What would a gas tax mean for ASX energy stocks?

It appears momentum is growing for a gas and coal tax in Australia amidst the global energy crisis.

According to The ABC, Unions, the Greens, crossbenchers and One Nation are among those who want gas profits levied, with pressure mounting on Labor to respond to growing calls to reform the current tax system.

What is a gas tax?

Currently, the government collects about $1.5 billion in annual revenue through the Petroleum resource rent tax (PRRT).

In simple terms:

• It’s a tax on profits, not on total sales
• Companies only pay PRRT after they’ve made enough money to cover all their costs
• Once a project becomes really profitable, the government takes a share of those extra profits.

However, some politicians are now pushing for reforms to the current model.

ACT independent senator David Pocock has criticised this current system as a “rip-off”.

He said Australia should have a flat 25 per cent tax on all gas exports, which was the proposal also put forward by the Australian Council of Trade Unions (ACTU) last year.

The Australia Institute has estimated it would raise about $17 billion a year.

What’s happening now?

According to The ABC, The Coalition and gas exporters have pushed back against this proposed change, arguing the current energy crisis sparked by war in the Middle East was the worst time to act. 

They warned that a new gas tax would discourage investment, create uncertainty, and weaken energy security and job growth.

Total taxes and royalties paid by the gas industry were $21.9 billion in 2024-25, according to the sector.

However, The Department of Prime Minister and Cabinet have reportedly asked the Treasury to model “new levy options” to tax windfall gas and thermal coal company profits ahead of the federal budget in May.

In the rationale for the request, which also included exploring reforms to the PRRT, the department said that energy producers should not benefit from high international prices at the expense of domestic customers.

How does this impact energy stocks?

It’s important to understand that any sort of concrete tax changes have not been promised.

If tweaks were to be made to the current system, it could impact energy stocks in a few ways. 

For ASX-listed oil, gas, and coal companies, a new “gas tax” (especially something like a flat export levy) would likely reduce earnings. 

Companies such as Woodside Energy Group Ltd (ASX: WDS) or Santos Ltd (ASX: STO) could see a direct hit to net profit, especially on export-heavy LNG projects.

However, even with an increased tax, these companies will likely remain very profitable.

Some investors may view the sector as still attractive, just less lucrative than before.

Further down the pipeline, second-order effects spread across producers, infrastructure, services, and even utilities – some negatively, some potentially positively.

For example, companies such as AGL Energy Ltd (ASX: AGL) might actually benefit if policy shifts increase domestic supply or lower local gas prices.

While this is all hypothetical, developments are worth monitoring for ASX energy investors, as eyes will be on the federal budget in May.

The post What would a gas tax mean for ASX energy stocks? appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Bell has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.