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.

This is Australian taxpayers’ money subsidising an already filthy rich fossil fuel business.

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.

$12 billion of our tax dollars subsidise dirty fossil fuels every year

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.

Subsidy (values in $AU millions) 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20
Fuel tax credit scheme** $5,871 $6,117 $6,194 $6,913 $6,922 $7,241
Statutory effective life caps (accelerated depreciation)*** $1,000+ $1,930 $1,850 $1,745 $1,650 $1,650^
Concessional rate of excise levied on aviation gasoline and aviation turbine fuel $1,110 $1,260 $1,220 $1,260 $1,310 $1,400
FBT – Application of statutory formula to value car benefits $720 $740 $830 $850 $880 $940
FBT – Exemption for employee taxi travel to or from their place of work* $5 $5 $5 $5 $5 $5
GST – Tourism; domestic air or sea travel as part of an international arrangement* $55 $55 $55 $55 $55 $55
PRRT – Expenditure uplift rate* $55 $55 $55 $55 $55 $55
PRRT – Gas transfer price regulations* $55 $55 $55 $55 $55 $55
PRRT – Starting base and uplift rate for capital assets* $55 $55 $55 $55 $55 $55
Shipping – Investment incentives $30 $30 $30 $30 $30 $30
FBT – Alternatives to the logbook method of substantiating car expenses* $550 $550 $550 $550 $550 $550
FBT – Exemption for minor private use of company motor vehicle* $55 $55 $55 $55 $55 $55
FBT – Exemption for transport for oil rig and remote area employees in certain circumstances* $55 $55 $55 $55 $55 $55
NRT – Crude Oil Excise N/A N/A N/A N/A N/A N/A
NRT – Junior Minerals Exploration Incentive $6 $10 $9
NRT – Denial of refund of tax credits for losses at project end $5 $5 $5 $5 $5 $5
Total $9,641 $10,997 $11,014 $11,694 $11,692 $12,160

^ This is not an official figure. Values for this subsidy are not available for 2019-20 onwards and 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 Paper No. 1 2018-2019 Paper 1. and Australian Government 2017-18, 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 2018 published 29 January 2019.

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 $6 billion worth of credits and grants to cover the excise tax paid on petrol and diesel to reduce its costs to heavy users.

It’s 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 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 almost $2 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.

Meanwhile…renewables subsidies get slashed

Tax and other financial assistance to victims of natural disasters — those on the front lines of the extreme weather resulting from climate change — shows the federal government is fully aware of the increasingly devastating impacts of such disasters. Yet in recent years it has slashed $500 million from The Australian Renewable Energy Agency (ARENA) and reduced the Renewable Energy Target (RET) by 20%. Certain government members also continue to call for more cuts to renewables.

In an environment of falling corporate tax rates, tax-based fossil fuel subsidies leave us less able to fund the renewable energy and broader economic transition Australia so desperately needs to align itself with the goal of limiting global warming to below 1.5°C. Without such subsidies, perhaps we could afford more of the projects required for Australia to achieve zero emissions within 10 years.