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Petroleum resource rent tax

Last updated 4 December 2018

The petroleum resource rent tax (PRRT) is a profits-based tax that only taxes profits above a specified rate of return.

PRRT revenues are also affected by key design features of the PRRT. PRRT will only arise when a project has recovered all eligible outlays associated with the project (after deducting eligible exploration expenditure transferred from other projects), including the achievement of a threshold rate of return on the outlays. This means that projects tend to pay no PRRT for some years even after production has commenced.

Unlike income tax, where many capital costs are deductible over a defined life, all deductible expenditure for PRRT purposes is immediately deductible, whether capital or revenue.

Total PRRT payable

There are 9 corporate entities in the 2015–16 PRRT transparency population, with total PRRT payable of $845 million. The number of entities paying PRRT decreased from 12 in the previous year, while PRRT payable decreased from $1.2 billion.

The decline in PRRT payable reflects the lower profitability of PRRT liable companies in 2015–16. Oil prices are a key driver of PRRT payable and, in 2015–16, global oil prices declined by 41% due to lower demand for energy resources. The decline in oil prices more than offset the 13% decline in the Australian dollar, which generally has a positive impact on the profitability of PRRT liable companies.