The Hydrogen Production Tax Incentive (HPTI) and Critical Minerals Production Tax Incentive (CMPTI) came into legal effect following the passage of the Future Made in Australia (Production Tax Credits and Other Measures) Act 2025 (the Act) through the Senate on 10 February 2025 and its receipt of Royal Assent on 14 February 2025.
These tax incentives represent a significant legislative milestone in advancing Australia’s green hydrogen and critical mineral industries. Designed to enhance Australia’s industrial and economic transition to renewable energy, these incentives will be available once projects are fully operational.1 The Act also expands the role and remit of Indigenous Business Australia to enable greater investment in First Nations communities.2
This article outlines the key elements of the Act and explores its intended operation and practical implications. It draws on insights shared by our Partner and New Energy Lead, Matt Baumgurtel, who recently spoke on the CMPTI and engaged with key industry stakeholders during the inaugural Critical Minerals and Energy Transition Summit (Summit), held on 12 August 2025.
Hydrogen Production Tax Incentive (HPTI)
The HPTI is structured as a refundable tax offset, providing $2 for each kilogram of eligible hydrogen produced in Australia.3 This measure seeks to incentivise early-stage investment in hydrogen production, addressing current cost barriers and catalysing Australia’s role as a leader in the global hydrogen market.4
Eligibility requirements
Eligibility for the HPTI is divided into two requirements for: (1) the entity claiming the offset and (2) requirements for the hydrogen produced.
| To be eligible, the entity must (amongst other things): | |
| 1. | Be the person that creates the registered Product Guarantee of Origin (PGO) certificate under the Future Made in Australia (Guarantee of Origin) Act 2024 which will certify information about the product, including the facility’s location and the production pathway.5
To be able to create a PGO, the company will need to hold a production profile which ensures verifiable renewable hydrogen and streamlined entitlement criteria.6 |
| 2. | Comply with the rules implementing the community benefit principles for the HPTI, which will be established at the Treasurer’s discretion.7 |
| To be eligible, the kilogram of hydrogen produced in Australia during the income year must (amongst other things): | |
| 1. | Be produced during the offset period selected by the company which must occur during the eligibility window (1 July 2027–1 July 2040).8
The production time for hydrogen is determined as the moment the final portion of the batch comprising the kilogram exits the production gate.9 This timing is documented in the registered PGO certificate, serving as verifiable proof of eligibility.10 |
| 2. | Be subject to a registered PGO certificate which confirms the production emissions intensity did not exceed 0.6kg of CO2 per kilogram and for hydrogen produced using grid-connected electricity, it satisfied the grid matching requirements.11 |
| 3. | Hold a Clean Energy Regulator (CER) certified production profile at the time of production, requiring the facility to be on a single Australian site, have at least 10MW electrolyser capacity, avoid excluded processes, secure final investment decision by 30 June 2030 (for certification from 1 July 2030) and for the CER to have no reasonable basis to doubt eligibility.12 |
Administration
Following certification of a company’s production profile by the CER, the administration of the tax offset primarily transitions to the Australian Taxation Office (ATO).13 The HPTI is intended to be self-assessed by the company, with the offset amount being reported in the company’s income tax return for the relevant income year.14 ATO decisions regarding the offset are subject to the standard tax law processes of objection and review.15
While it is recognised that companies may be eligible for both the Hydrogen Headstart program and the HPTI, it is not intended that a company should benefit from both programs.16 The explanatory memorandum to the Act therefore states, ‘to manage the interaction between the two incentives, payments made to companies under the Hydrogen Headstart program will be proportionally reduced by ARENA to reflect any amount of the hydrogen production tax offset that a company has received’.17
Critical Minerals Production Tax Incentive (CMPTI)
The CMPTI is structured as a refundable tax offset, equal to 10% of eligible expenditure incurred while processing Australia’s 31 critical minerals.18
Eligibility Requirements
| A company is entitled to the CMPTI for an income year if it meets a number of eligibility criteria, which includes: | |
| 1. | The income year falls within the prescribed period (1 July 2027–1 July 2040).19 |
| 2. | It conducts one or more CMPTI processing activities registered with the Industry Secretary, either by:
|
| 3. | It incurred CMPTI expenditure within the income year for registered CMPTI processing activities.21 |
| 4. | It meets the conditions specified in the CMPTI community benefit principles, which will be established at the Treasurer’s discretion.22 |
Administration
The administration of the CMPTI is shared between two key regulators:
- The Industry Secretary, responsible for registering CMPTI processing activities;23 and
- The Commissioner of Taxation, responsible for assessing and administering tax offset claims as part of the broader income tax system, including determining whether particular expenditure is CMPTI expenditure.24
The CMPTI tax offset is intended to be self-assessed by companies and claimed through their income tax returns, in accordance with the existing Australian tax framework.25 However, if a company’s registration status changes – whether through transfer, variation, suspension, or revocation – the Commissioner has the authority to amend the assessment to reflect the updated eligibility status.26
Community benefit principles
As noted above, compliance with the community benefit principles is a fundamental requirement for both the HPTI and CMPTI.27
While the high-level principles are set out in s 10(3) of the Future Made in Australia Act 2024, specific compliance requirements for the HPTI and CMPTI will be determined by the Treasurer through legislative instrument.28 These rules will establish binding conditions that entities must meet to qualify for the tax offsets.29 It is anticipated that compliance will require independent certification by expert bodies to confirm that an entity’s activities align with the prescribed requirements.30
While this flexibility allows the Treasurer to respond to ‘current and emerging circumstances’,31 the lack of specific detail on the forthcoming rules has left industry stakeholders uncertain.32 In relation to the HPTI, this concern is heightened by the requirement for businesses to make a final investment decision on a prospective hydrogen facility before 1 July 2030 to be eligible.33
The Australian Chamber of Commerce and Industry has expressed concern that this five-year timeframe may not provide sufficient time to enable some projects to meet the necessary requirements.34 For these incentives to effectively stimulate private investment, clear and objective compliance criteria must be established to enable companies to plan and structure their projects with confidence.
Next steps
The Act was swiftly passed following the Senate Economics Legislation Committee’s report released on 31 January 2025. Beyond the uncertainty surrounding community benefit rules, the report highlights concerns that the 10 per cent CMPTI tax offset may be insufficient to attract investment, with stakeholders calling for an increase to 25 per cent to remain globally competitive.35 This sentiment was echoed by key industry stakeholders who attended the Summit. Additionally, there is growing recognition that supply-side incentives alone may not be enough to drive investment in both the hydrogen and critical minerals industries.36 Stakeholders have proposed demand-side mechanisms, such as a government-backed Clean Commodities Trading Company, to guarantee offtake agreements, reduce investment risk and ensure long-term market viability.37 Without these measures, there is concern that production may outpace demand, leading to investment uncertainty.38 While much needed adjustments and practical clarifications on the operation of these incentives will be provided in forthcoming regulation, this is a groundbreaking step toward securing Australia’s place in the net-zero economy and attracting world-class investment into the sector.
Industry participants at the Summit expressed concern that a two-year delay before the CMPTI becomes available is too long, meaning that only operating projects are likely to benefit, while projects yet to reach a financial investment decision may see little impact. The HPTI is contingent on the Guarantee of Origin Scheme becoming operational, which is anticipated to be in late 2025, as hydrogen producers must obtain a PGO certificate to establish eligibility. Given the lead time to access the tax incentives, producers operating in, or seeking to enter, the Australian energy and resources market in these industries should proactively assess how these tax incentives could strengthen the commercial viability of their hydrogen and critical mineral projects. Investors and financiers should likewise monitor developments, as the availability and certainty of this policy framework will be central to de-risking projects and enhancing bankability, particularly in the hydrogen sector where offtake certainty and financing remain key barriers to final investment decisions.
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.
1The Hon Madeleine King MP Minister for Resources and Minister for Northern Australia, the Hon Dr Jim Chalmers MP Treasurer, the Hon Chris Bowen MP Minister for Climate Change and Energy and Senator the Hon Tim Ayres Assistant Minster for Trade and Assistant Minister for a Future Made in Australia, ‘Production tax credits pass the Senate’ (Joint Media Release, 10 February 2025) <https://www.minister.industry.gov.au/ministers/king/media-releases/production-tax-credits-pass-senate>.
2Senator the Hon Malarndirri McCarthy Minister for Indigenous Australians, ‘Legislative Reform to Support First Nations Economic Empowerment’ (Media Release, 25 November 2024) <https://ministers.pmc.gov.au/mccarthy/2024/legislative-reform-support-first-nations-economic-empowerment>.
3Explanatory Memorandum, Future Made in Australia (Production Tax Credits and Other Measures) Bill 2024 [1.20] <https://parlinfo.aph.gov.au/parlInfo/download/legislation/ems/r7297_ems_00fa0e2e-bb91-4c72-9a66-086436d63677/upload_pdf/JC014789.pdf;fileType=application%2Fpdf#search=%22legislation/ems/r7297_ems_00fa0e2e-bb91-4c72-9a66-086436d63677%22> (‘Explanatory Memorandum’).
4Ibid p.g. 100.
5Explanatory Memorandum n 3 [1.32] – [1.34].
6Ibid [1.38].
7Ibid [1.47], [1.50].
8Ibid [1.57].
9Ibid [1.61].
10Future Made in Australia (Guarantee of Origin) Act 2024 s 50(1)(i).
11Explanatory Memorandum n 3 [1.65]-[1.66], [1.72].
12Ibid [1.81], [1.85].
13Ibid [1.140].
14Ibid.
15Ibid.
16Ibid [1.152].
17Ibid.
18Ibid [2.14].
19Ibid [2.15].
20Ibid [2.106], [2.107].
21Ibid [4.10].
22Ibid [2.31].
23Ibid [2.215]-[2.218].
24Ibid [2.219].
25Ibid [2.220].
26Ibid [2.221].
27Ibid [1.23], [2.16].
28Ibid [1.50], [2.31].
29Ibid [1.50], [2.34].
30Ibid [1.53], [2.37].
31Ibid [1.52], [2.36].
32Economics Legislation Committee, Future Made in Australia (Production Tax Credits and Other Measures) Bill 2024 [Provisions] (Report, 31 January 2024) [2.48] <https://parlinfo.aph.gov.au/parlInfo/download/committees/reportsen/RB000560/toc_pdf/FutureMadeinAustralia(ProductionTaxCreditsandOtherMeasures)Bill2024[Provisions].pdf> (‘Economics Legislation Committee Report’).
33Explanatory Memorandum n 3 [1.85].
34Economics Legislation Committee Report n 32 [2.25].
36Ibid [2.59].
37Ibid [2.61].
38Ibid [2.59].
