Australia’s largest business association is concerned that requiring companies to meet community benefit rules to qualify for tax breaks will increase production costs instead of helping businesses
Under the impending Future Made in Australia (Production Tax Credits and Other Measures) Bill 2024, the Labor government has introduced a hydrogen production tax credit scheme and a critical minerals production tax incentive to support the growth of Australia’s renewable sector.
The bill is part of the Future Made in Australia legislation, a $22.7 billion (US$14.2 billion) economic plan to accelerate the country’s transition to a net zero economy.
While the economic plan is expected to provide assistance to businesses, it also imposes on them the duty of taking care of local communities under the Community Benefit Principles framework.
Business Costs Will Increase: Peak Industry Body
At a recent parliamentary inquiry hearing, Peter Grist, a director at the Australian Chamber of Commerce and Industry (ACCI), expressed support for the production tax incentives established under the new bill.“Australian businesses face significant challenges when considering large-scale investments, particularly when adopting new low-emissions technology,” he told the Economics Legislation Committee.
“Production tax incentives offset part of the difference between the higher production costs of new technology relative to established processes, giving the investor a level of certainty that a reasonable price for their goods and a return on the investment in the initial years of production.”
However, he raised concerns about the government’s intention to tie access to the incentives with the Community Benefit Principles.
“This will drive up costs, complexity and compliance and be a major retardant on investment that the scheme is designed to achieve,” he said.
“The focus of the Community Benefit Principles on secure jobs, diverse workplaces and engaging with local communities appears to relate more to achieving other government agendas unrelated to investment in renewable hydrogen and critical minerals.”
The director also noted that the Community Benefit Principles duplicated other regulations and processes that businesses must already comply with, such as the new secure jobs federal pay legislation and the community consultation requirements for planning and environmental approval processes.
“They will be expensive and complex to administer, and the annual compliance requirements will add considerable uncertainty to financial viability,” he said.
Echoing the sentiment, Ross Lyons, a general manager at the Minerals Council Australia (MCA), said the Community Benefit Principles might create further barriers and uncertainty regarding project eligibility.
“The Community Benefit Principles … cannot be used as an excuse for policy overreach,” he said.
ACCI Wants Extension to Investment Deadline
At the same time, the ACCI said the timeline to access the production tax incentives is very narrow, as businesses are required to submit their final investment decision by July 1, 2030, at the latest.Due to the many regulatory requirements for getting approval, Grist said businesses could experience delays and miss opportunities.
As such, the ACCI director proposed the government extend the deadline to July 1, 2035.
“While the ACCI supports the use of production tax incentives to assist emerging industries over the long term, renewable hydrogen and critical mineral industries must be profitable and sustainable without continued government financial support,” he said.
