IN BRIEF
- Concerns have been raised about Australia's gas policies.
- A Senate inquiry is examing how our gas exports are taxed.
Australia's gas export tax is facing scrutiny as experts debate whether the country is receiving a fair return from its liquefied natural gas (LNG) exports.
New research published by the Australia Institute suggests the Japanese government has generated more revenue from taxing its imports of Australian LNG than the Australian government has from exporting its gas.
Speaking to ABC Radio on Tuesday, co-CEO of the Australia Institute, Richard Denniss, questioned why Australia was giving the gas industry "so much gas for free".
He suggested that, unlike Australia, the Japanese government sees an opportunity to profit from Australian LNG while also looking after its taxpayers' interests.
Australia supplies about 40 per cent of Japan's LNG imports.
"We're the mugs here, we get literally zero in royalties or PRRT on more than half the gas we export, and countries like Japan are making out like bandits," Denniss said.
The report said that over five years, Japan raised $8.9 billion from gas imports, compared with $7 billion from Australia's Petroleum Resource Rent Tax (PRRT).
The PRRT was introduced in 1988 and is designed to capture a share of profits from oil extraction. It is a 40 per tax on the extraction of natural resources: gas, petroleum and condensate.
A different report, released last May by the Institute for Energy Economics and Financial Analysis (IEEFA), raised concerns similar to those of the Australia Institute. It also stated that the Australian LNG bought by Japan was also being resold at a higher profit.
Revenue 'not flowing' into Australian companies
The report found that more than two-thirds of Australian LNG that Japan had resold ended up in Taiwan and South Korea. Both countries are considered to be high-value markets for Australian gas producers.
Josh Runciman, lead analyst for Australian gas at the IEEFA, told SBS News that the institute estimated the revenue of LNG resales could have been between $11 and $14 billion, and that Japanese companies were most likely able to make a profit.
"That potentially is a billion dollars of revenue that's not flowing into the Australian company and therefore is not being taxed here in Australia," Runciman said.
While resales of LNG are of concern, Runciman said that Japan should still be recognised as an important trading partner, as companies have made large investments in Australian LNG supply.
"The debate about Australia's energy supply to Japan has really been about Japan's energy security versus our own energy security."
Runciman said there was no suggestion that Australia should stop exporting LNG to Japan, but argued that it would be reasonable for the country to implement policies that would ensure its own energy security.
Focus turns to domestic energy
In an attempt to investigate the tax treatment of Australian oil and gas resources, the Senate has established a Select Committee on the Taxation of Gas Resources. During the Senate hearings, proposals relating to a 25 per cent gas export tax will be presented, and it will examine the effectiveness of Australia's Petroleum Resource Rent Tax (PRRT).
At the first hearing on Tuesday, former Treasury secretary Ken Henry said the Australian government's existing gas revenue regime is insufficient.
While Runciman acknowledges the argument for tax reform, he said that there is also a need for a reservation policy to ensure that gas is supplied domestically when needed.
The IEEFA has referenced gas shortfalls predicted by the Australian Energy Market Operator in the next five to six years in Australia.
A reservation policy would require LNG exporters to supply gas domestically before they meet their export commitments. In Western Australia, a reservation policy has been implemented for several years.
In December 2025, a joint review between the Department of Industry, Science and Resources and the Department of Climate Change, Energy, the Environment and Water assessed current gas market policies and regulations, which resulted in the Australian government agreeing to develop a prospective gas reservation policy to secure domestic supply while still supporting trade LNG.
"It's crucial they get that right. If they don't, we're not likely to see the benefits domestically from additional gas supply," Runciman said.
"If they do get it right, that would likely address our energy security issues, at least with respect to gas, and would probably put downward pressure on gas prices and this is important because gas flows through to so many parts of our economy [such as] fertiliser and electricity prices.
"That would also then have an influence on household energy bills, industrial energy bills, inflation more broadly, and therefore to some extent, potentially on your mortgage rate as well."
Increased calls for a tax on gas
Independent senator David Pocock has campaigned for a 25 per cent tax on gas exports and has raised more than $94,000 to fund billboards in favour of the tax.
The proposal aligns with the recent analysis from the Australia Institute that a levy on gas exports could generate $17 billion in public revenue per year.
However, the proposal has drawn strong criticism from the gas industry.
Peak industry body Australian Energy Producers (AEP), which represents active oil and gas explorers and producers in the country, argued that the 25 per cent export tax could undermine investment and energy security.
Australian AEP Samantha McCulloch told SBS News in a statement that the Australia Institute's reporting "cannot be taken seriously."
"It is more spin and misleading reporting from an organisation that wants to tax the oil and gas industry out of Australia," McCulloch said.
McCulloch said that the Australian oil and gas industry is Australia's second-largest corporate taxpayer and paid $21.9 billion in taxes and royalties last year alone.
"In the middle of a global energy crisis, Australia cannot afford policies that will stop investment in new oil and gas projects, undermine energy trade relationships and put the country’s energy security at risk," she said.
A proposed 25 per cent gas tax would increase the amount LNG producers pay by applying an additional levy to export revenue, which may reduce the share of earnings they retain.
Unlike the PRRT, which is applied once a production licence is in force and levied on the economic rent generated from a project, a flat tax would be an immediate obligation, meaning companies have to pay earlier in the project cycle.
Correction: A previous version of this article said the IEEFA has predicted gas shortfalls in the next five to six years in Australia. It has been amended to clarify this prediction was from the Australian Energy Market Operator.
For the latest from SBS News, download our app and subscribe to our newsletter.
