The Hydrogen Production Tax Incentive is a refundable tax offset of $2 per kilogram of eligible low-emissions hydrogen. It will apply to hydrogen produced in income years between 1 July 2027 and 30 June 2040, for a maximum of 10 years.
The incentive will support medium to large scale production of renewable hydrogen in Australia. As part of the Future Made in Australia package, this offset will help companies start production while the market is still developing.
Accessing the incentive requires participation in the Product Guarantee of Origin (PGO) which provides verified information about eligible hydrogen production. This information will be used to support eligibility and reporting requirements of the incentive.
The Clean Energy Regulator and Australian Taxation Office (ATO) will jointly administer the incentive.
Eligibility
Both your company claiming the offset and the hydrogen it produces must satisfy the eligibility criteria to claim the incentive.
Eligible companies
To be an eligible company for the incentive, you must:
- be either:
- an Australian resident company that has an ABN
- a foreign resident company that has a permanent establishment in Australia and an ABN
- be subject to Australian tax on any income from your hydrogen producing activities
- hold a certified production profile with the Clean Energy Regulator under the PGO
- comply with the Community Benefit Principles for the incentive – these are currently under development and will be finalised before the incentive starts
- have reached final investment decision before 1 July 2030 (for production profiles approved from 1 July 2030), including for construction of new facilities or upgrades.
Entities that are not corporations, such as trusts or partnerships, are not eligible for the incentive.
Eligible hydrogen
To be eligible for the incentive, the hydrogen must be:
- renewable hydrogen produced in Australia at a single facility
- produced at a facility with an electrolyser that has a nameplate capacity of 10 megawatts
- produced using an eligible production method, which must not involve either:
- coal gasification
- steam reformation of natural gas
- produced between 1 July 2027 to 30 June 2040
- certified by a PGO certificate, which verifies:
- the facility producing the hydrogen
- the hydrogen’s production emission intensity did not exceed 0.6 kg of carbon dioxide per kilogram of hydrogen
- grid matching requirements are met (when grid electricity is used).
The incentive applies to eligible hydrogen that you’ve sold or used onsite in your production processes.
Grid-matching requirements
Grid matching applies when hydrogen production uses electricity from an external electricity grid. Grid matching ensures the renewable electricity claimed for hydrogen production comes from an electricity grid that can supply the facility, rather than from an unrelated or unconnected grid.
If a hydrogen production facility is connected to an electricity grid, any renewable electricity used to demonstrate hydrogen production must be matched to the same electricity grid that supplies the facility. This prevents renewable electricity from a different or unconnected grid being used to claim that hydrogen is renewable when that electricity could not physically supply the facility.
Grid matching is demonstrated using recognised renewable electricity instruments, including:
- surrendering large scale generation certificates (LGCs)
- retiring Renewable Electricity Guarantee of Origin (REGO) certificates
- buying GreenPower, which involves the surrender of renewable electricity certificates on your behalf.
These renewable electricity instruments must relate to generation connected to the same electricity grid as the hydrogen production facility, where grid electricity is used.
Grid matching is assessed and verified when you register a PGO certificate. The certificate records whether grid-matching requirements are met and is used to check if you’re eligible for the incentive.
Facilities that don’t get electricity from an external electricity grid, such as facilities relying entirely on onsite generation and not connected to a grid, are not subject to grid-matching requirements.
Whether a facility is considered grid connected is assessed as part of the PGO production profile and certificate registration process, based on how electricity is sourced.
How to participate
Applying for the Hydrogen Production Tax Incentive involves steps with both the Clean Energy Regulator and the ATO.
You must first enrol as a registered person in the PGO with the Clean Energy Regulator.
Set up a production profile for your hydrogen production facility with the Clean Energy Regulator.
Complete a Hydrogen Production Tax Incentive eligibility statement (under development) and submit it to the Clean Energy Regulator.
The eligibility statement is a declaration that there are reasonable grounds to believe hydrogen produced at the facility, using the specified production pathway, could be eligible for the incentive if all legislative requirements are met.
You can complete this step either:
- when you apply to register your production profile
- at a later time.
Create and register PGO certificates for your hydrogen production with the Clean Energy Regulator.
All PGO certificates must undergo an Annual Reconciliation Check conducted by the Clean Energy Regulator.
The check verifies that information recorded in the PGO certificates remains accurate and complete for the relevant period. This includes production data, emissions information and any required matching or compliance claims.
As part of the check:
- you (or the relevant profile holder) must make a declaration that the information provided is true and correct
- an audit is required at the first, fifth, and every subsequent fifth Annual Reconciliation Check.
The Clean Energy Regulator may correct or invalidate a registered PGO certificate based on information identified through an Annual Reconciliation Check.
Once the check is complete and the declaration is accepted, the PGO certificates are finalised for incentive purposes.
The Community Benefit Principles are currently under development and will be finalised before the incentive starts.
Claim the Hydrogen Production Tax Incentive in your company’s tax return with the ATO. See the ATO’s information about the tax incentive.
The ATO will process your claim in accordance with your eligibility to the tax offset.
The ATO uses information recorded in your PGO certificates to verify eligibility.
Correction notices following Annual Reconciliation Check
A correction notice will be issued if after PGO certificates have completed an Annual Reconciliation Check it is subsequently determined, contrary to their certificate, that either:
- the production emissions intensity exceeded the 0.6 kg CO2e per kg of hydrogen threshold
- grid-matching requirements were not satisfied for grid connected production.
The Clean Energy Regulator will issue this correction notice for the certificates to the ATO and the participant.
Where a correction notice has been issued for a PGO certificate that has been used to support a tax offset claim, the claim may no longer be valid. Any amounts received may need to be repaid in accordance with tax law.
Administration
The Clean Energy Regulator and ATO will jointly administer the incentive, with each agency performing distinct roles.
Clean Energy Regulator
The Clean Energy Regulator will administer the incentive by:
- certifying production profiles for hydrogen producing facilities that intend to claim the incentive
- receiving and recording eligibility statements as part of the production profile certification process
- issuing PGO certificates that verify eligible hydrogen production, including:
- the facility where the hydrogen was produced
- certified emissions intensity information
- compliance with grid-matching requirements, where applicable
- publishing and maintaining certified information on the GO Register to support verification of eligibility for the incentive.
Australian Taxation Office
The ATO administers the incentive by:
- administering the tax offset claimed in a company’s income tax return
- assessing incentive claims, including the eligibility for the offset and process requirements
- relying on information in PGO certificates to verify eligibility for the incentive.