How the Japanese Government taxes Australian gas

The Japanese Government raises $8 billion per year from its Petroleum and Coal Tax, including around $710 million from imports of Australian gas.

By contrast, the Australian Government is currently getting around $420 million per year from gas exporters paying Petroleum Resource Rent Tax (PRRT). Prior to 2023, it was receiving zero. Nada. Nothing.

In other words, the Australian Government is getting less money from our gas exports than Japan is.

State and territory governments also raise money from gas, especially Queensland which expects to get $1.2 billion this financial year (page 64) from its onshore deposits.

But most of Australia’s gas exports come from massive offshore deposits owned by the Federal Government. This means that even though far more federally owned gas is exported, Queensland’s government (like Japan’s!) raises more money.

How can this be?

The Australian Government is unusual because it effectively gives gas away for free. It does not charge a fee or a royalty to companies to extract the gas under the seabed around Australia that the government owns (there is one exception that we’ll come back to).

The state governments are different. They do charge royalties for the gas and other resources that companies dig out of the ground in their territories, such as iron ore, coal, gold, etc.

Instead of charging a royalty like the states, or an export/import tax like Japan, the Australian Government has its PRRT on offshore oil and gas.

PRRT works differently to a simple royalty or export tax. It applies to particular gas company profits under particular conditions.

The quirks and complications of PRRT lead to another perverse outcome – the oil and gas projects that supply Australia’s domestic market pay around $1 billion per year in PRRT, while the much bigger export projects pay next to nothing.

That $1 billion per year that the domestic projects paid is less than the government collects on HECS debts, less than beer excise, but it’s still something. Prior to 2023, the Federal Government plainly stated that “to date, not a single [gas export] project has paid any PRRT” (page 180). Some exporters thought they might never pay it.

The Albanese Government was well aware of Australia’s great gas giveaway and made changes to the PRRT in 2023. But instead of fixing the problem, they made a minor tweak to tax deductions that was “welcomed” by the gas companies.

It was this tweak that led to gas exporters paying $420 million per year in PRRT. This is new information that the Australian Taxation Office (ATO) provided to the recent Senate Select Committee on the Taxation of Gas Resources. The ATO told the Senate that gas exporters had paid $1.2 billion in PRRT between 1 July 2023 and 26 April 2026, or roughly $420 million per year (PDF page 5).

To be clear, the Australian Government is getting less money than Japan from Australian gas exports even after it “fixed” the PRRT.

There is one exception to the Australian Government’s gas giveaway – the North West Shelf project off Western Australia. It was developed in the 1970s and 1980s, with around $8 billion in WA Government subsidies to supply both WA domestic gas and gas exports.

To claw some of that taxpayer money back, the WA and Australian governments do charge for North West Shelf gas. In 2025-26, the WA Government expected $402 million from North West Shelf Grants (page 145), meaning the Australian Government would collect around $200 million. Not all of that is from exports, as North West Shelf gas is also supplied to the WA market. Even if it was all from exports, it wouldn’t see the Australian Government’s revenue from gas exports overtake Japan’s tax on Australian gas.

It’s clear that Australia is not getting a fair return for our gas resources. A 25% tax on gas exports would raise $17 billion per year and at last see Australians get more for Australian resources than the Japanese Government.