Speaking in Adelaide this morning, APPEA chairman Colin Beckett said a tax reform would cost governments about $500 million in deferred tax revenue for a new two-train LNG project, but this same project would deliver $4.5 billion in tax and royalties over a 27-year project life.
“This is one of the keys to unlocking the industry’s vast potential,” APPEA chairman Colin Beckett said.
“Without tax reform – including the introduction of a competitive five-year capital depreciation period for large gas projects – Australia will struggle to compete against Middle East suppliers with lower costs to build the LNG plants that will offset the country’s massive and growing trade deficit in petroleum products.”
He also said APPEA supported a carbon-pricing mechanism, subject to a number of conditions being met.
The report also pushed for more frontier exploration, calling for new licensing terms as well as the introduction of a 175% investment allowance under the company tax regime.
“A financial signal to ensure that the inherent risks and higher costs associated with frontier exploration is required,” Beckett said.
“A 175% allowance, which would be similar to the existing premium R&D rate, is an approach worthy of serious consideration.”
As a first step towards establishing a national regulatory regime, APPEA also called on the Australian Government to review the legislation for petroleum activities across all jurisdictions.
“The length and complexity of the multi-jurisdictional approvals regime is contributing to an international perception that Australia is a difficult place to invest in oil and gas exploration and development,” Beckett said.
“This is reducing Australia’s competitiveness for petroleum investment.”
The report also recommended the Government remove tax and subsidy-related “distortions” from the domestic gas market.
“Subsidies for renewable energy and coal, as well as taxation rates that have offshore Victorian gas taxed at between 4 and 13 times per gigajoule, the rate for coal, have substantially distorted the market for gas in electricity generation,” Beckett said.
The Platform for Prosperity report is the culmination of an 18-month petroleum industry analysis by the sector in consultation with state and federal governments.
APPEA says it outlines the ways to strengthen the industry in the face of critical challenges, such as climate warning, declining oil production, skills shortages and escalating costs.
