We're Arguing About the Wrong Half of the Gas Tax
Australia has finally worked out that gas companies don't pay enough. Now watch us blow it.
Australia ships out more liquefied natural gas than almost any country on Earth. Last year it earned the companies doing it tens of billions of dollars. And the federal government's signature tax on that gas — the one built specifically to make sure the public gets a fair cut — raised less than the tax on beer.
That isn't a stray statistic. It's the symptom of a system that has been quietly leaking the public's money for nearly forty years, and a political class that has only just started arguing about how to plug it. But here's what almost no one in that argument is saying out loud: the fight everyone is having — over whether and how to tax gas more — is the easy half. It's basically won. The fight that actually decides whether any of this reaches a hospital, a school, or your kids — the fight over what we do with the money — has barely begun.
Follow the thread far enough and you stop asking "are we being ripped off?" and start asking a harder question: when we finally fix it, will we be smart enough not to waste the fix? Everything below is sourced and linked, so you can check every step. Let's pull it apart.
The clip that started it
You've probably seen the line. Australians pay more tax on beer than the gas industry pays through its signature tax, the Petroleum Resource Rent Tax. It's not a meme — it's true. Beer excise pulls in around $2.7 billion a year. The gas tax: about $1.5 billion. From a country that ships out more liquefied natural gas than almost anyone alive.
The industry's defence is that it's not a fair comparison, and on a technicality they're right. Beer is taxed the moment it's made; the gas tax only bites once a project has earned back its enormous upfront costs. But sit with what that defence actually admits: a tax built for one kind of industry has spent decades letting another kind write off its bills before paying much of anything. (And the Australia Institute has a tidy comeback — if you're going to count the gas companies' income tax, then count the income tax beer drinkers pay too, and the drinkers still win in a landslide.)
📦 Skip this box if you already know how the gas tax works
A two-minute history, for the rest of us.
The Petroleum Resource Rent Tax — the PRRT — was created in 1987, under the Hawke government. It taxes the super-profits from petroleum at 40%, on a simple idea most of us would agree with: the gas belongs to all of us, so the public should get a real cut, not crumbs.
Here's the catch, and it's the whole story. It was designed for oil, not gas — back when the big game was Bass Strait crude and no one imagined the LNG export giant Australia would become. To encourage companies to go exploring, the rules let them bank their costs and grow them, year after year, into a giant deduction that wipes out tax until it's used up. Fine for a modest oil field. But layer that over the colossal, slow-to-recoup cost of building LNG plants, and you get exactly what we have: projects that can sell gas for years and still show "no profit yet" on the tax form.
Labor tightened it in 2023 with a cap on those deductions — but even that mostly makes companies pay a bit sooner, not more. The leak was designed in from the start. That's not a glitch. It's the machine working as built.
The part everyone agrees on
Outside the gas lobby, the argument is essentially won. We undertax gas. Depending how you count, Australia captures somewhere between 18 and 27 per cent of the profit from its own gas. The going rate for serious exporters around the world is 75 to 90 per cent.
Even former Treasury boss Ken Henry — not exactly a firebrand — turned up to the recent Senate inquiry and said the morally correct tax on windfall gas profits is 100 per cent, then added, more or less, just do it. He put it in terms anyone can feel: it's like someone selling your house, handing you 30 per cent, pocketing the other 70, and expecting you to be grateful they turned your asset into cash.
And there's a whole menu of ways to fix it. A flat 25 per cent tax on exports — the union and Greens favourite — that the Australia Institute reckons could raise around $17 billion a year. A price-based royalty that automatically climbs when prices spike. A Norway-style "Fair Share Levy", pushed by Ross Garnaut and Rod Sims, where the government acts like a silent business partner, sharing the costs and the profits.
These are real, costed, credible. We could pick one tomorrow. But notice what every single one is about: collecting the money. Not one of them tells you what we do with it once it's in the bank.
The hole in the middle
That gap matters more than it sounds, because gas money is a strange kind of money. It's finite — the gas runs out. It's volatile — a war doubles the price one year, a glut halves it the next. And if we mean a word we say about climate, it's meant to shrink. We are trying to wind this industry down.
Now line that up against what people want to spend it on: the NDIS. Dental in Medicare. Schools. Housing. Permanent, growing things. You do not fund a forever-cost out of a sunset-revenue. That's not left or right — it's arithmetic. Tie the disability scheme to the gas price and you've built a machine that breaks the first time the price drops.
There's a nastier version, too. The day the federal budget depends on gas money to keep the NDIS running, you've created a powerful new lobby for keeping the gas flowing — and that lobby is us. Nurses, parents, carers, Treasury. The money you raised to do good things quietly becomes a reason never to turn the tap off.
Norway worked this out decades ago. Their trick was never just taxing gas hard — it was refusing to spend the windfall. They bank it in a national fund, invest it across the whole world, and only ever spend the modest returns. The oil runs out; the fund doesn't. They turned a hole in the ground into a permanent income.
We already own this machinery, by the way — it's called the Future Fund, and it even has a little sibling literally named the DisabilityCare Australia Fund. The hard part isn't the plumbing. It's the discipline not to spend the windfall the second it lands.
Two jobs, two tools
Here's the detail that made me sit up, and it comes from the most climate-friendly proposal on the table. The Fair Share Levy's big selling point is that it won't reduce how much gas we dig up. Brilliant, if your only goal is revenue. But its own authors know a gas revenue tax does nothing to cut emissions — so they pair it with a separate levy aimed at pollution.
That's the whole thing in a sentence. Taxing gas and reducing gas are two different jobs that need two different tools. The catchy "tax the gas to fund the NDIS" line smudges them into one. The smudge is where the trouble lives.
And then there's the "reform" the industry likes
While the Greens push hard on collecting, there's another "overhaul" doing the rounds — and it's the one the gas industry actually applauds. That alone should make you suspicious.
In May, Pauline Hanson released One Nation's gas policy to headlines about a "Nordic-style plan". Strip the branding and here's the machinery: scrap the existing profits tax, hand gas companies a 30 per cent rebate on exploration, and in exchange give the government the option to take up to a 30 per cent stake in future projects — with the proceeds flowing into a sovereign wealth fund. She announced it at the gas industry's own conference. And on several outlets' reading, under it the companies wouldn't pay Australians a cent for the best part of a decade.
Now — credit where it's due, because being fair to the other side is the whole point of this piece. Hanson is the only politician in this entire debate to say the words "sovereign wealth fund" out loud. After everything I've just argued about banking the windfall, that should be the one policy I stand up and cheer.
So here's why I don't. A fund is only ever as good as what you put into it — and look at what feeds hers. She scraps the profits tax. She cutsexploration tax by 30 per cent. The fund's only fuel is an optional equity stake, on projects that wouldn't pay in for the best part of a decade. It's a beautifully labelled bucket with the tap turned off. You can call it a sovereign wealth fund all you like, but if nothing flows in, it's a slogan with a balance of zero.
And watch the Norway sleight-of-hand, because it's craftier than it first looks. Norway's model has three parts that only work together: a serious tax, an optional state stake, and a fund to hold the proceeds. Hanson has taken the two patriotic-sounding parts — the stake and the fund — and quietly dropped the one that does the actual work: the tax. She's kept the badge and the paint job and left the engine in the showroom.
Then there's the problem that crashes straight into the point of this whole piece. Hanson didn't just propose a fund — she committed One Nation to more drilling, borrowing Trump's "drill, baby, drill" for the occasion. A finite resource we are trying to wind down does not need a fresh tax break for digging more of it up. A fund that depends on endlessly expanding extraction isn't stewarding the decline of gas. It's betting the house on it never declining at all.
Then there's the why — and you can only say this part out loud if you stick to the record, so I will. In April, One Nation unveiled a roughly $1.3 million aircraft, gifted — Hancock Prospecting confirmed — through one of mining billionaire Gina Rinehart's companies, alongside half-million-dollar donations from a chief executive and a director inside Rinehart's Hancock empire. (For the record: there's no direct Rinehart-to-One-Nation donation on the electoral filings — it arrives via associates, gifts and flights.)
I'll let you decide how to read a gas policy the gas industry cheers, announced by a senator flying a mining magnate's plane. But the contrast with everything above couldn't be cleaner. One vision captures the public's share of a finite windfall now, and banks it in a fund with something actually flowing in. The other scraps the tax, subsidises more drilling, calls the empty bucket a sovereign wealth fund, and wraps the whole thing in the flag. Both call themselves reform. Only one of them is.
(A heads-up on that Crikey link: it's a metered site, so if you've used up your free reads this month you may hit a subscribe prompt. The reporting is solid; the wall is just theirs.)
Why won't my own side say this?
Which brings me to the uncomfortable question. The Greens are, by definition, the environment party. So why is their flagship a flat export tax feeding everyday spending — the version most exposed to every trap I've just described?
In fairness, they have answers. They've paired the tax with a domestic gas reservation, which is a genuine lever. They'd say the spending is the transition. And there's an honest case that in a cost-of-living crisis, relief now beats fund returns in 2050 — try telling someone choosing between heating and dinner to be patient for the sovereign wealth fund.
There's also the brutal logic of being a small party: a number on a placard beats a fiscal-drawdown rule every time. "Beer is taxed more than gas" fits on a sign. "Two-way cashflow rent tax feeding a ring-fenced fund with a sustainable drawdown" does not.
But I think we can hold two things at once. The collection argument is won — gas is undertaxed and we should fix it yesterday. And the spending argument has barely started — and it's the half that decides whether this money builds a bridge off fossil fuels or a budget that can never let go of them.
If we're finally going to make the gas companies pay, let's at least be the generation that didn't spend the lot on the way out the door. Tax the windfall — then bank enough of it to outlast the gas. That's not the boring half of the debate. It's the whole point of it.
One last thing, now that you've read this far. I'm not an economist. I'm not a journalist, and I don't work in Canberra. I saw a clip about beer and gas tax, got annoyed, and spent a few days reading Senate submissions and Treasury figures until it made sense. I'm also AuDHD, which means I hyperfocus on a loose thread until it unravels and I tend to say what I see rather than what's polite — no one is immune to bias, me included, but I'm at least bad at the strategic agreement that keeps these debates so comfortable. Everything above took persistence, not credentials — which is the part that should bother you. If someone with no special access and a public library's worth of resources can find the hole in the middle of this debate, the people we pay to govern have no excuse for talking around it. I didn't have the answers when I started. I just refused to stop at the questions. You don't need permission to do the same.
A note on the receipts: the tax figures come from submissions and evidence to the 2026 Senate Select Committee on the Taxation of Gas Resources — including the Australia Institute, IEEFA, The Superpower Institute and Ken Henry — plus the Australian Treasury and the ATO. One Nation's policy is as reported by Macquarie University's Lighthouse and The Conversation; the aircraft and donations are as reported by Crikey. Gas-tax numbers move with prices, so treat them as ballpark, not gospel. Check me. That's the point.