Legislative framework

Under the terms of the 1979 Offshore Constitutional Settlement and the division of powers provided for under the Australian Constitution, the power to impose taxation and other charges on oil and gas production is divided between the Commonwealth and the States/Territories.

The Commonwealth holds title for all areas seawards of the outer boundary of the territorial sea while the States/Territories control areas landwards of this boundary. As part of the Settlement, a common mining code was adopted that covers all petroleum regulation in submerged lands.

Because the provisions of the Australian Constitution restrict the power of the States/Territories to impose certain types of charges, the major tools for revenue raising by these governments are royalty-based. However, the Commonwealth can levy excise as well as royalty and profit taxes. This distinction is the basis for the existence of several secondary taxation regimes applying to Australian oil and gas production.