Australia has passed landmark legislation introducing production tax incentives for critical minerals and renewable hydrogen, a move aimed at strengthening domestic processing capabilities and reducing reliance on China.

The Critical Minerals Production Tax Incentive (CMPTI) legislation, passed on Tuesday, will provide a 10% refundable tax credit on eligible processing and refining costs for 31 critical minerals. 

The incentives will be available for up to ten years per project, covering production between July 1, 2027, and June 30, 2040. The Albanese government has allocated A$7-billion to the initiative over the decade.

Federal Resources Minister Madeleine King said the legislation was a transformative moment for Australia’s resources industry, particularly for resource-heavy states such as Western Australia and Queensland.

"By processing more of these minerals here in Australia, we will create jobs and diversify global supply chains.

"Critical minerals and rare earths are key to the world’s efforts to reduce emissions and they are vital for our national security,” she said in a statement.

Industry groups and critical minerals companies have widely supported the legislation, highlighting its potential to strengthen Australia’s position in the global supply chain. However, the Bill faced opposition from the Coalition, with King criticising opposition leader Peter Dutton for not backing the initiative.

Association of Mining and Exploration Companies CEO Warren Pearce praised the CMPTI legislation. “This is the first time any Australian government has put their money where their mouth is for the critical minerals industry.”

“The CMPTI is a powerful strategic lever that provides the foundation for the Future Made in Australia ambitions of the country. It’s also the largest ever commitment from an Australian government to critical minerals.”

“This will stimulate billions in new investment in critical minerals processing, which will be far more valuable than the incentives on offer," said Pearce.

Critical minerals and rare earths are essential components in renewable-energy technologies such as solar panels and batteries. They are also critical to the defence industry, used in the construction of submarines and aircraft.

The tax incentives form part of the government’s broader strategy to bolster domestic mineral processing under its "Future Made in Australia" framework. By offering financial support for refining operations, the government aims to ensure Australia captures more value from its mineral deposits rather than exporting raw materials for processing overseas.

The legislation also establishes a hydrogen production tax incentive worth $2/kg of renewable hydrogen produced for up to ten years per project.

Chamber of Minerals and Energy WA CEO Rebecca Tomkinson said production tax incentives for hydrogen and critical mineral processing sent a clear message to investors that Australia was serious about seizing the opportunities presented by the global energy transition.