Proposed gas tax changes could result in Albanese government fight for backing

Treasurer Jim Chalmers on Sunday announced proposed changes to the petroleum resource rent tax, which if adopted would raise another $2.4 billion over the next four years, including by limiting deductions for offshore liquefied natural gas projects.

It would set a 90 per cent cap on the proportion of PRRT-assessable income that can be offset by deductions.

Mr Chalmers has declared the money raised is "meaningful" and would "help fund our cost-of-living package and other priorities in the Budget."

The proposal comes after the Treasury Gas Transfer Pricing Review and the former Coalition government-commissioned Callaghan review of the petroleum resource rent tax found the current system was affecting the government's ability to raise revenue from the sector.

But the government figure of $2.4 billion falls well below a Greens commissioned Parliamentary Budget Office costing, which found scrapping the tax credits would add more than $92 billion to the fiscal balance over a decade.

The government will need either the Greens or the Coalition on board to get the changes through Parliament but neither party has confirmed whether it will support or oppose the proposal.

The Treasurer called on the opposition to not vacate the field and leave it to the Greens which he said was "not something the industry wants". Regardless, he still called on the Greens to support the PRRT changes to get a "fairer return on resources".

"The devil's in the detail," Shadow Treasurer Angus Taylor told the ABC's Insiders program.

Mr Taylor said "more broadly" the Coalition wanted to see the budget put "downward pressure on inflation".

"If you want to get prices down, typically you don't tax it more," he said.

Greens senator Dorinda Cox said her party wanted to see a "more ambitious" proposal but would ultimately need to see more detail before announcing a position.

"We could be raising absolutely tens of billions of dollars in PRRT tax across the country but instead, we are letting the gas corporations write this policy and then making the decisions ahead of budget week. It is a perfect example of what state capture represents Australia," she said.

"The gas companies in this country have been riding off the back of making record profits in the wake of the Ukraine war and the unfortunate circumstances there."

It is estimated that LNG earnings will reach $91 billion in 2022-23, three times that of 2020-21.

The government said most LNG projects weren't "expected to pay any significant amounts of PRRT until the 2030s".

Senator Cox said "proper changes" to the tax could mean more investment in "things that people actually need", including cost of living measures.

The government is at a stalemate with the Greens on the $10 billion Housing Australia Future Fund, a key bill for the government that is expected to fund 30,000 over the next five years.

APPEA Chief Executive Samantha McCulloch said the gas industry made "an enormous contribution to the Australian economy, $16.2 billion just this year flowing directly to state and federal budgets".

"We're supporting energy security, meeting almost 30 per cent of Australia's energy needs. We support 80,000 jobs along the supply chain. The industry is expected to invest more than $45 billion directly in goods and services in Australia," she said.

"Taxation is part of that but it's far more."

The federal government will hand down the budget on Tuesday.