Production Tax Incentives for Renewable Hydrogen and Critical Minerals - Bill introduced into Parliament

The Future Made in Australia (Production Tax Credits and Other Measures) Bill 2024 (the Bill) was introduced to Federal Parliament on 25 November 2025. It sets out the proposed legislation to govern the previously announced Production Tax Incentives for Renewable Hydrogen (HPTI) and Critical Minerals (CMPTI). The Bill broadly gives effect to the principles set out in the Consultation Paper of 28 June 2024 and summarised in our previous Tax Alert but some uncertainty remains.

The HPTI and the CMPTI will each provide tax offsets relevant to activities undertaken by ‘constitutional corporations’ that are subject to tax in Australia and comply with ‘community benefit principles’ set out in the proposed Future Made in Australia Bill 2024.

The HPTI provides a tax offset of $2 per kilogram of eligible hydrogen produced by eligible entities. Broadly, to be eligible:

• The hydrogen must be produced in Australia from renewable sources or processes with an emissions intensity of not more than 0.6 kg of carbon dioxide per kilogram of hydrogen.

• The hydrogen must be certified by the Clean Energy Regulator as being eligible hydrogen production.

• The HPTI applies to hydrogen produced in income years starting on or after 1 July 2027 and before 1 July 2040.

• The production facility must have a capacity equivalent to an electrolyser with 10 MW or more.

• A final investment decision must have been made before 1 July 2030.

The CMPTI provides a tax offset of 10% of the eligible expenditure incurred by eligible entities. Broadly, to be eligible: 

• The expenditure must be incurred in carrying on registered CMPTI processing activities.

• The activities must involve the substantial transformation of a feedstock containing a critical mineral into a purer and chemically distinct form of the critical mineral, or achieve a prescribed outcome relating to critical minerals.

• The CMPTI applies to eligible expenditure incurred in income years starting on or after 1 July 2027 and before 1 July 2040.

• The processing activity must be registered with the Industry Secretary, be carried on at one or more facilities in Australia and must not be for expenditure incurred on an “excluded activity”, such as mining, beneficiation or manufacturing.

• Eligible expenditure does not include capital expenditure or expenditure on depreciating assets.

As the legislation evolves, it will be important to understand what criteria the Treasurer will set to ensure projects seeking to obtain either the HPTI or CMPTI satisfy the "community benefit principles". The Bill does not include specific details on what the qualifying criteria will be, with the explanatory materials indicating this is a deliberate drafting approach to allow the Treasurer to update the criteria for ‘current and emerging circumstance’ without elaborating on what these may specifically include.

The introduction of legislation to promote the advancement of the hydrogen and critical minerals sectors in Australia is a welcome and important step forward. Key next steps we will be watching closely include whether the Bill is passed in what is a busy last sitting week before the end of the calendar year and whether any amendments to the Bill are introduced as part of parliamentary process. More broadly, stakeholders will require clarity on the scope of the community benefit principles and confidence that any legislation passed will continue to be supported after the 2025 Federal election, as these will be key determinants influencing the success of the incentives in driving near term investment decisions on hydrogen and critical mineral projects in Australia.