On 15 September 2025, Treasury released exposure draft regulations (Draft Regulations) for a proposed expansion of the types of activities that will be eligible for the Critical Minerals Production Tax Incentive (CMPTI). The CMPTI, an additional tax offset, is a key component of the Australian Government's 'Future Made in Australia' initiative.
Under the recently introduced Division 419 of the Income Tax Assessment Act 1997 (ITAA 1997), a 10% refundable tax offset is available for eligible expenditure incurred in relation to a 'CMPTI processing activity'. In broad terms, this is a processing activity carried on at an Australia facility (or facilities), that 'involves substantially transforming a feedstock containing a critical mineral through extractive metallurgical processing into a purer or more refined form of the critical mineral that is chemically distinct from the feedstock'.
The Draft Regulations supplement this 'CMPTI processing activity' definition to capture activities that:
- substantially transform aluminium-containing feedstock through extractive metallurgical processing;
- either: (i) substantially transform graphite-containing feedstock through chemical or thermal purification, or that (ii) shape or (iii) reduce the size of graphite particles in graphite-containing feedstock; or
- substantially transform critical mineral-containing feedstock into a chemically distinct output, in relation to the processing of precursor cathode active material.
Expenditure incurred in relation to these activities will be entitled to the same refundable tax offset, equal to 10% of the eligible expenditure, provided the activity: (i) does not constitute beneficiation or manufacturing, and (ii) satisfies a prescribed outcome, being:
- for 1, production of high purity alumina (minimum 99.99% purity);
- for 2 (as applicable), (i) increasing the feedstock's total graphitic carbon content, (ii) substantially improving graphite particle spherical shape, or (iii) substantially improving graphite particle size uniformity; or
- for 3, production of precursor cathode active material that contains one or more critical minerals and is suitable for the manufacture of cathode active material for lithium-ion batteries.
As the Draft Regulations will, if made, form part of the existing CMPTI provisions, the tax offset will be available for eligible expenditure incurred in a period of up to 10 income years occurring between 1 July 2027 and 30 June 2040. To qualify, the applicable taxpayer must either be: (i) an Australian resident company, or (ii) a foreign resident company relevantly acting through an Australian permanent establishment. Registration of the relevant activity and compliance with integrity rules contained in the existing Division 419 of the ITAA 1997 will also be required.
Companies and industry professionals should review the eligibility criteria, compliance requirements, and potential benefits contained in the Draft Regulations and Division 419 of the ITAA 1997 to assess how the CMPTI may impact their investment and operational strategies. Early engagement with the registration and reporting processes is essential to maximise the value of the incentive and ensure ongoing compliance.
Treasury is seeking industry feedback on the Draft Regulations, with submissions due by 10 October 2025.
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