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1 November 2026

Hydrogen Production Tax Incentive explained: eligibility, registration and how to claim

The Hydrogen Production Tax Incentive pays $2 per kilogram of eligible renewable hydrogen produced in Australia from 1 July 2027. Here is who qualifies, what the hydrogen must meet and how the Clean Energy Regulator and ATO steps work.

By Leigh Heaney, Watson Advisory

The Hydrogen Production Tax Incentive (HPTI) pays eligible companies $2 for every kilogram of eligible renewable hydrogen they produce in Australia from 1 July 2027. This guide explains who can claim it, what the hydrogen has to meet, how registration works with the Clean Energy Regulator, and how the claim is made through the company tax return.

Who this guide is for

This guide is for hydrogen project developers, owners and investors who are working towards a final investment decision on an electrolysis project in Australia. It is also useful for their finance, tax and regulatory teams, and for offtakers, councils and state agencies who want to understand how the incentive affects project economics.

If you are still at the concept stage, read it to understand the timing pressures. If you are close to final investment decision, use it as a checklist of what needs to be in place with the Clean Energy Regulator before you can claim.

What the Hydrogen Production Tax Incentive is

The HPTI is part of the Australian Government’s Future Made in Australia package, announced in the 2024–25 Budget. It is a refundable tax offset of $2 per kilogram of eligible hydrogen produced by an eligible company. It applies to hydrogen produced in income years between 1 July 2027 and 30 June 2040, and the offset period for each facility and production pathway is up to 10 years.

The ATO describes the offset as time-limited and uncapped. Because it is refundable, a company can receive the benefit even if it has little or no tax to pay, which matters for new projects that are not yet profitable.

The incentive is law. It was introduced by the Future Made in Australia (Production Tax Credits and Other Measures) Act 2025 (Act No. 9, 2025), which amended the Income Tax Assessment Act 1997. Grid matching rules are set out in the Income Tax Assessment (Hydrogen Production Tax Incentive—Grid Matching Requirements) Instrument 2026, registered on 30 July 2026.

Two agencies run it together:

  • The Clean Energy Regulator (CER) runs the Guarantee of Origin (GO) scheme. It certifies production profiles, records eligibility statements, issues Product Guarantee of Origin (PGO) certificates, runs Annual Reconciliation Checks and publishes certified information on the GO Register.
  • The ATO administers the tax offset claimed in the company tax return. It relies on the information in your PGO certificates to verify eligibility.

In practice, the PGO certificate is the key document: eligible hydrogen must be certified by one, and the ATO checks your claim against it.

Eligibility

Both the company claiming the offset and the hydrogen it produces must meet the criteria.

The company

According to the ATO and CER, an eligible company must:

  • be an Australian resident company with an ABN, or a foreign resident company with a permanent establishment in Australia and an ABN
  • hold a production profile certified by the CER while producing the hydrogen
  • be subject to Australian tax on income from its hydrogen production activities
  • reach final investment decision before 1 July 2030 (this applies to production profiles approved from 1 July 2030), including for construction of new facilities or upgrades
  • comply with the rules implementing the Community Benefit Principles for the HPTI.

Trusts, partnerships and other entities that are not corporations cannot claim. If your project sits in a unit trust or joint venture, the claiming entity needs to be worked out early.

The Community Benefit Principles for the HPTI are still being developed. The CER says they will be finalised before the incentive starts. DISR and Treasury sought feedback on draft guidance on the principles until 2 February 2026. We could not find final rules as at 1 November 2026, so check the CER’s page before relying on this.

The hydrogen

To be eligible, the hydrogen must be:

  • renewable hydrogen produced in Australia at a single facility, on or after 1 July 2027 and before 1 July 2040
  • produced under a production profile certified by the CER
  • produced at a facility whose capacity to produce hydrogen, under the production pathway, is at least equal to that of an electrolyser with a nameplate capacity of 10 megawatts
  • not produced using coal gasification or steam reformation of natural gas anywhere in the production pathway
  • certified by a PGO certificate that verifies the facility, that the production emissions intensity did not exceed 0.6 kg of carbon dioxide equivalent per kilogram of hydrogen, and that grid matching requirements were met if grid electricity was used.

The CER notes that the incentive applies to eligible hydrogen that you have sold or used onsite in your production processes.

Grid matching

If your facility draws electricity from an external grid, the renewable electricity you rely on must be matched to the same grid that supplies the facility. The CER lists three ways to show this: surrendering large-scale generation certificates (LGCs), retiring Renewable Electricity Guarantee of Origin (REGO) certificates, or buying GreenPower. The certificates must relate to generation connected to the same grid as the hydrogen facility.

Grid matching is checked when you register a PGO certificate, and the CER publishes each profile’s grid connection on the GO Register. Facilities that rely entirely on onsite generation and are not connected to a grid are not subject to grid matching.

How to register and claim: step by step

The CER and ATO set out seven steps. The first six happen with the CER; the last happens with the ATO.

  1. Enrol in the GO scheme. Submit the Register for GO form in the CER’s Online Services. You must verify your identity, be (and remain) a fit and proper person, and pay a registration fee of $490.
  2. Register a production profile. Set up a production profile for your hydrogen facility. You need to own or operate the facility, follow the methodology for calculating emissions, and be able to provide accurate, auditable data on emissions, energy use and production volumes. Some profiles require a scheduled audit.
  3. Certify the profile with an HPTI eligibility statement. This is a declaration that there are reasonable grounds to believe hydrogen from the facility, using the specified production pathway, could be eligible. You can lodge it when you register the profile or later. As at 1 November 2026, the CER’s page (last updated 12 October 2026) still lists the statement as under development.
  4. Create and register PGO certificates. Once your production profile is approved, create certificates for the batches of hydrogen you produce. Grid matching is assessed at this point.
  5. Complete the Annual Reconciliation Check. Each year the CER checks that certificate information is accurate and complete. You make a declaration that it is true and correct. An audit is required at the first, fifth and every following fifth check.
  6. Meet Community Benefit Principles reporting. These requirements are still being finalised.
  7. Claim the offset in your company tax return. The ATO processes the claim and uses your PGO certificate information to verify eligibility.

The ATO’s September 2026 update advises companies that intend to claim to engage with the CER early, so the certifications are in place before they lodge a claim. (Watson Advisory can help you plan early engagement with the CER: admin@watsonadvisory.com.au)

Timelines

  • Now: GO scheme enrolment and production profile registration are done through the CER’s Online Services. Until July 2027, the only fee is the $490 enrolment fee; other participation costs apply once cost recovery begins.
  • 1 July 2027: hydrogen produced from this date can be eligible. Offsets can be claimed for income years that start on or after 1 July 2027.
  • Each year, 1 July to 30 September: the Annual Reconciliation Check runs. The CER may allow an extension of up to 30 days, making 30 October the latest final declaration date.
  • Before 1 July 2030: final investment decision must be reached (for production profiles approved from 1 July 2030).
  • 30 June 2040: the incentive ends. Claims are only available for income years ending on or before this date, and each facility and production pathway can claim for up to 10 years.

The practical consequence: a project that starts producing late in the window will not get the full 10 years. Every year of delay in construction is potentially a year of offset lost.

Common mistakes

  • Using the wrong entity. Trusts and partnerships cannot claim. Structure the project so the producing company is the one that holds the certified profile and lodges the return.
  • Treating the CER steps as paperwork for later. No PGO certificate means no claim. Profile registration, emissions methodology and audits take time, so start them well before first production. (We can help you map out the registration steps with the Regulator: admin@watsonadvisory.com.au)
  • Underestimating grid matching. If you use grid electricity, your LGCs, REGO certificates or GreenPower must relate to generation on the same grid. Build the certificate strategy into your power purchase arrangements.
  • Running close to the 0.6 kg CO2e threshold. If an Annual Reconciliation Check later finds the emissions intensity was exceeded, or grid matching was not met, the CER issues a correction notice to you and the ATO. The claim may no longer be valid and amounts received may need to be repaid.
  • Missing the 1 July 2030 final investment decision deadline. Treat it as a hard date in your project schedule and financing plan.
  • Ignoring the Community Benefit Principles. They are not yet final, but compliance is an eligibility condition. Keep records of local engagement, employment and community commitments now.

FAQ

How much is the Hydrogen Production Tax Incentive worth?

$2 per kilogram of eligible hydrogen, as a refundable tax offset, for up to 10 years per facility and production pathway. The ATO describes it as uncapped.

Can blue hydrogen or hydrogen from natural gas qualify?

No. The hydrogen must be renewable, and the production pathway must not use coal gasification or steam reformation of natural gas. It must also meet the 0.6 kg CO2e per kilogram emissions intensity limit.

Is there a minimum project size?

Yes. The facility’s capacity to produce hydrogen must be at least equal to that of an electrolyser with a nameplate capacity of 10 megawatts. Smaller pilot plants will not qualify.

Do I apply to the ATO first or the Clean Energy Regulator?

The Clean Energy Regulator. You enrol in the GO scheme, register and certify a production profile, and create PGO certificates with the CER. Only then do you claim the offset in your company tax return with the ATO. (Watson Advisory can help you sequence your dealings with the CER and ATO: admin@watsonadvisory.com.au)

What happens if my PGO certificate turns out to be wrong?

The CER can correct or invalidate certificates through the Annual Reconciliation Check. If it later finds the emissions threshold or grid matching rules were not met, it issues a correction notice to you and the ATO, and you may need to repay amounts already received.

Can a joint venture claim the incentive?

Only companies can claim; trusts and partnerships cannot. How a particular joint venture is treated depends on its structure and who holds the certified production profile, so get tax advice on your arrangement. The CER says a business that solely or jointly owns or operates a facility can register a production profile, but we could not find ATO or CER guidance specific to joint ventures or multiple-owner facilities.

How Watson Advisory can help

Watson Advisory works with hydrogen and clean energy developers on the government side of their projects: tracking the rules still being made, such as the Community Benefit Principles, engaging with the agencies and departments involved, and aligning HPTI timing with state approvals and other Commonwealth support. We work alongside your tax and legal advisers. Contact us at admin@watsonadvisory.com.au.

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About the author: Leigh Heaney is a Partner at Watson Advisory, specialising in government relations and public affairs. Leigh spent more than a decade as chief of staff to a senior federal frontbencher in both the House of Representatives and the Senate. Before joining Watson Advisory, Leigh was Government Relations director at Australia’s renewable energy peak body, working on the Capacity Investment Scheme and the production tax credits in the Future Made in Australia package.

This guide is general information only, current as at 22 October 2026. It is not legal, financial or tax advice. Program guidelines, eligibility and funding rounds change often, so check the official guidelines before applying, or contact Watson Advisory for advice on your circumstances.

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