The Business Council of Australia (BCA) welcomes the opportunity to provide a submission to the Select Committee on the Taxation of Gas Resources.
It is the BCA’s strong contention that the imposition of an additional tax burden on Australia’s gas production and exports now or at any time in the future would be entirely counter to the interests of our economy, community and region.
A time to build energy resilience and work with trading partners
The current conflict in the Middle East is a sobering reminder of the vulnerability of our economy to global energy shocks. The strength of Australia’s regional relationships and sovereign energy capability are critical determinants of our resilience to such energy shocks.
The BCA fully concurs with the Prime Minister’s recent statements emphasising the high mutual dependence between Australia and its regional partners in navigating the current energy crisis.
“Just as we expect countries that supply us to stick to agreements which are there, we think it’s very important that the contracts that we have be fulfilled completely with countries in our region. That’s the quid pro quo, if you like. And I think that is very important as we go forward. So, to be clear, our first priority is supply. Supply depends upon those relationships being adhered to.”
The BCA highlights the collaboration, coordination and goodwill demonstrated in recent weeks between governments and industry participants — within Australia and with our regional partners — in response to the current energy crisis.
For the longer term, this collaboration and goodwill must continue in order for Australia to strengthen its sovereign energy capability, which will require continued investment in gas resources, liquid fuel security and the roll out of renewables. Greater energy resilience feeds into Australia’s economic resilience in other areas including manufacturing and mining, where commercial and industrial gas users require an ongoing supply of affordable gas while there are no ready alternatives.
This is a time to be fortifying our key regional relationships and encouraging investment in Australia’s sovereign energy capability, rather than penalising investors and ‘burning our bridges’ with reactive and unpredictable changes to Australia’s energy policy settings.
Investment competitiveness drives Australia’s prosperity
The attractiveness of Australia as an investment destination underpins the productivity potential of our economy and the living standards of all Australians. The BCA Global Investment Competitiveness Index shows that while we have strengths in some areas, we also have significant work to do in others, if we are to continue to attract global capital to our industries. Other nations are also chasing this pool of global capital and it is not a given that Australia will be the preferred destination.
In 2025 Australia ranked very strongly on trade (2nd) but very poorly on business taxation (38th) against 41 other nations. An increase in the gas sector’s tax burden, whether it be for existing or new projects, can only hurt our international competitiveness in an area where Australia is already ranking poorly.
Policy instability has damaged investor confidence in the past
When changes to regulatory settings are unpredictable and significant, investor confidence is shaken, not only in the sector directly impacted, but in terms of Australia’s reputation as an investment destination more broadly. This effect is particularly acute in the gas sector because projects operate on long cycles that can extend for many decades, from exploration through to development, production and decommissioning.
The BCA fully concurs with the head of the International Energy Agency’s statements emphasising the value of Australia’s reputation as a trustworthy partner in this regard.
“I would be very careful to implement sudden, abrupt changes to the tax regimes,” … I would be thinking: what are the implications for getting further investments? Because … energy investors are like butterflies: if they are scared, they fly away.”
The range and significance of changes to Australia’s gas market regulatory settings over the past two decades speaks to the enormous challenges faced by the gas sector — including persistent supply shortfall risks on the east coast — and the implications for Australia’s broader energy affordability and reliability.
Key regional partners, such as Japan and South Korea, have expressed serious concerns in the past about the reactive and unpredictable nature of some of these changes and the potential impact on their capital investments (as shareholders in LNG projects) and their supply contracts (as buyers of LNG). On recent tours of Asia, the BCA has been reminded by our regional partners that they are considering a range of other LNG supplier options, including the United States and Canada.
The Australian Government’s recent Gas Market Review is an opportunity to address these challenges decisively and more effectively than in the past, thereby encouraging steady investment in new gas supply capacity. We note that imposing an additional tax burden on the gas sector, whether it be for existing or new projects, is counter to the ambitions of the Gas Market Review and risks deterring investment and driving up domestic energy prices as a result.
Gas is a significant contributor to the national economy
Australia’s gas sector is a significant contributor to the national economy in terms of its regional trading relationships, capital investment, export income, job creation, production of input and end use products, and payment of taxes and royalties. In 2021-22 the sector represented 3.7 per cent of Australia’s GDP and supported about 215,000 full time equivalent jobs.
A recent analysis by Wood MacKenzie estimates that Australian oil and gas projects have an effective tax rate of about 53 to 58 per cent (based on the Corporate Income Tax and the Petroleum Resource Rent Tax). Both of these taxes are inherently profit based mechanisms that capture additional tax revenue when energy prices increase. It is also important to note that the design of the Petroleum Resource Rent Tax means that payments are generally lower in the early years of a project’s production life, and higher as revenue exceeds deductable costs (including capital expenditure) in later years.
Gas is a key enabler of the region’s energy transition
It is not possible to build an affordable and secure energy system without gas as the world transitions to net zero. As outlined in the Australian Government’s Future Gas Strategy, gas is a key enabler of the domestic energy transition and that of our regional partners, as coal based energy (for the grid and industry) is gradually replaced with renewables supported by gas. While continued investment in Australia’s LNG export facilities is a crucial option for many Asian economies seeking to balance their energy security, economic growth and decarbonisation objectives, these countries have a range LNG supplier options beyond Australia, including, as noted above, the United States and Canada. An increase in the gas sector’s tax burden, whether it be for existing or new projects, is a direct financial disincentive to continued investment in Australia’s LNG facilities and the ability to shift from higher to lower emission intensity energy.