House of Representative

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Jim Chalmers MP)

Chapter 1: Hydrogen Production Tax Incentive

Outline of chapter

1.1 Schedule 1 to the Bill establishes the HPTI, in the form of a new tax offset called the hydrogen production tax offset. The offset is a refundable tax offset that is available at a rate of $2 for a kilogram of eligible hydrogen for companies satisfy the eligibility requirements. ^[1] It is available for income years commencing on or after 1 July 2027 and ending before 1 July 2040.

1.2 The HPTI will provide an incentive for companies to commence medium to large scale production of renewable hydrogen in Australia at a time when the renewable hydrogen market is still developing.

1.3 All legislative references in these explanatory materials are to the ITAA 1997 unless otherwise specified.

Context of amendments

Renewable hydrogen production in Australia

1.4 Renewable hydrogen refers to hydrogen produced using renewable technologies and processes, with the most common commercial renewable hydrogen production pathway being electrolysis of water.

1.5 Other production methods that can produce renewable hydrogen include biomass conversion (which converts organic material into hydrogen) and photocatalytic hydrogen production (which uses sunlight to directly split water into hydrogen and oxygen without requiring electrical energy).

1.6 Renewable hydrogen can be used for high-temperature industrial processes and is a key feedstock for producing chemicals such as ammonia and methanol. It can be used as a clean fuel and as an effective means of storing renewable energy. When combusted, the only by-product is water and there are no carbon emissions at that point. It is expected to be an important part of meeting the future energy needs of Australia and the global economy.

1.7 Renewable hydrogen opens the door to green metals, such as iron, steel, alumina and aluminium, and other applications critical to industrial decarbonisation. Australia's world class renewable energy resources mean that we are well placed over the longer term to produce renewable hydrogen at internationally competitive prices. Additionally, Australia is close to key markets, and our major trading partners have expressed a significant appetite for importing renewable hydrogen or its derivatives.

1.8 However, the technology allowing for the production of renewable hydrogen at scale is evolving and the market for renewable hydrogen and its derivatives in particular is limited by the current cost of production. While demand is expected to grow and improvements in technology are expected to drive down production costs over the next decade, there are a number of challenges faced by first movers in this sector.

Future Made in Australia agenda

1.9 In the 2024-25 Budget, the Government announced its $22.7 billion Future Made in Australia agenda. The initiatives that form part of this package are intended to create new jobs and opportunities for every part of our country by maximising the economic and industrial benefits of the move to net zero and securing Australia's place in a changing global economic and strategic landscape.

1.10 This package included a National Interest Framework to guide targeted public investment into priority industries and sectors. Renewable hydrogen was identified as being aligned with the Net Zero Transformation Stream of the National Interest Framework as it was assessed that public investment, such as a production tax incentive, could play an important role in unlocking private investment at scale and driving the development of a renewable hydrogen industry. Australia is committed to reaching net zero greenhouse gas emissions by 2050, and the development of the renewable hydrogen industry will play a key role in facilitating Australia's net zero transition and meeting Australia's international commitments.

Guarantee of Origin Scheme

1.11 Another measure which supports the Future Made in Australia agenda is the GO Scheme.

1.12 The Government, through the Department of Climate Change, Energy, the Environment and Water, and the CER, has worked closely with industry to design the GO Scheme as a voluntary framework to track and verify emissions associated with renewable electricity and clean products - starting with hydrogen.

1.13 The Future Made in Australia (Guarantee of Origin) Bill 2024 was introduced to Parliament on 12 September 2024 to enact the GO Scheme.

1.14 Participants in the scheme will be able to use emissions accounting methodologies, underpinned by international best practice, to create certificates for each kilogram of hydrogen produced. Participants will be able to use these certificates to evidence that emissions and other characteristics associated with their product. These certificates will be housed on a public register.

1.15 The GO Scheme will be administered by the CER.

1.16 The GO Scheme utilises 'profiles' to capture upfront information about registered persons in the scheme. Three types of profiles can be registered:

•

A production profile - which captures information about the production facility, including the owners and operators, the location and details about the facility such as capacity or electrolyser size. Amendments to the production profile, for example the addition of a new electrolyser, will require application for a new profile.

•

A delivery profile - which captures information about entities transporting or storing the product between the point of production and point of use.

•

A consumption profile - which captures details about the end consumption of the product.

1.17 Holders of a production profile can create certificates for each functional unit of product (which will be defined as kilograms in the case of hydrogen). This will contain details including the production pathway for the product and the emissions-intensity of the product to the "production gate".

1.18 Once a delivery profile holder has added post-production information to the certificate, the holder of the production profile can apply to the Regulator to register the certificate. If the Regulator approves, the certificate will be published on the register. To register the certificate, the Regulator must be satisfied that the product could have reasonably passed from the production gate to the delivery gate.

1.19 Certificate information may be updated to correct for errors. This may be initiated by registered persons or the Regulator. Certificate information can generally only be corrected until that information has been confirmed through an Annual Reconciliation Check.

Summary of new law

1.20 Schedule 1 to the Bill amends the tax law to establish the HPTI, in the form of the hydrogen production tax offset, a refundable tax offset of $2 for each kilogram of eligible hydrogen.

1.21 To be eligible for the hydrogen production tax offset for hydrogen in an income year, a company must, broadly:

•

be a constitutional corporation that is subject to tax in Australia;

•

hold the production profile (within the meaning of the Future Made in Australia (Guarantee of Origin) Act 2024) under which the hydrogen was produced, allowing it to issue the PGO certificate for the hydrogen; and

•

have complied with the rules implementing the community benefit principles for the HPTI made by the Treasurer.

1.22 Further, to be eligible for the hydrogen production tax offset for an income year, a kilogram of hydrogen must:

•

have been produced in Australia in the income year, which must have commenced on or after 1 July 2027 and ended before 1 July 2040;

•

have been produced during the offset period (the period in which the hydrogen production tax offset can be claimed) for the production profile under which it was produced and at a time when that production profile was certified by the CER for the purposes of the tax offset;

-

for the profile to be eligible to be certified, the facility set out in the profile must be a single site located in Australia with a production capacity at least equivalent to an electrolyser with 10 MW and a final investment decision must have been made in relation to the facility before 1 July 2030;

•

be the subject of a registered PGO certificate (within the meaning of the Future Made in Australia (Guarantee of Origin) Act 2024) for which the initial reconciliation period has expired and for which no correction notice is in force, that indicates:

-

the hydrogen has been produced with an emissions intensity of not exceeding 0.6kg of carbon dioxide for each kilogram of hydrogen; and

-

if produced using electricity from a grid, the electricity meets the grid matching requirements; and

•

be the subject of a correction notice for the PGO certificate for the hydrogen is in force.

Detailed explanation of new law

1.23 The hydrogen production tax offset is a refundable tax offset of an amount equal to $2 for each kilogram of eligible hydrogen, subject to any reduction that may occur if an entity does not comply with the rules implementing the community benefit principles for the HPTI.

1.24 It is available to companies that satisfy the eligibility requirements, including issuing the PGO certificate for the hydrogen as the holder of the production profile under which the hydrogen was produced.

1.25 There is no cap on the amount a company can receive under the offset, but it is only available for a specified period, reflecting the Government's intention to support early investment.

1.26 The HPTI can only be claimed for hydrogen produced in income years commencing on or after 1 July 2027 and ending before 1 July 2040. This ensures it will provide targeted support to the sector in its early development.

1.27 The eligibility requirements for the HPTI can be divided into requirements that apply to the company claiming the hydrogen production tax offset, and requirements that apply to the hydrogen for which hydrogen production tax offset is being claimed.

Eligible Companies

1.28 To be eligible for the hydrogen production tax offset for hydrogen for an income year, a company must:

•

be a constitutional corporation;

•

hold the production profile under the Future Made in Australia (Guarantee of Origin) Act 2024 under which the hydrogen was produced;

•

be subject to Australian tax in relation to any income from its activities relating to the production of the hydrogen; and

•

comply with the rules implementing the community benefit principles for the HPTI.

Constitutional Corporation

1.29 The first requirement for a company to be entitled to the hydrogen production tax offset is that it is a constitutional corporation. 'Constitutional corporation' is defined in subsection 995-1(1) of the ITAA 1997. An entity will be a constitutional corporation if it is either:

•

a trading, financial or foreign corporation to which paragraph 51(xx) of the Constitution applies; or

•

a body corporate that is incorporated in a Territory.

[Schedule 1, item 3, paragraphs 421-5(1)(g) and 421-5(2)(a) of the ITAA 1997]

1.30 Entities that are not corporations, such as trusts or partnerships, cannot be constitutional corporations and will never be entitled to the hydrogen production tax offset (even if some or all of the trustees of the trust or the partners in the partnership are constitutional corporations).

1.31 If a company that is a member of a consolidated group is a constitutional corporation and satisfies all of the other requirements to be eligible for the hydrogen production tax offset, the head entity for the group will be able to claim the hydrogen production tax offset in respect of the member's entitlement.

Holder of a Production Profile allowing the creation of PGO certificates

1.32 The second requirement for a company to be entitled to the hydrogen production tax offset for an income year is that the company must have created the PGO certificate for hydrogen under the GO Scheme. To be able to create a PGO certificate, the company must be the holder of the production profile that relates to the hydrogen.

[Schedule 1, item 3, paragraphs 421-5(1)(g) and 421-5(2)(b) of the ITAA 1997]

1.33 'Production profile' is defined in the Future Made in Australia (Guarantee of Origin) Act 2024.

1.34 It consists of the information about a product that is being produced, including details of the facility at which it is produced and the manner in which it is produced (the production pathway and production modules). It also includes details of all of the entities that own and operate the production facility.

1.35 The initial holder of a production profile is the person that applied to CER to register the profile. If this person is not the sole owner and operator of the facility, there must be written agreements between the entity and any other owner or operator allowing the person to register the profile and issue PGO Certificates for the hydrogen produced from the facility.

1.36 Under the GO Scheme, production profiles can be suspended, cancelled, surrendered and transferred. If an entity ceases to be the holder of a production profile, they cease to be able to issue PGO certificates and will not be eligible for the hydrogen production tax offset for any subsequent production.

1.37 For further details on the operation of the GO Scheme, please see the Explanatory Memorandum to the Future Made in Australia (Guarantee of Origin) Bill 2024.

1.38 This requirement ensures that there is a clear rule about which company will be entitled to the hydrogen production tax offset for a quantity of hydrogen. Rather than create a new concept or rules, it links entitlement to issuing PGO certificates and holding the relevant production profile under the GO Scheme. Having a production profile is a necessary prerequisite to the production of verifiably renewable hydrogen in Australia. As the process for becoming the holder of a production profile requires the agreement of any other owners or operators, this provides a simple and fair basis to determine entitlement to the hydrogen production tax offset.

Subject to Australian tax

1.39 The third requirement for a company to be eligible for the hydrogen production tax offset for an income year is that it must be subject to Australian tax on income from the activities in the course of which it created the PGO certificate.

1.40 The first element of the requirement is that the company must have created the PGO certificate in the course of an enterprise it is carrying on in the indirect tax zone, and, at all times when that enterprise was being carried on, the company must either be:

•

an Australian resident that has an ABN; or

•

a foreign resident that has both a permanent establishment in Australia and an ABN.

[Schedule 1, item 3, paragraphs 421-5(1)(g) and 421-5(2)(c) to (d) and subsection 421-5(3) of the ITAA 1997]

1.41 'Indirect tax zone' and 'carried on in an indirect tax zone' are defined in sections 195-1 and 9-27 of the GST Act, respectively.

1.42 Enterprise, is defined in section 9-20 of the GST Act. It includes, but is not limited to an activity or series of activities done in the form of a business, on a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property or by a charity or trustee of a complying superannuation fund.

1.43 The 'indirect tax zone' means Australia but does not include external territories and certain offshore areas. An enterprise will be carried on in an indirect tax zone if the enterprise is carried on by one or more specified individuals that are in Australia, and:

•

the enterprise is carried on through a fixed place in Australia; or

•

the enterprise has been carried on through one or more places in Australia for more than 183 days in a 12-month period; or

•

the company intends to carry on the enterprise through one or more places in Australia for more than 183 days in a 12-month period.

1.44 In effect this element of the requirement ensures that the company must be linked to Australia in a way that makes its activities subject to Australian tax.

1.45 The second element of the requirement that the company be subject to Australian tax is that the company must not be an exempt entity. An exempt entity is defined in subsection 995-1(1) of the ITAA 1997 as, broadly, an entity all of the income of which is exempt from income tax. An indicative list of exempt entities is set out in section 11-5 of the ITAA 1997.

[Schedule 1, item 3, paragraphs 421-5(1)(g) and 421-5(2)(e) of the ITAA 1997]

1.46 The combined effect of these requirements is that the company must be in a position where any income derived their activities relating to the production of hydrogen must be taxable in Australia. This does not mean that the company must derive taxable income in a particular income year, just that it must be subject to tax on its income it might derive for carrying on its related activities.

Community benefit principles

1.47 The final requirement for a company to be eligible for the hydrogen production tax offset for an income year is that the company must comply with the rules implementing the community benefit principles for the HPTI that apply to the company during that income year.

[Schedule 1, item 3, paragraphs 421-5(1)(g) and 421-5(2)(f) of the ITAA 1997]

1.48 The community benefit principles are the principles set out in the Future Made in Australia Bill 2024. For grants programs and other spending initiatives that are designated Future Made in Australia supports, the Future Made in Australia Bill requires decision makers to have regard to these principles in deciding whether to provide these supports, allowing appropriate enforcement of community benefits.

1.49 While the hydrogen production tax offset is provided through the tax system rather than being a spending initiative, it has been designed with regard to the community benefit principles. This includes providing for the making of rules implementing the community benefit principles in the context of the hydrogen production tax offset.

1.50 The rules implementing the community benefit principles for the HPTI (referred to as the HPTO community benefit rules) are made by the Treasurer (or another Treasury Minister) by legislative instrument and specify conditions that must be met for a company to be eligible for the hydrogen production tax offset for an income year.

[Schedule 1, item 3, paragraph 421-45(1)(a) of the ITAA 1997]

1.51 The rules may also specify that the amount of the hydrogen production tax offset that a company is entitled to for an income year is reduced by a specified amount or proportion if the company does not comply with specified requirements in the rules.

[Schedule 1, item 3, subsection 421-10(2) and paragraph 421-45(1)(b) of the ITAA 1997]

1.52 As the rules will need to be strict requirements, they may require regular updating to address current and emerging circumstances. Given this, it is not considered feasible to include the requirements in primary law. However, the rules will be subject to disallowance and sunsetting after 10 years and will therefore be subject to appropriate parliamentary scrutiny.

1.53 It is anticipated the rules implementing the community benefit principles for the HPTI may involve requiring that entities arrange for the certification of their activities by expert bodies that their activities meet certain requirements, with the ATO needing to confirm the fact of that certification.

1.54 In making the rules, the Treasurer must have regard to the community benefit principles set out in subsection 10(3) of the Future Made in Australia Act 2024. Further, when having regard to those principles, the Treasurer is required to treat the hydrogen production tax offset as if it were Future Made in Australia support within the meaning of the Future Made in Australia Act 2024. Given this, the Treasurer may only make the rules implementing the community benefit principles for the HPTI after the Future Made in Australia Bill 2024 has received royal assent and commenced.

[Schedule 1, item 3, subsections 421-45(2) to (4) of the ITAA 1997]

1.55 This ensures that the requirements under these rules are aligned with the requirement relating to community benefits for other support under the Future Made in Australia agenda despite the differing legislative context.

1.56 For further details on the community benefit principles, please see the Explanatory Memorandum to the Future Made in Australia Bill 2024.

Eligible Hydrogen

1.57 Even if a company is eligible to claim the hydrogen production tax offset for an income year, it may only do so for a kilogram of hydrogen produced in Australia during the income year if:

•

the income year started on or after 1 July 2027 and ended before 1 July 2040;

•

there was a registered PGO certificate for the kilogram of hydrogen for which the initial reconciliation period has ended that indicates:

-

the hydrogen was produced at the facility specified in the production profile, in accordance with the production pathway specified in the profile

-

the production emissions intensity of the hydrogen did not exceed 0.6 kg of carbon dioxide per kilogram of hydrogen; and

-

if electricity used to produce the hydrogen was sourced from a grid, it meets the grid matching requirements,

•

the nominated production profile was certified at the time of production in relation to the facility and production pathway;

•

the kilogram of hydrogen was produced during the offset period for the facility and the production pathway;

•

no correction notice for the PGO certificate is in force.

[Schedule 1, item 3, subsection 421-5(1) of the ITAA 1997]

Where Eligible Hydrogen is Produced

1.58 The first requirement for the hydrogen is that it must have been produced in Australia. This reflects the Government's intention to support the production of renewable hydrogen in Australia.

[Schedule 1, item 3, subsection 421-5(1) of the ITAA 1997]

1.59 In this context, "Australia" includes Norfolk Island, the Coral Seas Islands, Ashmore and Cartier Islands, Christmas Island, Cocos (Keeling) Islands, Heard and McDonald Islands and the coastal seas of Australia, but does not include any other external Territory - see section 960-505 of the ITAA 1997 and sections 2B and 15B of the Acts Interpretation Act 1901.

When Eligible Hydrogen is Produced

1.60 The second requirement for the hydrogen is it must have been produced in an income year starting on or after 1 July 2027 and ending before 1 July 2040. This ensures that the HPTI serves as an incentive for early investment.

[Schedule 1, item 3, paragraph 421-5(1)(a) of the ITAA 1997]

1.61 For the purposes of the measurement of emissions under the GO scheme, units of products, including kilograms of hydrogen, are grouped into batches, representing production for a facility over a set period of time, which can range from an hour to a year. The registered PGO certificate for a kilogram of hydrogen must set out the time and date when the batch was produced. Under paragraph 50(1)(i) of the Future Made in Australia (Guarantee of Origin) Act 2024 this is 'the time and day the last part of the batch left the production gate'.

1.62 To align with these arrangements, the time of production for hydrogen is taken to be the time when the last part of the batch hydrogen that contains the kilogram leaves the production gate within the meaning of the Future Made in Australia (Guarantee of Origin) Act 2024.

[Schedule 1, item 3, subsection 421-15(1) of the ITAA 1997]

1.63 However, the time of production is taken to be prior to 1 July 2027 and the hydrogen will not be eligible for the hydrogen production tax offset if production of the batch of hydrogen commenced before 1 July 2027.

[Schedule 1, item 3, subsection 421-15(2) of the ITAA 1997]

1.64 Together, these rules ensure there is no ambiguity about the time of production in a situation where the production of a kilogram of hydrogen commences in one income year and concludes in another.

Registered PGO certificate

1.65 The third requirement for hydrogen to be eligible for the hydrogen production tax offset is that each kilogram of hydrogen for which the hydrogen production tax offset is being claimed must be the subject of a registered PGO certificate created by the company claiming the offset under the GO Scheme. The certificate must identify the facility at which the hydrogen was produced and the related production pathway and production profile. This information is a standard feature of PGO certificates.

[Schedule 1, item 3, subparagraph 421-5(1)(b)(i) of the ITAA 1997]

1.66 The certificate must also indicate both that:

•

the production emissions intensity of the hydrogen did not exceed 0.6 kg of carbon dioxide per kilogram of hydrogen; and

•

if electricity used to produce the hydrogen was sourced from a grid, it satisfied the grid matching requirements.

[Schedule 1, item 3, subparagraphs 421-5(1)(b)(ii) and (iii) and sections 421-20 and 421-25 of the ITAA 1997]

1.67 In relation to the emissions intensity, the production emissions intensity is the measure of the carbon dioxide emitted when producing the hydrogen, being effectively the emissions from well to production gate. It is defined using the concept of 'production emissions sources' within the meaning of the Future Made in Australia (Guarantee of Origin) Act 2024, which are those sources specified by the Minister administering that legislation in relation to a production profile. It does not include emissions that may occur during delivery or consumption of the hydrogen.

[Schedule 1, item 3, section 421-20 of the ITAA 1997]

1.68 The identification of the level of emissions from well to production gate is a core function of the GO Scheme. This information will need to be included on all PGO certificates for hydrogen.

1.69 The grid matching requirements are intended to ensure grid-matching has occurred if electricity from a grid was used in the production of the hydrogen.

1.70 Grid-matching, the requirement that the electricity sourced by the hydrogen producer in producing the hydrogen through a grid-connected electrolyser project, must have been sourced from the same grid to which the electrolyser is connected, is not directly addressed in the provisions of the Future Made in Australia (Guarantee of Origin) Act 2024. However, it is intended that the rules made under that Bill once it has become law will provide for PGO certificates to indicate if grid-matching has occurred. The grid matching requirements for the hydrogen production tax offset will be aligned with those rules and the related information that will be included on the PGO certificates for hydrogen.

1.71 As the treatment of grid-matching under the GO Scheme will be set out in subordinate legislation, this instrument-making power is necessary to allow the appropriate link to be made.

[Schedule 1, item 3, section 421-25 of the ITAA 1997]

1.72 The grid-matching requirement does not extend to requiring that the time at which the electricity is generated must be matched to the time of production. Time-matching is complex, costly and imposes very substantial compliance costs. It is not appropriate for an incentive targeted towards first movers in the context of the emerging nature of hydrogen production in Australia.

1.73 The overall effect of requiring the certificate to indicate that the emissions intensity is below the required threshold and, if relevant, grid-matching has occurred, is to ensure that the hydrogen must not lead to significant emissions if benefitting from the HPTI.

1.74 Both of the matters that the certificate must address lie within the expertise of the CER rather than the ATO. Given this, the requirement will be satisfied by the existence of a registered certificate rather than by reference to the underlying facts. Any company that wishes to dispute whether hydrogen satisfies the emissions intensity threshold or the grid matching requirements must contest the decision of the CER under the GO Scheme and obtain a registered certificate that satisfies these requirements.

1.75 Further details on the operation of the GO Scheme are set out in the Explanatory Memorandum to the Future Made in Australia (Guarantee of Origin) Bill 2024.

1.76 In addition to containing this information, the relevant certificate must be registered. Under the GO Scheme, PGO certificates are created by the holder of a production profile rather than the CER. Requiring certificates to be registered with the CER before being used to claim the hydrogen production tax offset ensures that the offset is only available if the certificate has been subject to appropriate scrutiny.

1.77 In addition, even if a PGO certificate satisfying all of the other elements exists for a kilogram of hydrogen, this requirement will not be satisfied until the initial reconciliation period for the certificate has passed.

[Schedule 1, item 3, paragraph 421-5(1)(e) of the ITAA 1997]

1.78 Broadly, under the GO Scheme certificates registered during a financial year are subject to checks after the end of the financial year. This checking process concludes either:

•

when the production profile holder confirms the information they have provided to CER in relation to the activities undertaken during the year is true and correct; or,

•

if an error has been identified, after the CER makes a decision about the appropriate response.

1.79 The initial reconciliation period for a PGO certificate registered in an financial year concludes when the checking process relating to PGO certificates for that financial year concludes.

[Schedule 1, item 3, section 421-35 of the ITAA 1997]

1.80 This element of the requirement ensures that the hydrogen production tax offset cannot be claimed while key matters relating to the eligibility for the hydrogen are being reviewed. This reduces the risk that the hydrogen production tax offset may be overpaid and that both taxpayers and the ATO will need to go through the recovery process.

Certified production profile

1.81 The fourth requirements for hydrogen to be eligible for the hydrogen production tax offset, is that the production profile under which the hydrogen is produced must be certified by the CER.

[Schedule 1 , item 3, paragraph 421-5(1)(c) of the ITAA 1997]

1.82 For a production profile to be certified by the CER, a holder of a registered production profile must validly apply for that profile to be certified from a specified time in relation to the facility and the production pathway specified in the profile. The time specified in the application must not be later than the start of the day when the application is made. This is because it would not be possible for the CER to be satisfied of the matters that must be in place to certify an application for a future time.

[Schedule 1, item 3, subsections 421-50(1) and (2) of the ITAA 1997]

1.83 To be valid, that application must be:

•

in the form approved by the CER by notifiable instrument;

•

accompanied by any required information, documents or other materials specified by the CER by notifiable instrument; and

•

accompanied by an 'eligibility statement' for the production profile, being a statement that there are reasonable grounds to believe that the company would be entitled to the hydrogen production tax offset for an income year if the profile is certified.

1.84 CER cannot certify a profile as a result of an application that does not satisfy one or more of these requirements, even if the profile satisfies the conditions for certification. Such an application is taken to not have been made.

[Schedule 1, item 3, subsections 421-50(3) and (4) of the ITAA 1997]

1.85 The CER must certify a production profile in relation to a facility and production pathway for which a valid application has been made if the following requirements were met at the specified time and have continued to be met:

•

the facility covered in the profile is located on a single site in Australia (the location requirement);

•

the facility has a production capacity using the method specified in the profile (the production pathway under the GO Scheme) equivalent to the capacity of an electrolyser with a 10MW nameplate capacity (the capacity requirement);

•

the production of hydrogen under the profile does not involve any excluded processes (the excluded processes requirement);

•

if the start time for certification is on or after 1 July 2030, a final investment decision was made on the production of hydrogen at the required scale under the profile on or before 30 June 2030 (the final investment decision requirement); and

•

based on the information in the possession of CER, it would not be reasonable to believe that the eligibility statement is incorrect (the eligibility statement requirement).

[Schedule 1, item 3, subsections 421-55(1), (3) to (7) of the ITAA 1997]

1.86 However, the CER may, by written notice, request further information or documents that are relevant to certification by a specified time. The CER need not certify a profile if this request is not complied with.

[Schedule 1, item 3, subsection 421-55(2) and subsection 421-70(1) of the ITAA 1997]

1.87 The location requirement ensures that a production profile cannot be certified if the facility specified in the profile is not located in Australia. It also, by requiring that the facility must be a single site, ensures that the capacity requirement cannot be avoided by adding together multiple smaller production sites that fall below the scale the HPTI is intended to support.

[Schedule 1, item 3, paragraph 421-55(3)(a) of the ITAA 1997]

1.88 The capacity requirement specifies that, for a production profile to be certified, the facility specified in the profile must have a production capacity equivalent to the capacity of an electrolyser with a 10MW nameplate capacity either since the time from which certification is sought or over the period for which certification is sought. This ensures that the offset is only available for the production of renewable hydrogen at scale, consistent with the Government's policy intention.

[Schedule 1, item 3, paragraph 421-55(3)(b) of the ITAA 1997]

1.89 This requirement means that that facility specified in this profile must have this production capacity at the time of certification.

1.90 The CER may, by legislative instrument, specify how the production capacity of a facility is to be expressed and determined, including circumstances in which a facility will have production capacity equivalent to that of an electrolyser with a 10 MW nameplate capacity.

[Schedule 1, item 3, section 421-60 of the ITAA 1997]

1.91 This power is necessary to provide clarity and certainty for differing means of producing hydrogen. While the specified threshold provides clarity for the principal existing method for producing renewable hydrogen, other emerging methods do not have the same certainty. It would not be feasible to address all production methods in the primary law, especially given both the substantial ongoing change in this area and the fact that the ways of measuring capacity can differ between methods. The legislative instrument would be subject to appropriate parliamentary scrutiny, including being subject to disallowance and sunsetting after no more than 10 years. The legislative instrument would also be subject to the requirement for appropriate consultation under section 17 of the Legislation Act.

1.92 The excluded processes requirement ensures that the offset is not available to activities involving the production of hydrogen from fossil fuels, even where emissions may be captured using carbon capture and storage technologies.

1.93 The current excluded processes are steam reformation of natural gas and coal gasification, both of which involve the production of hydrogen from fossil fuels. Additional processes may be prescribed by the regulations as excluded processes. Prescribing additional excluded processes by regulation will allow the Government the ability to ensure the requirements are kept up to date and reflect different processes that may be developed in the future. The legislative instrument would be subject to appropriate parliamentary scrutiny, including being subject to disallowance and sunsetting after no more than 10 years. The legislative instrument would also be subject to the requirement for appropriate consultation under section 17 of the Legislation Act.

1.94 The requirement to have a final investment decision before 1 July 2030 ensures that the hydrogen production tax offset is only available to companies that make a definite commitment to the production of hydrogen during the early development of the industry in Australia at a sufficient scale.

[Schedule 1, item 3, subsections 421-55(4) to (6) of the ITAA 1997]

1.95 In this context, a final investment decision is an unqualified decision of the company, made by its directors, to proceed with the project for the production of hydrogen. The decision cannot be vague or tentative. It must be clear about the nature, scope and details of the activities to which it commits the company, including the production capacity that is to be constructed.

1.96 Given this, a decision that is not accompanied by subsequent tangible action would not usually constitute a final investment decision in this context. However, a decision does not need to be wholly unconditional to be a final investment decision. An otherwise unqualified decision to proceed with a project that is subject to external factors, such as receiving environmental approvals or successfully obtaining finance, can be a final investment decision.

1.97 Equally, a decision that is not clearly evidenced in contemporaneous documentation will be unlikely to constitute a final investment decision. A lack of documentation is strong evidence that the decision was not sufficiently final or clear at the relevant time.

1.98 The CER may seek documentary evidence about the nature and timing of a final investment as part of the certification process.

1.99 To satisfy the final decision requirement for a particular production profile the specified production capacity in the decision must be at least equal to the actual production capacity of the facility specified in the production profile -the nominal capacity - at and after the time for which certification is sought. The power of the CER to specify circumstances when a facility is taken to have a particular production capacity that is discussed in paragraph 1.90 above can apply in this context.

[Schedule 1, item 3, subsection 421-55(6) of the ITAA 1997]

1.100 In some cases, final investment decisions may be cumulative - there will have been one decision to construct and operate a 5 MW electrolyser and a subsequent decision to expand the capacity at the facility to 15 MW. If certification is sought for a production profile covering the expanded facility, the second decision would result in the cumulative final investment decisions for the facility in the profile satisfying the requirement that all of the capacity in the profile must have been the subject of a final investment decision.

1.101 Finally, the eligibility statement requirement means that the CER can only certify the profile if, on the basis of the information it possesses at the time, it could not reasonably believe the eligibility statement to be incorrect.

[Schedule 1, item 3, subsection 421-55(7) of the ITAA 1997]

1.102 While it is not feasible for the CER to ascertain the eligibility of a company for the hydrogen production tax offset in advance, this requirement ensures that production profiles held by entities that will never be eligible for the hydrogen production tax offset (such as an entity that is not a company) will not be certified.

1.103 The CER does not have a positive duty to seek information in its assessment of the eligibility statement beyond whatever information it possessed when it receives the certification application, including information that was contained in, or accompanied, that application.

[Schedule 1, item 3, subsection 421-55(9) of the ITAA 1997]

1.104 A decision by the CER to certify or not to certify a registered production profile in response to a valid application is subject to review by the Administrative Review Tribunal, as well as judicial review.

[Schedule 1, item 3, paragraph 421-75(d) and (e) of the ITAA 1997]

1.105 Once a production profile is certified, it remains certified even if the holder of the production profile changes.

1.106 The CER may revoke the certification of a production profile. For the CER to do so, at least one of the following conditions must be satisfied:

•

the registration of the production profile is suspended, cancelled or surrendered under the Future Made in Australia (Guarantee of Origin) Act 2024;

•

at a time after the time the certification of the production profile started, the CER is no longer satisfied that:

-

the facility specified in the profile is located on a single site in Australia;

-

the facility has a nameplate capacity of at least 10 megawatts; or

-

a final investment decision covering the facility and its production capacity was taken before 1 July 2030; or

•

the CER reasonably believes, based on the information in its possession, that the eligibility statement for the production profile is incorrect.

•

the production profile holder has failed to provide specified documents in the specified time in response to a request of the CER made in relation to the certified profile.

[Schedule 1, item 3, subsections 421-65(1), (2) and (4) and 621-70(2) of the ITAA 1997]

1.107 The effect of revocation is that the production profile ceases to be certified from the date the revocation has effect. This does not prevent a subsequent application for the certification of the profile.

[Schedule 1, item 3, subsections 421-65(6) to (8) of the ITAA 1997]

1.108 A decision to revoke the certification of a production profile has effect from the time specified in the instrument of revocation. For decisions relating to the suspension, cancelation or surrender of a production profile or the requirements for certification relating to location, capacity or the final investment decision, this time must be the earliest time at which the CER is satisfied that the relevant condition for revocation was satisfied. For decisions to revoke registration for a failure to comply with a request for information, the specified time must not be before the time at which the information was required to be given. For decisions relating to the eligibility statement being incorrect, the specified time must not be before the time when the instrument of revocation is made.

[Schedule 1, item 3, subsections 421-65(3) and (5) of the ITAA 1997]

1.109 In some cases, the specified time may be before the instrument of revocation is made. If the date specified for revocation is the same as the date the offset period started, the certification is taken to have never been in effect.

[Schedule 1, item 3, subsections 421-65(5), (6) and (7) of the ITAA 1997]

1.110 The CER must notify the production profile holder and the Commissioner if it certifies a production profile. Likewise, the CER must notify the production profile holder (or, if the certification is being revoked as the production profile no longer exists, the entity that held the production profile immediately before it ceased to exist) and the Commissioner if it revokes a production profile.

[Schedule 1, item 3, subsections 421-55(8) and 421-65(9) of the ITAA 1997]

1.111 A decision by the CER to revoke a production profile is subject to review by the Administrative Review Tribunal, as well as judicial review.

[Schedule 1, item 3, paragraph 421-75(f) of the ITAA 1997]

Offset period

1.112 The fifth requirement for hydrogen to be eligible for the hydrogen production tax offset is that the hydrogen must have been produced within an income year falling within the offset period for the facility and production pathway specified in the production profile.

[Schedule 1, item 3, paragraph 421-5(1)(d) of the ITAA 1997]

1.113 The offset period commences from the date chosen by the holder of the production profile. This choice must be done by providing notice to the Commissioner in the approved form. The date chosen must be during the period in which the hydrogen production tax offset is available (on or after 1 July 2027 and before 1 July 2040). Further, the date must be the first day of an income year for the holder of the production profile.

[Schedule 1, item 3, subsections 421-30(1) and (2) of the ITAA 1997]

1.114 An offset period notice cannot be revoked or replaced. Once an offset period notice has been given, the offset period for the specified facility and production pathway is fixed and cannot be varied. Even if the production profile is deregistered and a new production profile is registered and certified, if the same facility and production pathway are specified then the offset period will be the same.

[Schedule 1, item 3, subsection 421-30(3) and (4) of the ITAA 1997]

1.115 The offset period for a facility and production pathway ends at the earlier of the end of the period of 10 years starting from the offset start date or 30 June 2040.

[Schedule 1, item 3, subsections 421-30(5) of the ITAA 1997]

1.116 In some circumstances, hydrogen may be produced under different production profiles at the same facility. This production may occur at the same time, or at different points in time.

1.117 If multiple notices are given under different production profiles, in relation to the same facility, specifying their respective offset start dates, and the CER may be able to determine that a group consisting of two or more notices should be treated together for the purpose of setting the offset period for all of the notices. It does not matter whether the notices arrive at different times. It also does not matter if the production profiles concerned remaining certified or registered.

1.118 To do this be able to make such a determination, the CER must be satisfied that the production at the facility, in accordance with the production pathway specified in any one of the notices is not substantially different from the production at the facility in accordance with a production pathway specified in any other notice in the group.

1.119 In making this determination, the CER may have regard to:

•

the nature of the facility;

•

the nature of the production pathways specified in the notices; and

•

if some of the notices are given at different times - the nature of any changes to the facility between those times.

[Schedule 1, item 3, subsection 421-30(6) to (9) of the ITAA 1997]

1.120 These criteria highlight the key areas in which production processes may differ such as to demonstrate that one process is not the other process rebadged, in whole or part, but is instead a meaningfully distinct process.

1.121 Substantial difference is considered at a high level of detail. Production under different profiles at the same facility will not fail to be substantially different merely because both involve electrolysis, or because many of the production modules are the same. Instead, failing to be substantially different requires that the CER consider that the processes are, in whole or part, in substance the same process carried on at the same facility.

1.122 If the CER makes such a written determination, then the offset period for both production pathways in respect of the facility is the same - starting from whenever the earliest offset period for either pathway would have started. The decision of the CER to make or vary a written determination is subject to review by the Administrative Review Tribunal, as well as judicial review.

[Schedule 1, item 3, subsection 421-30(6) and paragraph 421-75(a)]

1.123 This rule ensures that the effect of the offset period cannot be avoided by the re-registration of what is in substance the same production process for a facility.

1.124 Limiting the period of support for any facility to 10 years means that the support provided under the HPTI is directed toward assisting the establishment of new production and the expansion of the market.

1.125 The start of eligibility is linked to a choice rather than the commencement of production. This allows companies that expect that the production of hydrogen may be limited in the first year in which the project is in operation to defer beginning to claim the offset until later years to maximise the benefit they receive over the 10-year period for which they are eligible for the hydrogen production tax offset. However, even if a company chooses to defer claiming the hydrogen production tax offset, they will not be eligible to claim the tax offset for hydrogen produced in income years commencing on or after 1 July 2040.

1.126 As the offset period must start from the beginning of a company's income year, usually it will be aligned with the income years of the holder of the production profile. However, this will not always be the case - for example, if the production profile holder changes to an entity with a substituted accounting period.

1.127 The making of the approved form for choosing the start date for claiming the hydrogen production tax offset is a matter for the Commissioner. However, it is anticipated that one of the options the Commissioner may consider is including the income tax return as an approved form for this purpose, so that companies can make an election simply by including or excluding the hydrogen production tax offset in their income tax return.

Correction notices

1.128 For hydrogen to be eligible, there must be no correction notice for the PGO certificate for the hydrogen in force.

[Schedule 1, item 3, paragraph 421-5(1)(f) of the ITAA 1997]

1.129 The CER must issue a correction notice if:

•

the initial reconciliation period for the PGO certificate has ended;

•

the registered PGO certificate states that the emissions intensity requirements and the grid-matching requirements (if any) are met; and

•

the CER is satisfied that one or both of the relevant emissions intensity and grid-matching requirements are not met.

1.130 The correction notice must state the CER's satisfaction that the emissions intensity or grid-matching requirements, or both, are not met. The correction notice is in force until revoked.

[Schedule 1, item 3, subsections 421-40(1) to (3) of the ITAA 1997]

1.131 This is likely to arise if material errors around the calculation of emissions or grid-matching are identified after the verification period is over. One common instance where this may occur is if the holder of the production profile or the CER identifies an issue with subsequent production from the facility which is then found to have also occurred for prior production.

1.132 In effect, this requirement is needed due to the otherwise conclusive nature of the GO certificate in relation to emissions intensity and grid-matching. The legislation empowers the CER to prevent companies from accessing the hydrogen production tax offset on the basis of PGO certificates containing materially incorrect information.

1.133 The CER may revoke a correction notice. The CER must be satisfied that one of the following is true:

•

the initial reconciliation period for the certificate is still ongoing;

•

the PGO certificate does not state that the hydrogen meets the emissions intensity requirements and grid-matching requirements (if any) - that is the certificate was never materially in error because it never indicated the relevant requirement was satisfied; or

•

the hydrogen actually does meet the emissions intensity requirements and the facility meets the grid-matching requirements (if any) - that is, the certificate was never materially in error because the hydrogen satisfied both of the relevant requirements.

[Schedule 1, item 3, subsection 421-40(4) of the ITAA 1997]

1.134 The CER must give copies of any correction notice for a registered PGO certificate, as well as any revocation, to the Commissioner and each entity that is a holder of a registered production profile specified in the PGO certificate.

[Schedule 1, item 3, subsection 421-40(5) of the ITAA 1997]

1.135 The correction notices rules are intended to create a mechanism for the CER to correct errors in certificates that it may become aware of in the course of its administration of the GO scheme and the HPTI. They are not intended to place extra burden on the CER or production profile holders. To make this clear, the amendments include express statements that no duty is imposed on the CER to seek or consider information, and do not have any effect on the content or status of the PGO certificate for the purposes of the Future Made in Australia (Guarantee of Origin) Act 2024.

[Schedule 1, item 3, subsections 421-40(6) and (7) of the ITAA 1997]

1.136 The decision of the CER to issue or revoke a correction notice is subject to review by the Administrative Review Tribunal, as well as judicial review.

[Schedule 1, item 3, paragraph 421-75(b) and (c)]

Administration

Joint administration

1.137 The HPTI is jointly administered by the ATO and the CER. The CER responsibilities under these amendments relate primarily to the certification of production profiles, which complement its responsibilities under the Future Made in Australia (Guarantee of Origin) Act 2024.

1.138 All significant decisions of the CER under the amendments are subject to administrative review by the Administrative Review Tribunal (in addition to judicial review).

[Schedule 1, item 3, section 421-75 of the ITAA 1997]

1.139 Because of the significant links between the hydrogen production tax offset and the GO Scheme, the CER's ongoing activity under the GO Scheme will have important consequences for the operation of the hydrogen production tax offset. In particular, CER's role in registering and verifying PGO certificates for hydrogen will be critical to the operation of the HPTI.

1.140 Once the CER has certified the production profile of a company, the hydrogen production tax offset is principally administered by the ATO. The hydrogen production tax offset will usually be self-assessed by the company with an amount included in the company's income tax return in relation to an income year. The ATO's general administration, dispute and compliance powers and functions will apply.

1.141 The decision of the ATO in relation to assessments are subject to the standard processes of objection and review that apply for the tax law.

1.142 To facilitate joint administration, the two regulators may each request the other to provide information that the other regulator may hold, where this information is reasonably necessary or convenient for the requesting regulator's administration of the hydrogen production tax offset. The other regulator must comply with such a request.

1.143 A tax officer complying with a request made for this purpose is acting in the course of their duties for the purposes of the exception to the tax secrecy provisions in section 355-50.

1.144 This amendment ensures that the two regulators can effectively co-operate and share information to efficiently administer the hydrogen production tax offset. It will minimise the need for duplicate reporting. It does not extend to the sharing of information beyond what is necessary or convenient for the administration of the hydrogen production tax offset.

[Schedule 1, item 3, section 421-80 of the ITAA 1997]

Period of review

1.145 In some circumstances issues may be identified with the certification of a production profile many years after certification. Similarly, a correction notice may be issued long after the relevant PGO certificate was registered. As the CER, not the ATO, is responsible for certification and correction notices the existing mechanisms that ensure that the period of review does not bar the ATO from making consequential changes to assessments would not apply.

To address this, the amendments provide that if the certification of a production profile has been revoked, or if a correction notice is issued or revoked, section 170 of the ITAA 1936 does not prevent the Commissioner from amending the assessment of a company to give effect to any consequences of a revocation of certification or the issue or revocation of a correction notice for the period of 4 years after the issue or revocation.

[Schedule 1, item 3, section 421-85 of the ITAA 1997]

Application of the general anti-avoidance rule

1.146 The general anti-avoidance rule in Part IVA of the ITAA 1936 does not apply to tax offsets by default.

1.147 Given the importance and expected financial impacts of the HPTI, the Schedule 1 to the Bill includes amendments to Part IVA of the ITAA 1936 so the hydrogen production tax offset will be a tax benefit to which Part IVA can apply.

[Schedule 1, items 22 to 31, subsection 177A(1), paragraphs 177C(1)(bf) and (j) and 177C(2)(h), subsection 177C(3), paragraphs 177C(3)(ce) and (k), 177CB(1)(h), 177F(1)(h) and 177F(3)(i) of the ITAA 1936]

Public reporting about the HPTI

1.148 The Commissioner must publicly report specified information about the HPTI as soon as practicable after the second 30 June after the financial year that corresponds to the income year for which the company indicated it was entitled to claim the hydrogen production tax offset.

1.149 The information that must be reported in relation to a company that has claimed the hydrogen production tax offset for an income year is:

•

the company's name,

•

the company's ABN (or if the relevant income tax return does not include its ABN but includes its ACN, its ACN); and

•

the amount of hydrogen production tax offset the entity was determined to be entitled to for that income year.

1.150 The company may notify the Commissioner in the approved form if there is an error in the information, including an appropriate correction. The Commissioner may make the correction publicly available at any time. Further, if the Commissioner is satisfied that the reporting of the required information is incomplete, the Commissioner may make publicly available other information to correct this failure at any time.

[Schedule 1, item 5, section 3L of the TAA 1953]

1.151 This reporting serves as a transparency mechanism to maintain the integrity of the HPTI by identifying what support has been provided to which entities as a result of the hydrogen production tax offset. It is based on the equivalent regime in section 3H of the TAA 1953 for the research and development tax incentive. Consistent with the arrangements for the research and development tax incentive, the Commissioner may publish information on an entity for an income year for which the entity claims the hydrogen production tax offset even if the entity is later found not be entitled to the hydrogen production tax offset for the income year.

Interaction with Hydrogen Headstart

1.152 The Government's Hydrogen Headstart grant program, administered by ARENA, provides revenue support for large-scale renewable hydrogen projects through competitive hydrogen production contracts. Companies may be eligible for both the HPTI and funding under the Hydrogen Headstart program. It is the Government's intention that a company should not benefit from funding under the Hydrogen Headstart program in addition to the HPTI. Therefore, 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.

1.153 To assist ARENA administering the Hydrogen Headstart program on this basis, a new exception is made to the prohibition in section 355-25 in Schedule 1 to the TAA 1953 to tax officers disclosing or recording information that is protected information acquired as a taxation officer. Specifically, a new exception is made in respect of protected information where the record is made for or the disclosure is to ARENA and the record or disclosure is of information relating to the entitlement of a company to the hydrogen production tax offset and it is for the purpose of ARENA administering the Hydrogen Headstart program.

[Schedule 1, item 6, subsection 355-65(7) of Schedule 1 to the TAA 1953]

1.154 The new exception is appropriate to ensure that ARENA has the necessary information to inform whether payments to a company need to be reduced under the Headstart Hydrogen program because of a company already receiving amounts under the hydrogen production tax offset.

1.155 The amendments inserting the new exception apply in relation to records and disclosure of information made on or after the commencement of these amendments, regardless of whether the information was acquired before, on or after that commencement.

[Schedule 1, item 7]

Consequential amendments

1.156 Schedule 1 to the Bill also makes a range of consequential amendments to the ITAA 1936 and the ITAA 1997 required by the primary amendments, including adding definitions to the Dictionary and incorporating and updating guide material.

[Schedule 1, items 1 to 5, 22 and 26, section 13-1, table item 29 in section 67-23, section 421-1 and subsection 995-1(1) of the ITAA 1997 and subsections 177A(1) and 177C(3) of the ITAA 1936]

Minor and technical amendment relating to shortfall interest charge

1.157 Schedule 1 to the Bill also makes amendments to Schedule 1 to the TAA 1953 and the ITAA 1936 to address a minor and technical issue with shortfall interest charge.

1.158 This amendment provides that if the assessment of an entity's tax liabilities is amended, and as a result, the amount of the tax offset for which the entity is eligible is reduced, the entity is liable to pay shortfall interest charge on the excessive amount of tax offset they received.

[Schedule 1, items 18, subsection 280-102E(1) in Schedule 1 to the TAA 1953]

1.159 Shortfall interest charge is payable for each day starting from the day on which the entity received the benefit of the excessive amount (the day on which the excess was applied in accordance with Division 3 and 3A of the TAA 1953) and ending at the end of the day before the Commissioner provides notice of the amended assessment.

[Schedule 1, item 18, subsection 280-102E(2) in Schedule 1 to the TAA 1953]

1.160 Consistent with other circumstances in which the shortfall interest charge applies, if a person is liable to pay a shortfall interest charge on the excessive amount of tax offset they received, the amount is due 21 days after the Commissioner gives the person notice of the amended assessment. If the amount that the person is liable to pay remains unpaid after the time by which it is due to be paid, the person is liable to pay the general interest charge on the unpaid amount for each day in the period starting at the beginning of the day on which the amount was due, and finishing at the end of the last day on which the amount, or the general interest charge on the amount, remains unpaid.

[Schedule 1, items 8 to 12, subsections 172A(2A) and (3) of the ITAA 1936]

1.161 Previously, shortfall interest charge did not apply consistently if a taxpayer received an excessive amount of a tax offset. To the extent that the tax offset had been applied to reduce the income of the taxpayer, shortfall interest charge correctly applied. However, to the extent that the tax offset had resulted in a refund, shortfall interest charge did not apply. This change ensures that shortfall interest charge will now apply to the full amount of all tax offsets.

1.162 The amendments to address the shortfall interest charge for excessive tax offset refunds also include in consequential amendments to the TAA 1953 to:

•

update guide material;

•

clarify that the liability to general interest charge applies for unpaid amounts of shortfall interest charge for excessive tax offset refunds;

•

clarify that the shortfall interest charge for excessive tax offset refunds is a tax-related liability; and

•

extend the general rules for the calculation of the shortfall interest charge apply to shortfall interest charge for excessive tax offset refunds; and

•

provide that the Commissioner must give a person notice stating the amount of shortfall interest charge they are liable to pay for excessive tax offset refunds.

[Schedule 1, items 14, 15 to 17, 19 and 20, table item 10A of subsection 8AAB(4) of the TAA 1953 and table item 75 of subsection 250-10(1), sections 280-1 and 280-50, paragraph 280-110(a)(a) and subsection 280-110(1) in Schedule 1 to the TAA 1953]

Commencement, application, and transitional provisions

1.163 The main provisions in Schedule 1 to the Bill commence on the first 1 January, 1 April, 1 July or 1 October to occur after the later of:

•

the day the Bill receives Royal Assent; and

•

the day the Future Made in Australia (Guarantee of Origin) Act 2024 commences.

1.164 However, these provisions do not commence at all if the Future Made in Australia (Guarantee of Origin) Act 2024 does not commence.

1.165 The HPTI relies upon a number of concepts from the Future Made in Australia (Guarantee of Origin) Act 2024. In particular, it would not function without production profiles and PGO certificates.

1.166 These commencement provisions ensure that these amendments will not commence if they would not function due to the absence of the Future Made in Australia (Guarantee of Origin) Act 2024.

1.167 The amendments apply to hydrogen produced in income years commencing on or after 1 July 2027 and ending before 1 July 2040.

1.168 The consequential amendments to the ITAA 1936 commence at the later of the time the other amendments made by schedule 2 to the Bill commence and the time immediately after the time the related consequential amendments to the ITAA 1997 being made by schedule 2 to the Bill commence. However, they do not commence at all if the other amendments made by Schedule 2 do not commence.

1.169 As the consequential amendments to the ITAA 1936 made by this schedule and the consequential amendments to the ITAA 1936 made by Schedule 2 to the Bill relate to the same provisions, the amendments have been drafted to operate together harmoniously, requiring a linked commencement.

1.170 The amendments to Schedule 1 to the TAA 1953 and the ITAA 1936 relating to shortfall interest charge commence on the first 1 January, 1 April, 1 July or 1 October to occur after later of:

•

the day the Bill receives Royal Assent; and

•

the day the Treasury Laws Amendment (Multinational - Global and Domestic Minimum Tax) (Consequential) Act 2024 commences.

1.171 These amendments and amendments contained in the Treasury Laws Amendment (Multinational - Global and Domestic Minimum Tax) (Consequential) Bill 2024 both alter provisions relating to shortfall interest charge. This commencement provision ensures that the two sets of amendments apply in the proper sequence.

1.172 The amendments apply to amounts of excessive tax offset refunds where the liability to repay the amount arises on or after the amendments commence.

[Schedule 1, items 13 and 21]