Jason Barnes shares insights on the Future Made in Australia (Production Tax Credits and Other Measures) Bill 2024 now that it has passed both houses of Parliament. The final step for the Bill to become law is the Governor-General’s approval (Royal Assent) – this is expected to happen soon. Despite the Bill’s passage and general support for the proposed tax incentives for hydrogen and critical minerals production, concerns and uncertainties remain.
The Senate Economics Legislation Committee released its report on the Future Made in Australia (Production Tax Credits and Other Measures) Bill 2024 (Bill) on January 31, 2025 (Report). The Bill establishes the hydrogen production tax incentive (HPTI) and the critical minerals production tax incentive (CMPTI). Not surprisingly given the Government’s desire to pass the Bill before the upcoming Federal election, the Committee recommended that the Bill be passed without amendment as a priority. The Bill has now been passed by both houses of Parliament, with one change made by the Senate to ensure that uranium cannot be a critical mineral for the purposes of the CMPTI.
Does this mean everything is fine? Not exactly…
Submissions received and comments made at the public hearing for the inquiry in relation to the Bill were generally supportive of the Bill. However, those submissions and comments also indicate that concerns remain over a number of key aspects of the tax offset regime and, in particular, the CMPTI. Principally, they relate to:
- the structure of the tax incentives (for example, the indexation of payments, the level of incentive for investment, the commencement date for the production tax incentives and, in the context of the CMPTI, whether a 10% offset would be enough to entice new investment), and
- the community benefit principles (CBPs).
What are the concerns?
Submissions in respect of the CBPs ranged from the need to tighten the rules (in other words, clear metrics to determine whether a project proponent is compliant were required), to caution against applying them too rigidly so as to not increase costs and duplicate existing processes that were already extensive and onerous (which would outweigh the benefits of the tax offsets).
The Coalition Senators’ dissenting report also noted:
- a lack of clarity in their view (and some submissions and witnesses) about what the final CPB rules in respect of the CMPTI and the HPTI (Rules) will include, and
- how the CBPs will be measured, monitored and enforced (including the ATO’s role in this respect).
The Coalition noted in the report that the Bill should not be passed.
However, the Department of Treasury indicated that the Government would distinguish between how the CBPs will be designed and operated for general support programs versus the production tax incentives. The committee also noted the requirement for further consultation on the Rules. These are welcome signs given how important certainty is when applying tax laws.
Following the release of the Report, the Coalition proposed amendments to the Bill providing that the Rules must not:
- specify certain conditions (for example, about the application of enterprise agreements, and conducting environmental impacts and consultation with First Nations communities unless such consultation is already required by Australian law),
- specify that the amount of the CMPTI or the HPTI will be reduced where the additional conditions are not complied with.
These were to address Coalition concerns, expressed in the Report, that the CBPs could range from union agreements, duplicative environmental or Indigenous consultation practices, and onerous tax disclosures. However, the proposed amendments were rejected.
We’ll keep you updated on further developments regarding the HPTI and the CMPTI, including how they will be implemented (if they are implemented at all) following the upcoming Federal election.
Want to know more about the CMPTI? Read our insights on the measures intended to help turn Australia into a renewable energy superpower.