The Australian Government has announced its Future Made in Australia agenda which supports the development of Australia’s renewable energy sector. Based on the 2024-2025 Australian Federal Budget, the Australian Government will provide an estimated $19.7 billion worth of funding over a 10 year period to accelerate the Government’s Future Made in Australia priority industries through the introduction of two new Production Tax Incentives. The priority industries include the following:

  • Renewable hydrogen;
  • Green metals;
  • Low carbon liquid fuels;
  • Critical minerals; and
  • Clean energy technologies which include solar and battery supply chains.

The Government funding package aims to promote Australia’s clean energy supply chains to turn Australia into a prime destination for renewable energy production.

 

Production tax credits for Australian critical minerals and green hydrogen

In support of Australia’s critical minerals industry, the Government will offer an estimated $7.1 billion worth of tax credits to miners involved in processing and refining critical minerals starting from 1 July 2027.

The incentive will provide a 10% tax credit for eligible expenditure incurred for the production of critical minerals in Australia. See the full list of the 31 critical minerals.

This tax measure applies to both existing and new projects for any processing or refining of critical minerals undertaken in Australia between 1 July 2027 and 30 June 2040.

The Government has announced an additional $6.7 billion worth of tax subsidies for green hydrogen production starting from 1 July 2027.

Tax credits will be available to producers of green hydrogen at a rate of $2 per kilogram of hydrogen produced between 1 July 2027 to 30 June 2040.

With current estimates of $4-$6 per kilogram for the production of hydrogen through renewable energy, the tax incentive will be quite significant for producers of green hydrogen.

As the current production tax credit measures appear broad, further details of how the measures will be applied will be confirmed at a later date upon consultation. It will be important to determine how the tax incentives will be treated from a Pillar Two perspective (i.e. the proposed Global and Domestic Minimum Tax rules to be introduced in Australia). We will keep you updated as further details are released for this tax measure.

 

Strengthening and streamlining approvals for renewable energy projects.

The Government has prioritised improving the approval process for renewable energy projects to be undertaken in Australia. It is doing so by providing $134.2 million of funding to better prioritise approvals for renewable energy projects of national significance, and expedite decisions on environment, cultural heritage and planning approvals. The investment is designed to accelerate the assessments across approval processes in order to fast track renewable energy projects while providing greater clarity to businesses.

A further $20.7 million of funding is to be provided by the Government to enhance engagement with communities involved in the energy transition and accelerate the provision of key renewable energy projects, through an Australian Energy Infrastructure Commissioner and voluntary national developer standards.

The Government will also provide $15.7 million of funding to improve scrutiny of high-risk foreign investment proposals, with enhanced monitoring and enforcement activities. Foreign investment applications with unsuccessful competitive bids, will receive refunds of 75 per cent of application fees.

 

Tax offsets for battery manufacturers

The Government will allocate $549 million worth of funding over eight years from 1 July 2024, to support battery manufacturing through ARENA. This includes:

  • $523.2 million over seven years, starting from 1 July 2024 ,to establish the Battery Breakthrough Initiative, administered by the Australian Renewable Energy Agency (ARENA), to boost the development of battery manufacturing capabilities through production incentives aimed at the highest value opportunities in the supply chain;
  • $20.3 million over five years from 1 July 2023 for the Powering Australia Industry Growth Centre, and the Future Battery Industries Cooperative Research Centre (https://fbicrc.com.au/) to enhance industry and research collaboration, including workforce training for battery research, manufacturing, transport and recycling;
  • $5.6 million for the 2024-2025 Financial Year to support the delivery of the Australian Made Battery Manufacturing Precinct to strengthen battery manufacturing in Australia.

 

Support for the Australian solar industry.

The Government has announced that it will provide $835 million, starting from 1 July 2024 (and $66 million per year from 1 July 2034 to 30 June 2037), to establish the Solar Sunshot program administered by ARENA, catalysing the development of solar photovoltaic (PV) manufacturing capabilities, while improving the industry’s supply chain through production incentives and other forms of Government assistance.

 

Guarantee of Origin

The Government is easing the process for businesses and trading partners to source low-emissions products by committing $32.2 million over four years, starting from 1 July 2024, to fast track the initial stage of the Guarantee of Origin Scheme, focused on renewable hydrogen. This support will enable the program to expand to green metals and low carbon liquid fuels.

 


Please note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.