The present Petroleum Resource Rent Tax (PRRT) generates no revenue until the project sponsor gets back all their capital together with the permitted uplift factors. The problem with this approach is that no PRRT revenue is generated until many years later which might exceed the life of the project and/or outlast the high returns—the economic rent that should be taxed.

In this paper, the author suggests the PRRT be reformed so that any high return on funds employed will generate revenue irrespective of whether or not the project sponsor has recovered the investment, augmented by generous uplift factors. In the worked example above PRRT collection of $4.8 million per annum were provided for. These would add up to $48 million over a decade. However, in this specific example, no PRRT would have been collected under present arrangements. This example used a relatively small project with a modest profit, but it can be appreciated that the amounts could be very significant for the many projects operating in Australia at the present time.