Gas companies in Australia borrow money from their own overseas parent companies. They charge themselves high interest on those loans. The interest payments reduce their tax bill in Australia. Santos made $50 billion in sales over a decade. It paid zero corporate tax. INPEX made $36 billion in revenue. It paid less than $500 million in total tax. The ATO found Chevron shifted $42 billion through a Delaware shell company. Chevron settled for $866 million. Related-party debt in the gas industry doubled in four years. It went from $52 billion to $107 billion. Interest flowing offshore hit $2.4 billion a year. Income tax from these companies fell from $1.9 billion to $547 million. New rules started in July 2024 to limit this. A Senate inquiry is investigating.
Related-Party Debt: How Australia’s Gas Industry Shifts Profit Offshore
Australia’s gas industry uses a financing structure that reduces its Australian tax bill by billions. It is legal. It has been challenged in court. And it is still happening.
Here is how it works.
The structure
A parent company sets up a funding entity in a low-tax jurisdiction. That entity borrows money on international bond markets at a low interest rate. It then lends that same money to the Australian subsidiary at a higher interest rate.
The Australian subsidiary claims the higher interest as a tax deduction. The money flows offshore to the parent company as interest payments. The profit that would have been taxed in Australia is now an expense.
This is not theoretical. It is Chevron’s documented structure, detailed in a unanimous 2017 Federal Court ruling. Chevron’s Australian subsidiary borrowed from a Delaware-based funding vehicle at 8.9% interest. The funding vehicle borrowed on US bond markets at 1.2%. The 7.7% difference was the margin that shifted profit offshore.
Chevron settled with the Australian Taxation Office for $866 million in May 2018.
$107 billion in related-party debt
The ATO told a Senate inquiry that oil and gas industry related-party debts doubled from $52 billion to $107 billion in four years. Third-party debt - borrowing from actual banks - was $3 billion to $6 billion by comparison.
Interest paid offshore to parent companies rose from $1.7 billion to $2.4 billion a year. Income tax payable by the same companies fell from $1.9 billion to $547 million.
The more companies owed to their own parent entities, the less tax they paid. The ATO described the pattern as aggressive. The industry has described it as standard corporate finance.
Interest paid offshore to parent companies rose from $1.7 billion to $2.4 billion a year. Income tax payable by the same companies fell from $1.9 billion to $547 million.
(Source: ATO Senate submission 139, 2017)
Santos: a decade of zero corporate tax
Santos has recorded nearly $50 billion in sales over the past decade. Corporate tax paid: zero.
Not low. Not reduced. Zero.
The Australia Institute confirmed it in their October 2025 analysis. Gas exporters “continue to pay no tax.” Santos is not an outlier in the industry.
Santos has stated that it complies with all Australian tax laws and that its tax position reflects the significant capital investment and financing costs associated with LNG projects.
(Source: Australia Institute, October 2025; ATO Corporate Tax Transparency Report 2023-24)
INPEX: under the threshold
INPEX’s Ichthys project has never paid corporate income tax. On $36 billion in revenue over 11 years, the company paid less than $500 million in total tax. FY23: $9 billion revenue, $6.7 million tax. That is 0.07%.
INPEX will not pay Petroleum Resource Rent Tax until at least 2030. The company told shareholders it would “continue to optimise” income tax.
FY24 saw a jump to $356.7 million on $7.63 billion income. Up from $6.7 million. That is 4.7%.
INPEX has stated it complies with all Australian tax obligations and that its tax position reflects the long construction period and accumulated deductions under existing law.
(Source: Michael West Media investigation; INPEX Australia Tax Transparency Report 2024; ATO transparency data)
The Petroleum Resource Rent Tax
The PRRT was designed to ensure Australians received a return on their own resources. In 2014-15, 95% of oil and gas projects paid zero PRRT. In 2023, PRRT payments were lower than 2001 despite record prices.
The mechanism is straightforward: exploration and construction costs compound at the bond rate plus 15% during the 7 to 8 year build period. Gorgon’s costs tripled before any gas was sold. By the time projects generate revenue, the accumulated deductions often exceed the taxable profit.
May 2023. The Treasurer announced a 90% deductions cap. The original forecast said it would raise $10.8 billion over four years. By budget time, that was revised down to $6.3 billion. A $4.5 billion gap.
Chevron made its first-ever PRRT payment in August 2025. INPEX says it will start paying from August 2027.
(Source: UTS study 2017; Treasury Laws Amendment 2024; Budget papers 2024-25)
The new rules: Debt Deduction Creation Rules
July 1, 2024. The ATO received a new tool: Debt Deduction Creation Rules. DDCR permanently disallows debt deductions from related-party financing in certain structures. Compliance guidance was finalised August 2025.
The ATO has warned about companies “dumping” debt via refinancing to reposition it outside the rules. The industry has been restructuring its debt arrangements in response.
Senator David Pocock described the situation as “an absolute rort” and “a total scam on Australians.” His comments reflect growing political frustration, though the companies involved maintain they operate within the law.
(Source: ATO PCG 2025/2; Senator Pocock Senate Hansard)
The comparison: Australia vs Qatar
Qatar earns $26.6 billion in royalties from comparable LNG volumes. Australia earns $800 million.
Fifty-six per cent of Australian gas exports pay zero royalties. The Australia Institute has noted that beer excise collects more than Chevron, Exxon, Woodside, and Shell pay in combined corporate tax.
That comparison is striking but worth unpacking. Beer excise is a volume-based tax on consumers, collected at production. Corporate tax is a tax on profit, applied after deductions. The two operate on fundamentally different bases. The comparison highlights how little corporate tax the gas industry pays, but it does not compare like with like.
Ken Henry, the former Treasury Secretary, has advocated a 100% windfall profits tax.
A Senate inquiry is active. CEOs from Santos, Woodside, INPEX, Chevron, Shell, and ConocoPhillips have been called to give evidence.
(Source: Australia Institute October 2025; ABC News March 2026; The Guardian March 2026)
JBIC: Japan’s role
Japan’s government bank, JBIC, issues sovereign-guaranteed bonds in international markets. It uses the proceeds to make direct loans to Australian LNG projects. More than $30 billion cumulatively.
Those loans come with supply guarantees for Japan. JBIC’s own press release from May 2024 describes “a framework with Woodside to create further opportunities for supplying LNG to Japan during emergencies.”
Japan’s sovereign bank funds Australian gas extraction. Japan secures supply. The profits flow offshore. The tax deductions remain in Australia.
(Source: JBIC press releases December 2012, May 2024; Friends of the Earth Japan October 2024)
The numbers
- $42 billion: Chevron’s related-party debt via Delaware funding entity
- $866 million: Chevron’s settlement with the ATO
- $107 billion: Industry related-party debt (up from $52 billion)
- $50 billion: Santos sales with zero corporate tax
- $36 billion: INPEX revenue, less than $500 million total tax
- $26.6 billion: Qatar’s royalties vs Australia’s $800 million
- $2.4 billion/year: Interest flowing offshore to parent companies
- $547 million: What income tax fell to from $1.9 billion
The other side
Debt structuring is standard corporate finance. Companies around the world use internal lending to fund operations, manage currency risk, and allocate capital. The gas industry is not unique in this regard.
The Chevron case, rather than proving the system failed, established important legal precedent. The Federal Court ruled unanimously that the ATO could challenge these structures. That ruling strengthened the ATO’s hand for future cases. The $866 million settlement demonstrated that the system can and does catch problems.
The DDCR rules that took effect in July 2024 directly address related-party debt deductions. The government has acted. The question is whether the rules go far enough and whether enforcement keeps pace with restructuring.
Santos and INPEX both argue they comply with all Australian tax laws as written. Their tax positions reflect capital-intensive, long-cycle LNG projects with enormous upfront costs that generate deductions under existing legislation. That is the structure Parliament created.
The beer excise comparison, while attention-grabbing, compares two fundamentally different tax types. Beer excise is a volume tax on consumers, collected at the brewery. Corporate tax is levied on profit after deductions. Comparing them side by side illustrates the scale of the issue but is not an apples-to-apples analysis.
The way forward
The DDCR rules are a start, but enforcement and monitoring will determine whether they work in practice. The ATO needs resources to track restructuring as it happens, not after the fact.
Mandatory thin capitalisation ratios would cap the amount of debt a company can hold relative to its equity. This would limit how much profit can be shifted through interest deductions. Many OECD countries already enforce these caps.
PRRT reform needs to apply to existing projects, not just new ones. The 90% deductions cap announced in 2023 only applies to projects that have not yet reached the PRRT threshold. The largest existing projects - Gorgon, Ichthys, Prelude - operate under the old rules.
Quarterly ATO reporting on related-party debt levels for resource companies would create transparency. Right now, the data emerges years after the fact through Senate inquiries and transparency reports. Real-time disclosure would allow Parliament and the public to track whether the new rules are working.
Sources
- Federal Court of Australia [2017] FCAFC 62 - Chevron Australia Holdings Pty Ltd v Commissioner of Taxation
- ABC News, “Chevron adds $7b to ‘in house’ loan, critics say move aims to shift income offshore,” 9 June 2016
- ATO Senate Submission 139, 2017 - Related-party debt data
- ATO Corporate Tax Transparency Report 2023-24
- ATO PCG 2025/2 - Debt Deduction Creation Rules compliance guidance
- Australia Institute, “Gas exporters pay no tax again,” October 2025
- Michael West Media, “INPEX and Australia’s gas rip-off,” January 2026
- INPEX Australia Tax Transparency Report 2024
- UTS Study on PRRT effectiveness - Kevin Morrison, “The Tale of Two Taxes,” 2017
- Treasury Laws Amendment (Delivering Better Financial Outcomes and Other Measures) Act 2024
- JBIC Press Release, “Framework with Woodside,” May 2024
- Friends of the Earth Japan, “Faces of Impact: JBIC and Japan’s LNG Financing,” October 2024
- Senator David Pocock, Senate Hansard, December 2025
- Budget Papers 2024-25 - Statement 5: Revenue
Related Investigations
Public Cost, Private Profit / Corporate Tax Avoidance
The $10.8 Billion Rebate
The Fuel Tax Credit Scheme hands back $10.8 billion a year to companies that burn diesel off-road. Mining takes roughly half. The cumulative bill is $122.7 billion. That is more than the Australian Army costs. One Rio Tinto executive lobbied the Treasurer personally to keep it. Eighty-six per cent of Australian mining is foreign-owned. The rebate flows to shareholders overseas. Australians pay foreign companies to dig up their own dirt.
The Singapore Shuffle
BHP sold Australian iron ore to its own Singapore subsidiary at below-market prices. The subsidiary sold at market rates. Profit booked in Singapore at 0 to 5 per cent tax. Not 30 per cent. BHP settled with the ATO for $529 million. Rio Tinto settled for roughly $1 billion. Chevron lost a Federal Court case over a $2.5 billion intercompany loan at an inflated interest rate. Glencore's ATO audit has been running since 2015. All settlements were made without admission of fault.
Gas, Royalties, and Who Gets What
Australia is one of the world's largest gas exporters. Yet it collects far less in royalties than comparable countries. Qatar earns 33 times more from similar volumes. Here is how the numbers break down.