TAXATION OF THE AUSTRALIAN OFFSHORE INDUSTRY: A PERSPECTIVE

Abstract

There is an extensive list of taxes (direct and indirect) that potentially apply to companies that explore and produce oil, gas or other hydrocarbons in Australia’s offshore waters. These taxes can include income tax, petroleum resource rent tax, royalties, goods and services tax, customs duties and fringe benefits tax. However, are such companies that produce in Australia taxed more than their counterparts in offshore locations elsewhere around the globe? This paper provides an insight into the principal forms of direct taxation that apply to the Australian offshore production industry. It examines the nature of the taxes applied, the rate of taxation and how the tax take has moved over the years since the first offshore exploration permits were granted in Australia in the late 1950s. The paper gives examples of how in practice each of the relevant taxes would apply throughout the life of a field and compares the taxation burden in Australia to that in other key offshore producing jurisdictions such as the UK, US and Norway. The paper concludes by looking at some of the economic and political factors that must be addressed by the Australian Government if Australia is to maintain a fiscally balanced tax regime to encourage further investment in our offshore industry.