Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Jim Chalmers MP)Chapter 4: Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Schedule 1 - Hydrogen Production Tax Incentive
Overview
4.1 Schedule 1 to the Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
4.2 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.
4.3 To be eligible for the hydrogen production tax offset for hydrogen in an income year, a company must, broadly:
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- be a constitutional corporation that is subject to tax in Australia;
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- 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
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- have complied with the rules implementing the community benefit principles for the HPTI made by the Treasurer.
4.4 Further, to be eligible for the hydrogen production tax offset for an income year, a kilogram of hydrogen must:
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- 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;
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- 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 hydrogen production tax offset;
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- 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;
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- 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:
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- the hydrogen has been produced with an emissions intensity of not exceeding 0.6kg of carbon dioxide for each kilogram of hydrogen; and
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- if produced using electricity from a grid, the electricity meets the grid matching requirements; and
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- be the subject of a correction notice for the PGO certificate for the hydrogen is in force.
Human rights implications
4.5 Schedule 1 to the Bill does not engage any of the applicable rights or freedoms.
4.6 The sole effect of the schedule 1 to the Bill is to provide for payments and reductions in tax liabilities to companies that produce hydrogen.
Conclusion
4.7 Schedule 1 to the Bill is compatible with human rights as it does not raise any human rights issues.
Schedule 2 - Critical Minerals Production Tax Incentive
Overview
4.8 Schedule 2 to the Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
4.9 It implements a new refundable tax offset, the CMPTI tax offset, to support the processing of critical minerals in Australia.
4.10 The offset is only available to constitutional corporations for income year that start on or after 1 July 2027 and end on or before 30 June 2040. The amount of the offset for an eligible company is equal to 10 per cent of the CMPTI expenditure of the company.
4.11 Broadly, a company that is a constitutional corporation and not an exempt (untaxed) entity is eligible for the CMPTI tax offset in an income year if it is either a tax resident of Australia and has an ABN or a foreign resident with an Australian permanent establishment through which the relevant production activities will be carried on, and has an ABN. The company will also have to comply with any rules implementing the community benefit principles made by the Treasurer.
4.12 A company's CMPTI expenditure is its expenditure incurring in carrying on its registered CMPTI processing activities.
4.13 A company may register an activity for the CMPTI tax offset by applying to the Industry Secretary. The company registering this activity must be the legal entity that will carry out the activity. This application must be in the form approved by the Industry Secretary and identify the critical mineral processing activities, the facilities at which the activity will occur, and the basis on which the company considers it will satisfy the requirements to be eligible for the CMPTI tax offset. The Industry Secretary is required to register the activity for the company where the Secretary is satisfied that the proposed activities will be CMPTI processing activities, and the Secretary has no reason to believe the information provided is not true, correct and complete or that the company would not satisfy the eligibility requirements.
4.14 CMPTI processing activities are processing activities carried on at a facility in Australia that:
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- involve substantially transforming a feedstock that contains a critical mineral through extractive metallurgical processing into a purer or more refined form of the critical mineral that is chemically distinct from the feedstock, and the substantial purpose for carrying on the activity is to achieve this transformation; or
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- are specified in regulations in relation to one or more critical minerals and produces the outcome prescribed by the Regulations, and the substantial purpose for carrying on the activity is to achieve this outcome.
4.15 Certain activities, including mining activities or beneficiation, are excluded from being CMPTI processing activities. The regulations may prescribe further exclusions.
Human rights implications
4.16 Schedule 2 to the Bill does not engage any of the applicable rights or freedoms.
4.17 The sole effect of Schedule 2 to the Bill is to provide for payments and reductions in tax liabilities to companies that engage in specified activities.
Conclusion
4.18 Schedule 2 to the Bill is compatible with human rights as it does not raise any human rights issues.
Schedule 3 - Amendments relating to Indigenous Business Australia
Overview
4.19 Schedule 3 to the Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
4.20 Schedule 3 to the Bill amends the ATSI Act to enable IBA to borrow and raise money in connection with the performance of its functions. IBA's functions involve driving First Nations economic empowerment through lending, investment and ancillary support across its three activity streams, home ownership, business support, and assets and investments.
Human rights implications
4.21 Schedule 3 to the Bill engages the right to self-determination in Article 1 of the International Covenant on Civil and Political Rights (ICCPR) and Article 1 of the International Covenant on Economic, Social and Cultural Rights (ICESCR).The right to self-determination, as set out in Article 1 of the ICCPR and Article 1 of the ICESCR, entails the entitlement of peoples to have control over their destiny and to be treated respectfully. This includes peoples being free to collectively pursue their economic, social and cultural development without outside interference. The right to self-determination is a collective right applying to groups of 'peoples'. The right is widely understood to be exercisable in a manner that preserves the territorial integrity, political unity and sovereignty of a country.
4.22 The right to self-determination is also contained in Articles 3 and 4 of the United Nations Declarations on the Rights of Indigenous Peoples (UNDRIP). While UNDRIP is not included in the definition of 'human rights' under the Human Rights (Parliamentary Scrutiny) Act 2011, it informs the way governments engage with and protect the rights of First Nations people. Article 18 of UNDRIP also provides that 'Indigenous peoples have the right to participate in decision-making in matters which would affect their rights, through representatives chosen by themselves in accordance with their own procedures, as well as to maintain and develop their own Indigenous decision-making institutions'.
4.23 Access to capital continues to be a significant barrier to First Nations economic development and empowerment.
4.24 Schedule 3 to the Bill 2024 will allow IBA to borrow and raise funds, providing IBA with flexibility to pursue a range investment opportunities and ultimately deploy a greater amount of finance and investment to support First Nations economic empowerment.
Conclusion
4.25 Schedule 3 to the Bill 2024 is compatible with human rights as it promotes the right to self-determination in Article 1 of the International Covenant on Civil and Political Rights (ICCPR) and Article 1 of the International Covenant on Economic, Social and Cultural Rights (ICESCR).