Purpose of the Bill

The purpose of the Future Made in Australia (Production Tax Credits and Other Measures) Bill 2024 (the Bill) is to introduce tax offsets in relation to hydrogen and critical minerals production projects through amendments to the Income Tax Assessment Act 1997 (ITAA 1997), the Taxation Administration Act 1953 (TAA) and the Income Tax Assessment Act 1936 (ITAA 1936). The Bill also separately makes changes to the ITAA 1936 and the TAA in relation to the shortfall interest charge (SIC). Furthermore, the Bill amends the Aboriginal and Torres Strait Islander Act 2005 (ATSI Act) to introduce changes to borrowing for Indigenous Business Australia (IBA), among other things.

Structure of the Bill

The Bill is comprised of 3 schedules.

Schedule 1 concerns the proposed Hydrogen Production Tax Incentive (HPTI) that will be available to companies between 1 July 2027 and 30 June 2040.

• Part 1 of Schedule 1 inserts proposed Division 421 into the ITAA 1997 to introduce the Hydrogen Production tax offset (HPTO) and to set out relevant details, such as the eligibility period and criteria, offset amount, certification processes, reporting requirements and decision reviewability. This Part also makes minor amendments to the TAA.
• Part 2 of Schedule 1 introduces changes to the ITAA 1936 and the TAA in relation to the application of the SIC to tax offsets.
• Part 3 of Schedule 1 amends the ITAA 1936 to subject the HPTO to the general anti‑avoidance rule (GAAR) in Part IVA of that Act.

Schedule 2 concerns the proposed Critical Minerals Production Tax Incentive (CMPTI).

• Part 1 of Schedule 2 inserts proposed Division 419 into the ITAA 1997 to introduce the CMPTI tax offset and to set out relevant details, such as the eligibility period and criteria, offset amount, registration processes and decision reviewability, among other things.
• Part 2 of Schedule 2 amends the ITAA 1936 to subject the CMPTI tax offset to the GAAR in Part IVA of that Act and introduces certain reporting requirements. This Part also makes minor amendments to the ITAA 1997 and the TAA.

Schedule 3 makes amendments to the ATSI Act in relation to the borrowing of money by IBA, and in relation to the powers of the Minister to make rules concerning IBA financing.

Background

The Future Made in Australia (FMIA) policy was first announced in October 2020 when then Opposition Leader Anthony Albanese proposed in his Budget Reply speech a ‘blueprint for local manufacturing jobs and skills’ to bolster domestic rail manufacturing, defence industry development and jobs for apprentices. Since then, the scope and focus of FMIA appears to have expanded to encompass:

• investment in renewable energy
• investment in National Broadband Network development
• the establishment of the National Reconstruction Fund[1]
• energy grid modernisation
• investment in defence, skills, jobs and infrastructure through the AUKUS nuclear-powered submarine acquisition agreement
• investment in the Solar Sunshot program.

The 2024–25 Budget, handed down on 14 May 2024, allocated $22.7 billion over a 10‑year period for the purpose of the FMIA policy to support private sector investment in key industries, science and technology innovation, strategic critical minerals investment, enhanced approvals processes and improvements to skills training (see Budget Strategy and Outlook: Budget Paper No. 1, pp. 14–15). Of this $22.7 billion allocation, $15.1 billion was specifically assigned to support hydrogen and critical minerals production (see Budget Measures: Budget Paper No. 2, pp. 65–73).

Pursuant to these commitments, the Government has passed the following FMIA-related legislation:

• Future Made in Australia Act 2024 (FMIA Act), which establishes the National Interest Framework (NIF), creates a framework to identify sectors that align with the NIF and enhance opportunities to boost private investment, introduces obligations to comply with community benefit principles, and excludes certain activities from FMIA support, including those involving coal, crude oil or natural gas extraction
• Future Made in Australia (Omnibus Amendments No. 1) Act 2024, which makes technical amendments in relation to the Export Finance and Insurance Corporation (now Export Finance Australia), and in relation to the Australian Renewable Energy Agency in order to reform governance arrangements and support research, development and commercialisation of renewable energy technology
• Future Made in Australia (Guarantee of Origin) Act 2024 (FMIA GO Act), which provides a framework that may be voluntarily entered into to register persons, certify products (such as hydrogen) and renewable electricity, and create and register (via the Guarantee of Origin (GO) Register) non-tradeable Product Guarantee of Origin (PGO) certificates and tradeable Renewable Electricity Guarantee of Origin (REGO) certificates. The FMIA GO Act also implements cost recovery, audit and enforcement mechanisms
• Future Made in Australia (Guarantee of Origin Charges) Act 2024, which imposes (subject to exemptions) charges (the amounts of which are specified by regulation) for the purpose of cost recovery on registered production profiles, delivery profiles and consumption profiles for products, and on certain electricity generation and storage systems
• Future Made in Australia (Guarantee of Origin Consequential Amendments and Transitional Provisions) Act 2024, which amends the Clean Energy Regulator Act 2011, the National Greenhouse and Energy Reporting Act 2007 and the Renewable Energy (Electricity) Act 2000 to include references to relevant FMIA legislation and introduce transitional provisions and rules.

This Bill, which has been developed following stakeholder consultation regarding the proposed HPTI and CMPTI, seeks to ‘partially implement’ the ‘Future Made in Australia – Making Australia a Renewable Energy Superpower’ measure in Budget Measures: Budget Paper No. 2 (pp. 67-70) by incentivising certain kinds of hydrogen and critical minerals projects through tax offsets (Explanatory Memorandum (EM) for the Bill, pp. 1–2).

The Government considers hydrogen production ‘to be an important part of meeting the future energy needs of Australia and the global economy’, noting that (EM, p. 6):

Australia’s world class renewable energy resources mean that we are well placed over the longer term to produce renewable hydrogen at internationally competitive prices. Additionally, Australia is close to key markets, and our major trading partners have expressed a significant appetite for importing renewable hydrogen or its derivatives. [emphasis added]

Similarly, in relation to critical minerals, the Government considers that (EM, p. 34):

The supply of critical minerals will be crucial for facilitating [the shift towards renewables and low carbon technologies], as many critical minerals are essential components of technologies that will form part of the transition to net zero emissions. As a result, the world’s demand for these minerals is expected to substantially increase in the coming decades. Australia has a significant natural endowment of critical minerals and a highly developed mining sector with expertise in extraction and beneficiation … [emphasis added]

The Bill will add to pre-existing Federal Government policies and programs concerning hydrogen and critical minerals production, such as the:

• National Hydrogen Strategy 2024 (NHS)
• Critical Minerals Strategy 2023–2030
• Hydrogen Headstart Program
• Regional Hydrogen Hubs Program
• Critical Minerals Development Program.

The Bill will also operate alongside state and territory government strategies and programs in relation to hydrogen and critical minerals. Each state and territory has implemented policies, strategies or programs at various scales to incentivise the production, sale or commercialisation of hydrogen, such as the Western Australian Renewable Hydrogen Strategy 2024–2030 and the South Australian Hydrogen Power SA program (see NHS, pp. 18–33). All jurisdictions (except the ACT) have also developed critical minerals strategies or are undertaking critical minerals-related projects, such as the Western Australian Battery and Critical Mineral Strategy 2024–2030 and the New South Wales Critical Minerals and High‑Tech Metals Strategy 2024–35.

Furthermore, the Bill will exist in a global context in which a range of subsidies and tax incentives are available that aim to incentivise hydrogen and critical minerals production and investment. For example, the United States has implemented:

• the Clean Hydrogen Production Tax Credit which provides ‘a varying, four-tier incentive depending on the carbon intensity of the hydrogen production process’, up to the value of USD $3 per kilogram and
• the Advanced Manufacturing Production Credit which provides a ‘a tax credit equal to 10% of the cost of production’ to the producers of specified critical minerals used in renewable energy generation, storage and related manufacturing.

It is not clear how these tax credits may be affected by policy reforms being pursued by the second Trump administration.

Similarly, Canada offers a Critical Mineral Exploration Tax Credit of 30% to ‘investors in companies exploring for certain critical minerals … based [on] the amount invested’.

According to the Platform for Collaboration on Tax:

Tax incentives—various forms of preferential tax treatment—have been widely used by countries to encourage desired activities and behaviors. However, while tax incentives can be effective in promoting specific goals, they can also erode tax revenue, create unintended distortionary and distributive consequences, and pose governance challenges.

Key issues and provisions

Hydrogen Production Tax Incentive (Part 1 of Schedule 1)

Overview

The HPTI is intended to be implemented by inserting proposed Division 421 into the ITAA 1997. The HPTI will be jointly administered by the Clean Energy Regulator (CER) and the Australian Taxation Office (ATO), with the CER primarily responsible for certification matters, and the ATO primarily responsible for oversight of the relevant tax offset (EM, pp. 26–27). In general terms, proposed Division 421 provides that between the period of 1 July 2027 and 30 June 2040 certain companies are entitled to a HPTO for each kilogram of hydrogen produced in Australia during an income year, subject to certain conditions (proposed section 421-15 provides details about when hydrogen is taken to be produced). In general, the HPTO is $2 per kilogram of hydrogen, although a reduced rate may apply in certain circumstances (proposed section 421-10). Information about the amount of HPTO to which an entity is entitled must be made publicly available by the Commissioner of Taxation (the Commissioner) (item 5 of Schedule 1). Subject to certain conditions, some decisions that may or must be made in relation to a company’s eligibility for the HPTO are subject to review by the Administrative Review Tribunal (ART) pursuant to proposed section 421-75.

What are the eligibility conditions for the HPTO?

Each of the following project-related conditions must be satisfied before a company is eligible for the HPTO:

• there must be a registered Product Guarantee of Origin (PGO) certificate that relates to a specific kilogram of hydrogen which states that (proposed paragraph 421-5(1)(b)):
  • the kilogram of hydrogen was produced at a facility listed in a production profile in accordance with a specified production pathway and
  • the kilogram of hydrogen has a production emissions intensity[2] less than or equal to 0.6 kilograms of CO2 per kilogram of hydrogen and
  • for hydrogen production facilities connected to an electricity grid, the electricity obtained from the grid and used by that facility to produce the kilogram of hydrogen satisfies grid matching requirements.[3]
• production profiles must be certified in relation to a specific facility and production pathway (proposed paragraph 421-5(1)(c))
• the kilogram of hydrogen must be produced during the offset period for a specific facility and production pathway (proposed paragraph 421-5(1)(d))
• the initial reconciliation period for the relevant PGO certificate must have ended (proposed paragraph 421-5(1)(e))
• there must be no correction notice in force for the relevant PGO certificate (proposed paragraph 421-5(1)(f)).

Key term 1 – what are ‘registered PGO certificates’?

A registered PGO certificate is defined in  item 4 of Schedule 1 (which would amend the Dictionary at subsection 995-1(1) of the ITAA 1997) as a PGO certificate that:

• has been registered by the CER under section 56 of the FMIA GO Act and
• has not been invalidated by the CER under section 64 of the FMIA GO Act.

A PGO certificate is a certificate under section 49 of the FMIA GO Act created by the holder of a production profile in relation to a batch of product produced at a facility specified in that production profile. (See the Bills Digest for the  Future Made in Australia (Guarantee of Origin) Bill 2024 for further information.)

Key term 2 – what are ‘production profiles’ and ‘production pathways’, and what are the rules for ‘production profile’ certification and registration?

The Bill provides that the terms production profile and production pathway have the same meaning as in the FMIA GO Act (see item 4 of Schedule 1). (See the Bills Digest for the  Future Made in Australia (Guarantee of Origin) Bill 2024 for further information.)

Under subsection 30(2) of the FMIA GO Act, a production profile for a product contains information about the product including, among other things:

• the name and location of the facility where the product is produced
• who owns and operates the facility
• the production pathway for the product being produced.

The term production pathway is defined in section 29 of the FMIA GO Act as a set of production modules. A production module is a step in the production of products, including the use of particular equipment and processes.

Various parts of the Bill operate only in relation to production profiles that are registered and certified.

• Registered production profiles:
  • Pursuant to item 4 of Schedule 1, a registered production profile is a production profile that has been registered under section 33 of the FMIA GO Act, and which has not been cancelled or surrendered under section 45 and section 48 of that Act.
• Certified production profiles:
  • The CER must certify a production profile if specific conditions outlined in proposed section 421-55 are satisfied, including that:
    • the facility that is the subject of the production profile is located on a single site in Australia and
    • the facility has capacity to produce hydrogen in accordance with a specified production pathway that is at least equal to an electrolyser with theoretical capacity of 10 megawatts and
    • the production pathway specified in the production profile does not involve coal gasification, steam reformation of natural gas or other processes prescribed in the regulations and
    • a Final Investment Decision (FID) has been made before 1 July 2030 to construct or upgrade the facility that is the subject of the production profile.

Key term 3 – what is the ‘offset period’?

The offset period is the period during which the HPTO can be claimed in relation to a hydrogen project. In general terms, pursuant to proposed section 421-30, the offset period is a period between 1 July 2027 and 30 June 2040 that:

• starts on the first day of an income year specified by the holder of a registered production profile and
• ends 10 years after the start date, or on 30 June 2040, whichever is earlier.

Key term 4 – what is the ‘initial reconciliation period’?

The initial reconciliation period for a registered PGO certificate is a period during which the accuracy of information contained in a PGO certificate is verified (proposed section 421-35). The initial reconciliation period:

• starts after the end of the financial year in which the PGO certificate was registered, and
• ends, either
  • when the holder of a production profile confirms, in accordance with sections 60 and 61 of the FMIA GO Act, that information provided to the CER in relation to the activity undertaken pursuant to the PGO certificate is correct or
  • if the holder of a production profile identifies errors in the information provided to the CER in relation to PGO activity, when the CER decides, pursuant to section 62 of the FMIA GO Act, whether to correct the registered PGO certificate.

Key term 5 – what is a ‘correction notice’?

A correction notice is a notice that must be issued for a registered PGO certificate by the CER if, after the end of the initial reconciliation period, the CER is satisfied that the production emissions intensity requirements and/or any applicable the grid matching requirements in proposed section 421-5 have not been met (see proposed section 421-40). Companies are not eligible for the HPTO whilst a correction notice is in force (see proposed paragraph 421‑5(1)(f)).

Correction notices may be revoked by the CER in certain limited circumstances where material errors have been made. For example, if the initial reconciliation period has not actually ended, or if the emissions intensity requirements or grid matching requirements have actually been met, the correction notice may be revoked (proposed subsection 421‑40(4)).

What types of companies are eligible for the HPTO?

The HPTO is only available to companies that, in addition to the abovementioned conditions, also satisfy the following requirements (proposed subsection 421-5(2)):

• the company must be a constitutional corporation, which is defined in the Dictionary at section 995-1 of the ITAA 1997 as a corporation to which section 51(xx) of the Australian Constitution applies (that is, a foreign corporation, or a trading or financial corporation formed within the limits of the Commonwealth) or a body corporate that is incorporated in a territory and
• the company must have created a registered PGO certificate under the FMIA GO Act in the course of carrying on an enterprise in Australia (excluding external territories and certain offshore areas)[4] and
• when carrying on that enterprise during an income year, the company must have been an Australian resident with an ABN or a foreign resident with a permanent establishment in Australia and an ABN and
• the company must not be an exempt entity (that is, an entity that is not liable to pay Australian income tax) and
• the company must comply with any applicable HPTO community benefit rules.

Key term 6 – what are the ‘HPTO community benefit rules’?

Under proposed section 421-45, the Minister may make, by legislative instrument, HPTO community benefit rules that:

• apply to specified classes of companies for an income year
• specify conditions that must be met before a company is eligible for the HPTO
• specify circumstances in which a company’s HPTO rate may be reduced by a specified portion.

If the Minister decides to make HPTO community benefit rules, the Minister must have regard to community benefit principles outlined in subsection 10(3) of the FMIA Act (proposed subsection 421-45(2)). The community benefit principles are that the FMIA policy should provide community benefits by, among other things, promoting safe, secure and well-paid jobs, developing a more skilled and inclusive workforce and strengthening domestic industrial capabilities and stronger local supply chains.

Critical Minerals Production Tax Incentive (Part 1 of Schedule 2)

Overview

The CMPTI is intended to be implemented by inserting proposed Division 419 into the ITAA 1997. The CMPTI will be jointly administered by the Secretary of the Department of Industry, Science and Resources (DISR) (the Industry Secretary) and by the ATO, with the Industry Secretary primarily responsible for matters concerning registrations and approvals, and the ATO primarily responsible for oversight of the relevant tax offset (EM, pp. 70–72). In general terms, proposed Division 419 provides that, subject to specific conditions, between the period of 1 July 2027 and 30 June 2040, certain companies are entitled to a CMPTI tax offset equivalent to 10% of certain expenditure in the course of producing critical minerals during an income year. This amount may, however, be reduced in some circumstances (see proposed section 419-10). Proposed section 419-15 lists 51 minerals, which reflect those minerals listed on Australia’s Critical Minerals List[5] as at 14 May 2024 (EM, p. 54). Proposed section 419-15 also allows critical minerals to be prescribed by regulations. Unlike companies claiming the HPTO, companies engaged in projects eligible for the CMPTI tax offset must prepare an annual report containing prescribed information, such as outputs for the activity and significant events that could affect an entitlement to the CMPTI tax offset (proposed section 419-45). Subject to the conditions under proposed subdivision 419-E some decisions that may or must be made in relation to a company’s eligibility for the CMPTI tax offset can be subject to internal review by the Industry Secretary of DISR; internal reviews by the Industry Secretary can be subject to external review by the ART.

What are the conditions for eligibility?

In general terms, each of the following project-related conditions must be satisfied before a company is eligible for the CMPTI tax offset for an income year:

• the income year for the purposes of the CMPTI tax offset must fall between the period of 1 July 2027 and 30 June 2040 (proposed paragraph 419-5(1)(b))
• the company must be undertaking at least one registered CMPTI processing activity during an income year (proposed paragraph 419-5(1)(c))
• the company must incur CMPTI expenditure during the income year for the purpose of CMPTI processing activities (proposed paragraph 419-5(1)(d))
• the company must meet the requirements of any CMPTI community benefit rules (proposed paragraph 419-5(1)(f)).

Key term 1 – what is a ‘registered CMPTI processing activity’?

In broad terms, a registered CMPTI processing activity is an activity that is registered and in force in accordance with proposed section 419-35, which requires certain information, such as details about the nature of the activity and the location of the processing facility, to be provided in a prescribed form.

Proposed section 419-20 provides that, in general terms, a CMPTI processing activity involves substantially transforming a feedstock containing a critical mineral through extractive metallurgical processing into a purer/more refined and chemically distinct form of the critical mineral. The term ‘substantial transformation’ is not defined in the Bill. However, the EM notes that activities that do not result in chemical changes to outputs, or to material change in the proportion of minerals in an output may not satisfy the requirement of ‘substantial transformation’ (EM, pp. 51–52). A CMPTI processing activity can also be prescribed under regulations. Beneficiation (the process of separating an ore into its valuable components and waste material), manufacturing (to the extent that those activities are not prescribed under the regulations) and mining, among other activities, are deemed not to be CMPTI processing activities (proposed subsection 419-20(2)).

Proposed sections 419-50 and 419-55 outline rules for the transfer and re-registration of registered CMPTI processing activities. Proposed section 419-50 also provides that, where the Industry Secretary decides that a registered CMPTI processing activity is similar to another registered activity, the second‑in-time registered activity ceases to be in force at the same time as the first-in-time ceases to be in force, subject to certain conditions. The registration underpinning a registered CMPTI processing activity can be varied (proposed section 419-60), revoked (proposed section 419-70) and disregarded (proposed section 419-105) in certain circumstances.

Registered CMPTI processing activities are in force for a 10-year period commencing at the start of a chosen income year (see proposed section 419-50).

Key term 2 – what is ‘CMPTI expenditure’?

Pursuant to proposed section 419-25, in general terms CMPTI expenditure is expenditure incurred in carrying out registered CMPTI processing activities, subject to exclusions. For example, CMPTI expenditure does not include capital expenditure or expenditure arising from asset depreciation (see proposed subsection 419-25(2)). Carve-outs to the definition of CMPTI expenditure can also be prescribed by regulations (see proposed paragraph 419‑25(2)(f)). Furthermore, CMPTI expenditure does not include goods and services tax (GST) (see proposed section 419-30).

Pursuant to proposed sections 419-95 and 419-100, CMPTI expenditure can also be reduced (thereby reducing the amount of CMPTI tax offset that can be received) to reflect the market value or actual cost of the expenditure where:

• the expenditure has been incurred in dealings that are not at arm’s length, or in dealings with associates, and the expenditure exceeds market value or
• the expenditure is incurred in relation to goods or services provided by a group entity that is an affiliate of, or connected with the entity that has incurred CMPTI expenditure.

Key term 3 – what are the ‘CMPTI community benefit rules’?

The CMPTI community benefit rules are rules, made by legislative instrument by the Minister under proposed section 419-145 that:

• apply to specified classes of companies for an income year
• specify conditions that must be met before a company is eligible for the CMPTI tax offset
• specify circumstances in which a company’s CMPTI tax offset rate may be reduced by a specified portion.

If the Minister decides to make CMPTI community benefit rules, the Minister must have regard to community benefit principles outlined in subsection 10(3) of the FMIA Act (proposed subsection 419-145(2)). The community benefit principles are (as explained above) that the FMIA policy should provide community benefits by, among other things, promoting safe, secure and well-paid jobs, developing a more skilled and inclusive workforce and strengthening domestic industrial capabilities and stronger local supply chains.

What types of companies are eligible for the CMPTI tax offset?

Constitutional corporations (explained above) that are ABN-holding Australian residents, or foreign residents with a permanent establishment in Australia, and that are not income tax exempt entities are, subject to the abovementioned project-related criteria, eligible for the CMPTI tax offset (see proposed paragraphs 419-5(1)(a) and (e), and proposed subsection 419-5(2)).

Changes to the shortfall interest charge (Part 2 of Schedule 1)

Part 2 of Schedule 1 of the Bill imposes liability for, and requires payment of, the SIC where a person has received excess tax offsets by inserting proposed section 280-102F into the TAA (item 18), and by amending section 172A of the ITAA 1936. Section 172A of the ITAA 1936 currently only requires repayment by the taxpayer of an excess amount the taxpayer receives for a tax offset, but does not require an additional payment of the SIC.

Pursuant to section 280-100 of the TAA, the SIC is applied where a tax return is amended to increase the amount of tax due, such that there is a shortfall in taxation paid. The ATO notes that the SIC is applied ‘on a daily compounding basis to the shortfall amount’ — this amount is calculated using a formula set under section 280-105 of the TAA.

The Bill also amends, via items 10 to 12 of Schedule 1, subsection 172A(3) of the ITAA 1936 to ensure that the general interest charge (GIC) will be payable on the unpaid amount of any SIC that is owed in relation to an overpayment of tax offset. The ATO states that the GIC is applied to tax liabilities that remain unpaid after the date on which payment was due.

These changes, which subject overpaid tax offsets to the SIC and GIC, apply prospectively only, pursuant to item 13 of Schedule 1, and will apply not only to the proposed HPTO and CMPTI tax offset, but to other types of tax offsets as well. (Note that in item 13 ‘liability’ is spelt incorrectly.)

General anti-avoidance rule (Part 3 of Schedule 1 and Part 2 of Schedule 2)

Part 3 of Schedule 1 and Part 2 of Schedule 2 of the Bill amend the ITAA 1936 to provide that the HPTO and the CMPTI tax offset are subject to the GAAR under Part IVA of the ITAA 1936, which relates to schemes to reduce income tax.

In general terms, the GAAR applies when:

• a scheme (which includes any agreement, arrangement or understanding) has been carried out and
• a tax benefit within the meaning of subsection 177C(1) of the ITAA 1936 (such as having an amount excluded from taxable income, or receiving a deduction) has been obtained in connection with the scheme and
• the scheme was, from the perspective of a reasonable person objectively analysing the scheme, for the sole or dominant purpose of enabling a tax benefit to be obtained as determined by reference to the factors listed in subsection 177D(2) of the ITAA 1936, including the manner in which the scheme was entered into or carried out and the form and substance of the scheme.

Where the GAAR has been infringed, the Commissioner may cancel the tax benefit that has been obtained pursuant to section 177F of the ITAA 1936.

The proposed amendments provide that if the HPTO or the CMPTI tax offset (as a ‘tax benefit’) have been obtained via a scheme that would not have been allowable (or might reasonably be expected not to be allowable), the tax offset may, subject to other abovementioned criteria that apply as part of the GAAR, be cancelled in whole or in part (proposed paragraphs 177C(1)(be), (bf), (i), (j), and 177F(1)(g) and (h)). The Commissioner may still allow the tax benefit to be obtained if it is fair and reasonable (proposed paragraphs 177F(3)(h) and (i)).

Amendments relating to Indigenous Business Australia (Schedule 3)

The Bill seeks to repeal and replace section 183 of the ATSI Act. That section currently provides that IBA may only borrow money on overdraft from a bank, for the purpose of meeting a temporary deficit. Proposed section 183 will allow the IBA to borrow money in connection with its functions in accordance with relevant authorisation under the Indigenous Business Australia rules (IBA rules) or section 57 of the Public Governance, Performance and Accountability Act 2013. IBA rules will be made by legislative instrument by the Minister for Indigenous Australians under proposed section 189A of the ATSI Act. However, the Minister must not make IBA rules relating to the circumstances in which IBA may borrow money, or limits or conditions on borrowing without the written agreement of the Finance Minister.

Policy position of non-government parties, independents and stakeholders

Non-government parties and independents

The Opposition has indicated that it is not supportive of the Bill.

• Phillip Thompson stated that ‘[t]he Coalition will be opposing this [B]ill. Labor's Future Made in Australia policy is about building bureaucracies not businesses.’
• Colin Boyce has stated that the Bill ‘… proposes to bring about a regime [that provides] tax credits to try and alleviate the cost of producing things like liquid hydrogen and gaseous hydrogen and, once again, the numbers simply don't stack up.’
• The Australian Financial Review reported on 16 May 2024 that the Opposition had vowed to repeal the HPTI and the CMPTI if elected.

However, the ABC has also reported that the Western Australian Liberals ‘support the measure’.

The only independent that has commented on the Bill is Kate Chaney, who has given it her support.

The Greens have raised some concerns about the Bill noting that ‘it may not have been exactly how we have would designed it’, but, nevertheless, support it on the basis that ‘it is a very important step in the right direction’.

Stakeholders

Most stakeholders have expressed general support for the Bill. However, views amongst these interest groups differ in several areas, some of which are discussed below.

• HPTO quantum ($2 per kilogram):
  • The Australian Hydrogen Council (p. 2), the Chamber of Minerals and Energy of Western Australia (CMEWA) (p. 4), the Business Council of Australia (BCA) (p. 3), Fortescue (p. 2), EY (p. 6) and Origin Energy (p. 1) have argued that the HPTO should be indexed to inflation.
  • The Australian Workers Union (AWU) (p. 4) has argued that the HPTO ‘should include a system of ‘stackable’ incentives, above the rate of $2 per kilogram, reflecting the proportion of output provided to domestic offtakers’.
  • Pilot Energy Ltd (p. 2) has argued that ‘Given the material disparity between the attainable market price and green hydrogen pricing today, subsidies of $8 per kilogram (or greater) may be required to initiate large scale green hydrogen production in Australia’.

• Final Investment Decision (FID) for the HPTO:
  • CMEWA (p. 4), BCA (p. 5) and EY (p. 8) have recommended that the requirement for a FID to be made by June 2030 should be removed.
  • The AWU (pp. 2–3) has argued that the inclusion of the FID is a ‘reasonable means of accommodating projects that experience delays during development’.
  • KPMG (p. 8) has suggested that the ‘the HPTI may be better served without reference to a FID and instead [should] rely [on] evidence that the expenditure is incurred on activities that either result (or are likely to result) in qualifying hydrogen production.’
• Minimum hydrogen production capacity:
  • The BCA (p. 6) and Star Scientific (p. 4) have argued for a reduction in the 10 megawatt hydrogen production capacity requirement to enable smaller-scale projects to be eligible for the HPTO.

• CMPTI eligible expenditure:
  • CMEWA (p. 2), KMPG (p. 4), BCA (pp. 4-5) and EY (p. 5) have variously recommended that expenditure that is eligible to attract the 10% CMPTI tax offset should include depreciation, waste disposal costs, finance costs, feedstock and raw material costs.

• Critical minerals list:
  • The Australian Chamber of Commerce and Industry (ACCI) (p. 4) and CMEWA (p. 3) argued that the list of minerals eligible for the CMPTI tax offset should also include copper, zinc, alumina/bauxite and uranium.
• Community Benefit Principles:
  • The Minerals Council of Australia (p. 2), ACCI (pp. 5–6), BCA (pp. 1–2) and CMEWA (p. 5) have argued that, given that mining and mineral processing projects must already adhere to other approvals process, compliance with the community benefit principles is/may be an unnecessary and duplicative feature of the CMPTI tax offset.
  • Origin Energy has noted that ‘there are existing principles and frameworks for community benefits, including other Federal and State government approvals processes’ and argued that ‘[a]ny reporting should reflect the requirements of existing frameworks’.
  • In contrast, the Australian Manufacturing Workers Union (p. 8) argues that ‘upholding transition principles is of critical importance’.
  • Similarly, the AWU (pp. 3–4) has argued that the fact that ‘the Bill provides for the application of community benefit principles to the HPTI and CMPTI is welcome’. Nevertheless, the AWU also notes that ‘requirements that the Treasurer, as responsible Minister, “has regard” to the overarching community benefit principles when setting “community benefit rules” for the HPTI and CMPTI specifically should be strengthened’ as this could result in the development of ‘community benefit rules that are only broadly consistent, partly consistent, or even inconsistent with the community benefit principles’.

Financial implications

According to the EM, across the 10 years from 2024–25, the HPTI is estimated to cost $6.7 billion (p. 1), and across the 11 years from 2023–24 the CMPTI is estimated to cost $7 billion (p. 2). However, given that neither the HPTI nor the CMPTI commence until 2027, none of these medium-term estimated costs will be incurred until the 2027–28 financial year. According to Budget Paper No. 2: Budget Measures (pp. 67–68), the HPTI will cost ‘an average of $1.1 billion per year from 2034–35 to 2040–41’ (approximately $7.7 billion across that period), and the CMPTI will cost ‘an average of $1.5 billion per year from 2034–35 to 2040–41’ (approximately $10.5 billion across that period).