The government is investing A$10.2m ($6.78m) in pre-feasibility studies to develop critical mineral common-user processing facilities. Credit: BETO SANTILLAN/Shutterstock.com.

The Australian Government has announced a Critical Minerals Production Tax Incentive, committing A$7bn over the decade to bolster the processing of critical minerals.

This move is aimed at enhancing supply chain resilience and supporting the downstream refining of 31 identified critical minerals including lithium, cobalt, nickel and rare earths.

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The incentive includes a 10% refundable tax offset for eligible costs associated with processing these minerals domestically.

According to the Association of Mining and Exploration Companies (AMEC), the initiative holds the potential to catalyse industry growth and value addition.

AMEC has been instrumental in shaping this proposal through collaboration with the Minister for Resources and Minister for Northern Australia Madeleine King.

AMEC CEO Warren Pearce said: “This announcement from the Treasurer demonstrates how serious the government is about the energy transition and decarbonising the Australian economy.

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“A Critical Minerals Production Tax Incentive is the cornerstone of the ‘Future Made in Australia’ strategy and sends a clear message to Australians and the world that Australia means business.”

The government’s A$22.7bn Future Made in Australia package ensures Australia can secure investment required for critical minerals projects, make the country a renewable energy superpower, and secure jobs and opportunities.

The Critical Minerals Production Tax Incentive is designed to provide a tax credit to companies that engage in downstream processing.

This measure is seen as a safer alternative to direct grants or accelerated depreciation schemes, as it ensures that tax returns are only issued once a company begins production, mitigating risks associated with market volatility.

Pearce added: “To be clear, this incentive is a zero-risk approach for Australia to take. If companies don’t produce a value-added product, they don’t receive a tax credit. It’s as simple as that.”

Furthermore, the Australian Government is investing A$10.2m in pre-feasibility studies to develop critical mineral common-user processing facilities to boost critical minerals processing capacity, and A$5.8m for a critical minerals trade enhancement initiative.

It has also committed A$1m to a pilot educational programme for strengthening capabilities to detect, prevent and mitigate foreign interference in the country’s critical minerals sector.