Every time iron ore, coal or LNG prices jump, mining and gas companies see their profits swell. A big question follows: how much of that windfall reaches the public that owns the underlying resources? A new report from the tax reform think tank Prosper Australia argues the answer is “not enough”. It estimates that Australia’s resource profits tax and royalty settings leave around $45 billion a year uncollected across federal and state governments. The figure is a modelled estimate, not money sitting in a bank account, but it raises a fair question about how well the system works when prices boom.
Why Australia’s Resource Tax System Is Back in the Spotlight
The core argument is simple. Coal, iron ore and gas can only be sold once, and companies don’t create them. Miners and producers should earn a fair commercial return on the capital, technology and skill they bring. But when prices surge well above normal levels, the report says the public should share meaningfully in the upside.
The report calls the missing feature “boom sensitivity”. A boom-sensitive system collects automatically more when prices and profits climb, without needing new legislation each time. Prosper Australia’s modelling suggests that if Australia had stronger settings, it would collect roughly $28 billion more a year from mining (coal, iron ore, gold, copper, lithium and others) and $16–18 billion more from petroleum (oil, gas and LNG). These are one think tank’s estimates, so they are best read as a case for debate rather than a settled budget number.
How Australia Compares With Norway, Alaska and Other Resource-Rich Regions
The report benchmarks Australia against Norway, Alaska, Chile, Peru, Québec and Queensland’s coal sector, using a “public-capture ratio”: how much of the value created by the resource sector ends up with the public.
- Petroleum: Australia looks weak next to Norway and Alaska. The authors adjusted Norway’s figures to strip out direct state participation, so the comparison is fairer to Australia’s private-operator model.
- Mining: Australia performs better than expected, and higher than Québec, Chile and Peru. That is partly explained by large, mature iron ore and coal operations, and the report is clear this doesn’t mean the royalty design is ideal.
- The big caveat: Collections depend on commodity mix, price cycles, project age, costs and tax administration, so cross-country comparisons are never perfectly clean.
The PRRT Problem: A Tax That Looks Strong on Paper
The Petroleum Resource Rent Tax (PRRT) was built to capture super-profits from offshore oil and gas projects. In theory, that makes it highly boom-sensitive. In practice, the report says it has not delivered strong or timely revenue, and current forecasts show no sustained improvement.
The lesson the authors draw is not that resource rent taxes fail. It is that design details matter. Overly generous deductions or complex rules can leave a tax that looks impressive on paper and collects little in reality.
Queensland Coal: A Real-World Test of Boom-Sensitive Royalties
The most concrete evidence comes from Queensland. Since 1 July 2022, the state has applied progressive royalty bands to coal, so the rate climbs as the price rises.
| Coal price band (per tonne) | Royalty rate on that portion |
|---|---|
| First $100 | 7% |
| $100–$150 | 12.5% |
| $150–$175 | 15% |
| $175–$225 | 20% |
| $225–$300 | 30% |
| Above $300 | 40% |
Before the change, the top rate was 15% on the portion above $150 a tonne. The report points out that active coal mines in Queensland rose from 53 in 2021–22 to 60 in 2024–25, while coal employment stayed steady at around 26,000 workers. Critics have since blamed the royalties for job cuts and reduced output at some mines, but the report argues that falling prices and rising costs also play a role, and that some mines become uneconomic in any well-designed regime. The latest state data shows 58 active coal mines in 2025–26, so the debate is clearly ongoing.
What Reform Could Look Like
The report makes two broad suggestions: modernise royalty systems and fix the petroleum under-capture, while still letting viable projects earn a commercial return. Specific ideas include:
- Market-linked royalties that rise when commodity prices exceed long-run norms.
- A minimum royalty floor plus a boom-sensitive layer tied to prices, profits or margins, which guarantees a baseline return while production continues.
- Judging any future petroleum tax reform against one test: do public returns rise when prices and profits surge?
The report does not design a new federal petroleum tax. The political and economic trade-offs, including investment certainty and regional jobs, would need careful debate before any change.
Frequently Asked Questions
How much could Australia collect with better resource taxes?
Prosper Australia estimates about $45 billion a year: roughly $28 billion from mining and $16–18 billion from petroleum. These are modelled estimates, not official government forecasts.
What does “boom sensitivity” mean?
It means government revenue rises automatically when commodity prices and industry profits surge, rather than staying flat when the resource is suddenly worth much more.
Would higher resource taxes drive investment away?
It’s one of the central debates. The report examines whether stronger public capture automatically deters investment and points to Queensland’s coal sector, where mine numbers and employment held steady after the 2022 royalty change. Critics argue that higher royalties add to pressure on mines when prices fall, so the evidence is contested.
Why is the PRRT considered underperforming?
The report says the tax is designed to capture super-profits but has not produced strong or timely revenue, and forecasts show no sustained improvement. It attributes this to design rules that are too generous or complex.
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