How your tax dollars subsidise fossil fuels

National tax-based subsidies that encourage fossil fuel production and consumption add up to a whopping $12 billion every year, approximately $468 for each Australian.

Rather than tackling climate change and record levels of air pollution, instead our politicians choose to dole out billions to a dirty and dying industry – one that also bears few costs for its devastating impacts on our health and environment.

Using estimates from the Australian federal government’s Tax Benchmarks and Variations Statement (TBVS) and Treasury papers, the table below lists measures within the national tax system that encourage the production and use of fossil fuels. The fossil fuel industry’s enjoyment of such benefits is an amazing feat, with many companies “donating” hefty sums to Australia’s main political parties.

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’s likely some 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.

Each year, Australia gives $2 billion in tax breaks to the fossil fuel industry

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wdt_ID	SUBSIDY (VALUES IN $AU MILLIONS)	2017-18	2018-19	2019-20	2020-21	2021-22	2022-23
1	Fuel tax credit scheme**	6913	7168	7343	7838	7925	8380
2	Statutory effective life caps (accelerated depreciation)***	1745	1650	1,650^	1,650^	1,650^	1,650^
3	Concessional rate of excise levied on aviation gasoline and aviation turbine fuel	1260	1300	1090	700	1270	1320
4	FBT – Application of statutory formula to value car benefits	840	990	970	800	840	870
5	FBT – Exemption for employee taxi travel to or from their place of work*	55	55	55	55	55	55
6	GST – Tourism; domestic travel as part of an international arrangement*	55	55	55	55	55	55
7	PRRT – Expenditure uplift rate*	55	55	55	55	55	55
8	PRRT – Gas transfer price regulations*	55	55	55	55	55	55
9	PRRT – Starting base and uplift rate for capital assets*	55	55	55	55	55	55
10	Shipping – Investment incentives*	55	55	55	55	55	55

^ This is not an official figure. From 2019-20 onwards, exact values for this subsidy are unavailable, being listed by the Treasury’s Tax Benchmarks and Variations Statement 2020 as being worth >$1 billion. We have therefore assumed it is equal to the most recently reported value.

N/A = Estimates not available

* 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 2020-21, Paper 1; Australian Government Budget 2019-2020, Paper 1; and Australian Government 2018-19 Budget, Paper 1.

*** Three latest figures taken from Budget 2015-16 Mid-Year Economic and Fiscal Outlook (MYEFO) – Tax Expenditures. Item removed in subsequent MYEFOs.

All other measures and their corresponding values are estimates taken from the Australian government Treasury’s Tax Benchmarks and Variations Statement 2020 (published 29 Jan 2021)

Subsidies via the Fuel Tax Credit Scheme

By far the biggest contributor to the tax-based subsidies total is the Fuel Tax Credit Scheme, which provides around $8 billion worth of credits and grants to cover the excise tax paid on petrol and diesel to reduce its costs to heavy users.

In FY2019, 15% ($1.12 billion) of these fuel tax credits went directly to fossil fuel producers. We have included the full amount as it all goes to supporting fossil fuel consumption.

Subsidies via statutory effective life caps

Australia also pays out large subsidies through statutory effective life caps, which allow for accelerated depreciation and a shorter write-off period for many vehicles. These tax deductions cost over $1.5 billion worth of taxpayers’ 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.

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Tell Treasurer Josh Frydenberg: End polluter handouts!

Name*
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Your message (you can personalise and amend this, your name will be automatically added at the end)*
To the Treasurer Josh Frydenberg, Finance Minister Simon Birmingham, and Assistant Treasurer Michael Sukkar. I'm asking you to end polluter handouts, to protect our climate, our communities, and our future. I'm very concerned about climate change and the impact it is already having on the lives of ordinary people. And if we're going to stop climate change, we need to stop funding it. Our governments continue to fund climate change with over $12 billion worth of handouts to big polluters per year. About $470 from every Australian every year. These handouts encourage more pollution, discourage energy efficiency and block clean energy. They also put a massive black hole in the Federal budget and represent the most perverse form of corporate welfare. I want all political parties to commit to serious action on climate change to protect the future of our children, our communities, our economy and our environment. Sincerely,
Of course I want to get updates about this campaign from Market Forces!
- Yes

How your tax dollars subsidise fossil fuels

Subsidies via the Fuel Tax Credit Scheme

Subsidies via statutory effective life caps

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