Future Made in Australia (Production Tax Credit and Other Measures) Bill 2024 passed in the upper house with amendments

The Future Made in Australia (Production Tax Credit and Other Measures) Bill 2024 passed the upper house on 10 February 2025, with amendments, and will now go back to the House of Representatives. These amendments seek to exclude uranium from the list of critical minerals.

The two production tax incentives

The Bill establishes two production tax incentives designed to encourage onshore mineral processing and renewable hydrogen production. These incentives, which are provided once projects are operational and producing either hydrogen or processing critical minerals, aim to support Australia's transition to net-zero emissions.

The Critical Minerals Production Tax Incentive (CMPTI)

The CMPTI tax offset is a refundable tax offset for expenditure incurred in carrying out registered CMPTI processing activities. The amount of the CMPTI tax offset for an income year is equal to 10 per cent of the CMPTI expenditure incurred by an eligible company in that income year, subject to compliance with the community benefit principles. The CMPTI tax offset applies to eligible processing expenditure related to any of the listed ‘critical minerals’ for minerals processed and refined between 1 July 2027 and 30 June 2040, for up to ten years per project.

To qualify, the expenditure must:

  • Be incurred in conducting one or more CMPTI processing activities involving a 'critical mineral', generally referring to activities carried out at one or more facilities in Australia with the primary purpose of transforming a feedstock containing a critical mineral into a purer or more refined form of that mineral, distinct from the feedstock, or achieving a prescribed result
  • Not be 'excluded expenditure' such as capital expenditure, depreciation, financing costs, the cost of feedstock, and expenditure on intellectual property if such expenditure constitutes more than 10 per cent of the eligible company's CMPTI expenditure for the income year
  • Not be incurred on an 'excluded activity' (for example, mining, beneficiation, or manufacturing for reasons other than their mineral content).

The Hydrogen Production Tax Incentive (HPTI)

The HPTI aims to encourage companies to commence medium to large-scale production of renewable hydrogen in Australia by offering a refundable tax offset of $2 for each kilogram of eligible renewable hydrogen produced by an eligible company. The HPTI tax offset is also contingent upon compliance with the community benefit principles.

There is no cap on the amount a company can receive under the offset, but it is only available for a specified period. The hydrogen must have been produced in Australia during the income year, starting on or after 1 July 2027 and ending before 1 July 2040, and is restricted to a maximum of ten years per project.

Other requirements include:

  • The eligible entity must hold a production profile that relates to hydrogen
  • The hydrogen must have been produced during the offset period, which is the time the hydrogen production tax offset can be claimed
  • The production profile must be certified by the Clean Energy Regulator (CER), and the facility must be located in Australia, with a production capacity at least equivalent to an electrolyser with ten megawatts (MW)
  • A final investment decision must have been made for the facility before 1 July 2030
  • The hydrogen should have a registered origin certificate (PGO) indicating it was produced with emissions not exceeding 0.6 kg of carbon dioxide per kilogram of hydrogen, and if using grid electricity, it must meet grid matching requirements
  • No correction notice should be in force for the PGO certificate during the hydrogen production.

BDO comment

With an estimated cost of $13.7 billion over the next decade, the production-based tax offsets represent one of the most substantial packages specifically designed to support the resources sector in recent history. This support mechanism comes at a pivotal time, especially given the current uncertainties surrounding the administration of the Inflation Reduction Act within the United States.

Although uranium is not currently listed on the Australian Government’s list of critical minerals, the exclusion of uranium projects from the production tax offsets may, in time, be seen as a missed opportunity to develop a mineral that could help achieve Australia’s transition to net-zero emissions.

While the production offset period is not until 2027-2028, it is advisable for companies to align their strategies to capitalise on these concessional incentives. Additionally, with a federal election occurring before the production period commences, companies should stay informed about any potential changes that could impact their eligibility.

How BDO can help

If you have any questions about this update or want support with your R&D initiatives, contact us today.