Hydrogen and critical minerals tax credits passed by Parliament

The bill to introduce new tax incentives for critical minerals production was finally passed by Parliament yesterday after the lower house agreed to amendments by the Senate.

The bill introduces the hydrogen production tax incentive (HPTI), a refundable tax offset that is available at a rate of $2 for a kilogram of eligible hydrogen, for companies that satisfy eligibility requirements.

It will also establish a critical minerals production tax incentive (CMPTI), a refundable tax offset designed to support the processing of critical minerals in Australia. The offset aims to encourage miners to also become refiners and processors, creating more value domestically.

“The Albanese Government's intention, unambiguously, is to re-industrialize our regions and our outer suburbs, refining value-added Australian metals here and making more complex manufacturing products in Australia,” Tim Ayres, assistant minister for Future Made in Australia, said to the Senate on Monday.

“Recent events demonstrate that the world is becoming a more turbulent place where violence, trade coercion and protectionism mean Australia's interest in our progress cannot be taken for granted. Complacency is our enemy. Does anyone sensibly think that Australia and Australians can be secure and prosper if we don't seek to re-industrialise and diversify our economy?”

Australia ranked 102nd out of 145 countries in terms of economic complexity, according to 2022 data from Harvard’s Atlas of Economic Complexity. This places it behind Senegal, Honduras, Pakistan, Cambodia and Morocco, and one ranking above Yemen, a country in the grips of a humanitarian crisis.

Australia primarily exports commodities including coal, gas, iron ore and agricultural products.

“For Australia to be secure in strategic and economic terms, Australians and Australian firms need to have more capability,” Ayres said.

“Australian firms need to be able to do more things here than simply being an exporter of resources and commodities.”

The Coalition dissented against the bill, accusing it of introducing bureaucracy and waste. They also argued that the plan was not detailed enough, and expressed concern that the bill’s community benefit principle requirements (CBPs) would increase compliance costs for businesses and lead to an uptick in compulsory unionism.

CBP requirements include promoting safe, secure and well-paid jobs, investing in skills development opportunities for workers, engaging collaboratively with local communities affected by the net-zero transition, strengthening local supply chains and demonstrating tax transparency and compliance.

“Tying the value of the tax credit to the Community Benefits Principles raises an important policy question: what is actually being incentivised here? The Community Benefits Principles mean the tax credits are intrinsically linked to social objectives, not economic ones,” the Coalition wrote in dissent to the bill.

“If the policy objective is to support the growth of new industries, tying them down in red tape and compliance costs seems at odds with the policy objective.”

Michele O’Neil, president of the Australian Council of Trade Unions (ACTU), praised the bill for boosting Australia’s climate mitigation efforts and spoke positively about the CBPs.

“They are the mechanism through which we ensure a fair share of the wealth that will be generated by these tax credits goes directly to Australian workers and communities, not just corporate shareholders,” O’Neil said regarding the CBP requirements.

The Greens have praised the bill for its positive environmental impact but blasted Labor’s continued support for fossil fuel industries.

“This bill is an important measure to reduce barriers for green industries and set Australia up as a future renewable superpower—but the Australian Government’s continued support for the growth of polluting industries like coal and gas is incompatible with this goal,” a Greens submission signed by Nick McKim read.