Petroleum Resource Rent Tax 1984

And here is a history of it post-implementation

From page 34 of

McLaren, J. A. & Chabal, P. (2011). Given the fact that Australia has had a ‘Petroleum Resource Rent Tax’ since 1987, why should there be any opposition to a ‘Mineral Resource Rent Tax’?. Journal of the Australasian Tax Teachers Association, 6 (1), 20-37.

In 1984 the Federal Government announced the introduction of a resource rent tax for new offshore petroleum projects and that the projects would be exempt from the imposition of royalties and the crude oil levy.79 It was a further three years before the legislation was finally passed by parliament. The federal government was not able to extend the rent tax to onshore petroleum production in lieu of state royalties because the state governments of Western Australian and Queensland objected.80 In 1990, Bass Strait petroleum projects became subject to the PRRT.81 The North West Shelf projects are subject to a federal royalty and the crude oil levy.82

The Act was effective from 15 January 1984, even though the legislation was not passed by Parliament until 1987. The Act applied retrospectively to exploration permits awarded on or after 1 July 1984 and recognised expenditure incurred on or after 1 July 1979. It was originally imposed on offshore petroleum projects other than Bass Strait and the North West Shelf. However, oil and gas production in Bass Strait moved from a royalty and excise regime to the PRRT regime in the fiscal year 1990 1991. The PRRT was imposed on oil companies with the enactment of the Petroleum Resource Rent Tax Act 1987 (Cth) and the Petroleum Resource Rent Tax Assessment Act 1987 (Cth). The resource rent tax is imposed on the taxable profit of a petroleum project that is located ‘offshore’ in Australia. The Hawke Labor Government of 1984 introduced a resource rent tax, based on the Garnaut and Clunies Ross model, in order to remedy the statebased taxation system of imposing royalties on resource production output.83 The Petroleum Resource Rent Tax Act 1987 (Cth) is imposed on the profit at the rate of 40 percent. The Petroleum Resource Rent Tax Assessment Act 1987 (Cth) contains the provisions relating to the calculation of the profit subject to the rent tax. The PRRT raised in excess of an additional $1 billion a year in revenue over and above the normal company tax on income84

83 Rob Fraser, ‘The state of resource taxation in Australia: “An inexcusable folly for the nation?”’ (1999)
The Australian Journal of Agricultural and Resources Economics 259, 260.
84 Australian Taxation Office statistics – 2002‐03 = $1.2 billion; 2003‐04 = $1.5 billion; 2004‐05 = $2.0 billion; 2005‐06 = $1.8 billion; 2006‐07 = $1.9 billion and 2007‐08 = $ 1.6 billion.

and this from journalist Paul Cleary

The Petroleum Resource Rent Tax (PRRT) … was an adapted version of the Garnaut model, was well designed . It was so well designed that in 1990 BHP and Exxon asked the government to replace production royalties on their Bass Strait operations with PRRT, thereby enabling them to extend the life of those fields by twenty years or more. Trade Minister Craig Emerson, who wrote his PhD thesis on RRT, said the regime has ‘stood the test of time, having scarcely been modified in its twenty-five years of operation’. It did not stop some very substantial investments in offshore gas production, including $60 billion in the recent Gorgon and Pluto LNG projects and $70 billion in coal-seam gas production. The major oil companies have proceeded with these projects without any fuss about excessive taxation.

(Cleary, P. 2011:94)

Cleary, P. 2011. Too Much Luck: The Mining Boom and Australia’s Future. Black Inc.  (my copy is a large print, so the page numbers are out!)



In 1984 the then Labor Government unveiled a proposal to introduce a petroleum resource rent tax on profits deriving from the offshore extraction of crude oil and liquid natural gas. This measure was introduced in response to a boom in world energy prices and a rapid rise in corporate profits.

The oil industry argued that the tax would lead to an immediate fall in investment and higher unemployment. It also suggested that the measure was a threat to Australia’s national security in so far as it would lead to an increased dependence upon oil imports. The government held its nerve during what proved to be a protracted and very public battle with the oil industry. The new tax was eventually introduced in 1987 with no appreciable impact upon investment levels. A quarter of a century later, the lesson the next generation of Labor leaders drew from this episode was that the mining industry’s threats to cut investment should not be taken at face value. As Wayne Swan argued: ‘when the resources rent tax in the petroleum industry came in, the same culprits were out there doing the same thing that they’re doing now. They were out there running a scare campaign, a massive scare campaign’ (The 7.30 Report 2010). Federal Resources Minister Ferguson (2010), argued similarly:

I remind the House that this proposal is no different from the controversy that surrounded the decision of the then government 25 years ago to introduce a national petroleum resource rent tax . . . that tax is now regarded as one of the most stable systems in the world . . . exploration and development in the oil and gas industries have flourished under that system.

(Bell and Hindmoor, 2014:477)

Bell, S. and Hindmoor, A. 2014. The Structural Power of Business and the Power of Ideas: The Strange Case of the Australian Mining Tax. New Political Economy, Vol. 19 (3), pp. 470-486.

Wayne Swan; “But, my point is this, Kerry: when the resource rent tax in the petroleum industry came in, the same culprits were out there doing the same thing that they’re doing now. They were out there running a scare campaign, a massive scare campaign. The future economic security of this country depends on us putting in place a modernisation of our tax system. Is it absolutely essential to our future prosperity and I make no apologies whatsoever for spending this money to correctly outline what the Government is intending to do, the rates of tax and the economic impact.”

Swan defends mining tax ads

Australian Broadcasting Corporation Broadcast: 01/06/2010

Reporter: Kerry O’Brien


Craig Emerson wrote a good piece on this in 2014

Emerson, C. 2014. ‘Déjà vu again on resources rent tax’, The Australian Financial Review, 25 November.


And here’s Aynsley Kellow, writing about the differences with the RSPT (2010)

First, and significantly, the PRRT applied only to offshore petroleum resources and was only given universal application in 2011, in the aftermath of the RSPT debacle. This meant that the Commonwealth did not have to deal with the states in 1986, and so intergovernmental concerns were not at issue in that success. Second, the RSPT had a different structure to the PRRT, and many key actors (and most political analysts) did not appear to appreciate this difference – nor its effects on both the policy and politics of the case of the RSPT and its deviations from the theoretical tax on which it was based.

(Kellow, 2016: 136)

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