Australia to Offer Tax Incentives for Critical Minerals Industry Expansion

Australia is set to introduce the Future Made in Australia (Production Tax Credit and Other Measures) Bill 2024 to Parliament, a landmark step aimed at securing the nation’s role in the global transition to net-zero emissions. The bill includes two pivotal tax incentives designed to drive investment in Australia’s renewable energy and critical minerals sectors, which are seen as essential for the country’s economic and environmental future.

The first incentive focuses on hydrogen production, offering a $2 per kilogram tax credit for renewable hydrogen produced between 2027–28 and 2039–2040. This tax relief will be available for up to 10 years per project, giving companies a clear and extended period to invest in and scale up hydrogen production. The second key incentive is aimed at critical minerals production. Under this provision, Australia’s 31 critical minerals will benefit from a 10% tax credit on processing and refining costs. This will run concurrently with the hydrogen incentive, from 2027–28 to 2039–2040, ensuring both sectors are supported equally in the transition to cleaner energy sources.

The proposed bill aims to provide the necessary investment certainty for businesses looking to enter or expand in these two strategic areas. By bolstering hydrogen and critical minerals production, the Australian Government hopes to position the country as a global leader in renewable energy, supporting technologies like electric vehicles, wind turbines, and solar panels—all of which rely heavily on critical minerals and clean hydrogen for their development.

However, the incentives will only be granted to projects that are operational and delivering products, such as renewable hydrogen or processed critical minerals, for use in clean energy technologies. Additionally, recipients of the tax credits will need to comply with the six community benefit principles outlined in the bill. These principles are designed to ensure that the benefits of the projects extend beyond economic gains, contributing positively to local communities.

This bill is part of the Australian Government’s broader ambition to reduce carbon emissions and improve energy security while fostering domestic manufacturing capabilities. The new tax incentives also follow the $22.7 billion package announced earlier this year to support clean energy initiatives and the production of critical minerals, advancing Australia’s goal to become a “renewable energy superpower.”

In a global context, the tax incentives will help Australia stay competitive with other nations, particularly in sectors critical to economic prosperity and national security, such as semiconductors and electric vehicle production. Despite the challenges posed by global commodity oversupply and market fluctuations, Australia remains optimistic about its long-term role in the global clean energy transition.