Bulletin: Consultation closing soon for Hydrogen Production Tax Incentive (HPTI)

The Treasury has released a consultation paper and seeks feedback from stakeholders on the Hydrogen Production Tax Incentive (HPTI) introduced by the Australian Government under the 2024‑25 Budget as part of the Future Made in Australia package.

The HPTI will be delivered through Australia’s tax system as a refundable tax offset to eligible producers of renewable hydrogen with the aim of accelerating the growth of Australia’s hydrogen industry and build scale to reduce hydrogen production costs over time.

The consultation period closes on 12 July 2024.

Key points in the consultation paper

1. The incentive will be available to corporations that are subject to Australian income tax throughout the relevant income year.
2. The proposed offset is $2 per kilogram of eligible hydrogen produced will be provided as a credit against corporations’ tax liability and will be uncapped. The offset will be in the form of either a cash refund or a reduced income tax liability.
3. There will be eligibility criterion for this incentive. Some of the key proposed requirements include:
   1. facilities must match hydrogen production with electricity from the same grid;
   2. the hydrogen must be produced between the 2027-28 and 2039-40 financial years;
   3. producers can only access the incentive for a maximum of 10 years from first eligible production for each existing or new facility;
   4. producers must make a final investment decision with respect to each eligible facility on or before 30 June 2030 (or production commenced by 30 June 2030);
   5. the production process must result in an emissions intensity of less than 0.6kg of carbon dioxide up to the production gate;
   6. facilities must be compliant with the Guarantee of Origin (GO) certificates; and
   7. facilities must have a minimum capacity equivalent to a 10-megawatt electrolyser.
4. The HPTI will be co-administered by the Australian Taxation Office (ATO) and the Department of Climate Change, Energy, the Environment and Water (DCCEEW) through the GO Scheme. Producers will also need to register their facilities with the Clean Energy Regulator and retain records under the existing taxation record keeping requirements.
5. The HPTI will include an eligibility criterion that aligns with the Community Benefit Principles under the Future Made in Australia Act, focusing on investment in local communities (including First Nations communities), domestic industry and supply chains, and skills, and the promotion of diverse workforces, secure jobs and tax transparency.

Keep an eye out for a more in-depth article from the Hamilton Locke Tax and New Energy teams on the HPTI in the coming weeks.

The consultation paper can be accessed here.

The Hamilton Locke team advises across the energy project life cycle – from project development, grid connection, financing, and construction, including the buying and selling of development and operating projects. For more information, please contact Matt Baumgurtel.