A damning investigation has found multinational companies are claiming billions of dollars in questionable deductions while exploiting the nation's natural riches, using accounting tricks allowed to flourish under a hands-off government approach that is dudding Australian taxpayers of royalties.

And in a stunning disclosure, the probe by Auditor-General Grant Hehir found nearly two decades had passed since a federal government audited the self-assessed royalty payments from the North West Shelf, a giant project located in the lucrative oil and gas region off the West Australian coast and jointly owned by Woodside, Shell, Chevron and BHP Billiton.

Underlining rising concerns over whether the $200 billion liquefied natural gas industry is paying its fair share of tax, Mr Hehir's report discovered a $5 billion bonanza of deductions claimed by the project in just one 18-month period.

Some of the Auditor-General's most damning criticism was reserved for a single $705 million cost deduction that helped reduce royalties owed to the taxpayer by $88 million. Mr Hehir argued the $705 million deduction may not have been technically valid.