How your taxes subsidise fossil fuels

There are a number of national tax-based subsidies that encourage fossil fuel production and consumption, adding up to a huge total of almost $11 billion each year.

Using estimates from the federal government’s Tax Expenditure Statement and Treasury papers, the table below lists a range of measures within the Australian federal tax system that encourage the production and use of fossil fuels. This is Australian taxpayers’ money subsidising fossil fuels.

These figures are only ever going to be a low estimate. Fossil fuel subsidies can be difficult to find in the tax system and it is likely that some will have been overlooked. These figures do not include state-level subsidies, direct government handouts to coal, oil and gas projects, or public financing of international projects through export credit agencies or international financial institutions.

Subsidy (values in $AU millions) 2014-15 2015-16 2016-17 2017-18 2018-19
Fuel tax credit scheme** $5,871 $6,117 $6,194 $6,308 $6,514
Statutory effective life caps (accelerated depreciation)*** $1,000+ $1,930 $1,850 $1,745 $1,650
Concessional rate of excise levied on aviation gasoline and aviation turbine fuel $1,110 $1,260 $1,230 $1,280 $1,330
FBT – Application of statutory formula to value car benefits $720 $740 $840 $850 $910
FBT – Exemption for employee taxi travel to or from their place of work* $5 $5 $5 $5 $5
GST – Tourism; domestic air or sea travel* $55 $55 $55 $55 $55
PRRT – Expenditure uplift rate* $55 $55 $55 $55 $55
PRRT – Gas transfer price regulations* $55 $55 $55 $55 $55
PRRT – Starting base and uplift rate for capital assets* $55 $55 $55 $55 $55
Shipping – Investment incentives $30 $30 $30 $30 $30
FBT – Alternatives to the logbook method of substantiating car expenses* $550 $550 $550 $550 $550
FBT – Exemption for minor private use of company motor vehicle* $55 $55 $55 $55 $55
FBT – Exemption for transport for oil rig and remote area employees in certain circumstances* $55 $55 $55 $55 $55
Total $8,616 $10,962 $11,029 $11,098 $11,319

* Values represent the middle value of a range estimated by Treasury. i.e. 5 is reflective of a Treasury estimate of 0-10, 55 reflective of a Treasury estimate of 10-100.

** Values taken from Australian Government Budget 2016-17, Budget Paper 1. and Australian Government 2017-18, Budget Paper 1.

*** Three latest figures taken from Budget 2015-16 Mid-Year Economic and Fiscal Outlook – Tax Expenditures

All other measures and their corresponding values are estimates taken from the Australian government Treasury’s Tax Expenditure Statement published 25 January 2018.

By far the largest contributor to the tax-based subsidies total is the Fuel Tax Credit Scheme, which provides around $6 billion worth of credits and grants to cover the tax paid on fuel to reduce its overall costs to heavy users. It is estimated that some 20% of these fuel tax credits go directly to fossil fuel producers. We have included the full amount as it all goes to supporting the consumption of fossil fuels.

Australia also pays out significant subsidies through statutory effective life caps, which allow for accelerated depreciation and a shorter write-off period for many vehicles. These tax deductions cost almost $2 billion worth of tax-payers’ money each year.

There are also a range of tax incentives for fossil fuel exploration and production, as well as measures encouraging aviation, shipping and motor vehicle use.