is no longer fit for purpose, particularly given how much gas we export.
Onshore liquefied natural gas producers in Queensland are exempt, but are still required to pay the standard 30 percent company tax rate.
But oil and gas companies are often able to reduce how much they pay here too, using various deductions and accounting practices. This is because the money they spend on construction, drilling and infrastructure is immediately deductible.
The governments of states where onshore gas companies are active can also impose royalties. These are payments which mining companies must make to the owner of the natural resources – the state government in most cases – for the right to extract them.
Royalties are different from taxes in that they are payments for the right to exploit a public resource. The royalty rate is based on the raw value of the oil and gas produced, rather than profit. Companies must pay royalties even if a project is losing money. In Queensland, gas producers pay between 5 percent and 10 percent of their revenue in tax. This can generate significant income, but nowhere near as much as a profit-based tax designed with fewer loopholes. That’s because royalties do not scale with profitability.
Australia’s gas export industry has long been under-regulated, particularly on the east coast. For many years producers have simply exported as much gas as possible.
But this is gradually changing. In 2023, the government introduced a mandatory gas code requiring producers to first offer gas domestically on fair, transparent terms. From 2027, the government will require producers to reserve some gas for the domestic market.
Looking overseas
Nations such as Norway tax their natural resource exports much more robustly.
The Norwegian government applies two taxes to petroleum profits – a 22 percent company tax and a 56 percent special petroleum tax – which mean companies are taxed on roughly 78 percent of their profits. Its taxation rules are stricter and more standardised, meaning companies have less scope to carry forward large deductions. The funds raised go to the Government Pension Fund Global, previously known as the Petroleum Fund of Norway, now worth more than $3 trillion. The fund was established in 1990 to shield the economy from oil industry volatility.
Gas giant Qatar also has a high-taxation system giving it a large share of oil and gas profits. Qatar uses these funds to subsidise health care, education and public infrastructure.
Even countries with limited domestic energy resources use these taxes. In 1978, Japan introduced a tax on oil and gas imports. This tax generates significant revenue, raising roughly $8 billion in 2025 alone.
In March, a proposal to introduce a 25 percent gas tax was defeated in the Australian Senate. But advocates aren’t giving up. They point to high public support amid soaring energy prices.
Why tax gas exports?
A 25 percent tax on gas exports would be applied as a flat tax on the value of gas exports, rather than the profits gas companies make from those exports. It’s similar to a royalty, but instead would be calculated as a percentage of the exported product.
This approach would simplify the tax system and could not be minimised in the same way as the Petroleum Resource Rent Tax and company tax.
An exports tax would also raise significant public revenue, estimated at $17 billion annually. That’s enough to provide free childcare or tertiary education for Australians. The revenue could also help reduce government debt, which reached a record $1.6 trillion in 2025.
Backers argue the tax would boost domestic gas supply, as it would encourage producers to avoid the tax by selling more gas locally. This could help lower domestic energy prices, an urgent concern for many businesses and households.
Samantha Hepburn is a Professor of Law at Deakin University. This article was first published by The Conversation
