Australia passes tax incentives law for critical minerals

Australia’s parliament has passed laws that would give production tax breaks for critical minerals and renewable hydrogen, in a boost for energy transition plans as it aims to hit net zero emissions by 2050, and reduce dependence on China.

The law, passed on Tuesday, will create tax incentives worth 10% of processing and refining costs for 31 critical minerals from the fiscal year ending June 2028 to 2040, for up to 10 years per project, the centre-left Labor government said.

For renewable hydrogen, a tax incentive worth A$2 ($1.26) per kg of renewable hydrogen produced will be offered.

“By processing more of these minerals here in Australia, we will create jobs and diversify global supply chains,” Resources Minister Madeleine King said in a statement.

Major economies are seeking to invest billions to support critical minerals projects and compete with China, the world’s largest producer of rare earths.

Critical minerals and rare earths are used in solar panels and batteries needed to lower carbon emissions, and are required for the construction of submarines and aircraft.

The opposition Liberal-National coalition voted against the legislation after its amendments that would require companies to undertake fewer environmental or Indigenous consultations were blocked by Labor and the Greens party.

“Labor’s tax credits come with additional and unnecessary red and green tape,” the opposition said in a statement.

The Anthony Albanese-led Labor government is seeking to showcase the tax breaks in some electorates in the resource-rich states of Western Australia and Queensland ahead of a national election due by May.

The Australian government in its May budget had pledged to introduce tax incentives worth A$7 billion for the processing and refining of critical minerals and A$6.7 billion for renewable hydrogen production from 2028 to 2040.

($1 = 1.5886 Australian dollars)

(By Renju Jose; Editing by Lincoln Feast)