Future Made in Australia measures ‘must not hinder R&D tax incentive’: BDO
Further clarity is needed on how the tax incentives under the Future Made in Australia reforms will interact with other tax offset provisions, BDO has said.
More information is needed on how targeted tax incentives aimed at enhancing Australia's production capabilities will interact with existing tax offsets, BDO has said in a recent submission.
In late November, the Future Made in Australia (Production Tax Credits and Other Measures) Bill 2024 was referred to the Senate Economics Legislation Committee for inquiry and report.
The bill introduces the hydrogen production tax Incentive (HPTI) which is a refundable tax offset that is available at a rate of $2 for a kilogram of eligible hydrogen for companies that satisfy the eligibility requirements.
It also introduces the critical minerals production tax incentive (CMPTI), a refundable tax offset to support the processing of critical minerals in Australia.
BDO said that further refinements are needed to the bill to ensure it effectively enhances its objectives while fostering community benefits and promoting sustainable growth.
The accounting firm said the bill must specifically address how the HPTI and CMPTI interact with other existing tax offset provisions, particularly given their reliance on emerging technologies.
"It is crucial that these tax incentives do not preclude taxpayers from accessing the R&D Tax Incentive," the submission said.
"The taxpayers engaged in these sectors are often at the forefront of technological innovation, aiming to develop solutions that offer broad-reaching benefits for Australia’s economy and its people."
BDO said it is critical that the bill facilitates and does not hinder access to the R&D tax incentive to ensure that these high-tech developments "contribute to the nation's strategic goals in renewable energy and critical minerals production".
The accounting firm also raised concerns about the timing and application of community benefit rules.
The proposed provisions 419-145 and 421-45 of the bill allow the minister to introduce a new rule that could potentially apply to a taxpayer in the same income year that the rule is introduced.
BDO said while it acknowledged the importance of the community benefit rules, the design of these rules may be unfair to the taxpayer as it may fail to provide sufficient time to comply with the new rule.
"Particularly if the new rule requires a significant investment by the taxpayer to comply with the new rule," it said.
"We therefore recommend adjusting the provision to ensure a taxpayer complies with a community benefit rule by the end of the next income year beginning after the introduction of a new rule by a legislative instrument."
The submission also recommended that the bill include provisions to protect taxpayers who fail to meet their certified production profile due to the commissioning of a facility or unexpected operational faults.
"Hydrogen production, which relies heavily on emerging technologies, often requires extended equipment maintenance, process upgrades and/or commissioning periods to ensure operational safety and efficiency," BDO said.
"During these periods, or in instances where unit operations unexpectedly fail, taxpayers may be unable to meet their certified production targets."
BDO said it would therefore like to see protections where a taxpayer is commissioning the facility and can demonstrate that the necessary steps are being taken to meet the production profile post-commissioning.
It would also like to see protections where a taxpayer experiences an unexpected operational fault and can demonstrate that the fault is being rectified, and the production profile will be met once operations resume.
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