“An own goal that we don’t need:” Investor group sounds alarm over new tax on renewables

Federal government plans to extend the Capital Gains Tax to large-scale solar, wind and battery storage projects will deliver a devastating “own goal” to Australia’s renewable energy transition, investor groups have warned, just as the market gears up to hit the legislated 82 per cent by 2030 target.

The Albanese government on Friday released long-foreshadowed draft legislation to strengthen the capital gains tax (CGT) regime, with a range of reforms geared at broadening the types of assets subject to CGT for foreign investors.

The reforms, originally proposed in the 2024-25 Budget, have been expected to bring energy and telecommunications infrastructure under the regime, including wind turbines, solar panels, battery energy storage systems (BESS), transmission towers, transmission lines and substations.

But industry has pushed back against the idea, warning that foreign investors – who currently account for more than 70 per cent of investment in Australian renewables and grid infrastructure – will take their money elsewhere if faced with paying a 30 per cent tax on project sales.

In a statement on Friday, federal Treasurer Jim Chalmers said his department had “engaged closely” with the renewables sector to ensure the reforms would strike the right balance between supporting investment while ensuring foreign investors pay their fair share of tax.

To this end, he says government proposes to provide a “time-limited, targeted concession” in the updated CGT regime for investment in the renewables sector, including a grace period until 2030 with a 50 per cent discount rate on CGT.  

But the Clean Energy Investor Group (CEIG), which has sounded the alarm on the proposed changes since 2024, says it remains “dismayed” by the draft reforms, despite the concessions, particularly considering so many projects are already struggling to reach financial close.  

“Australia’s world-leading levels of renewable energy were built largely with the investment of global capital, and the nation needs even more to finish the job, especially in new industries like offshore wind,” says CEIG CEO Richie Merzian.

“We reckon for the next 10 years it should be all about trying to back it in; like, once we’ve hit that critical mass then then let’s look at this,” Merzian told Renew Economy’s Energy Insiders Podcast on Friday. 

“I want to see more investors come to Australia, not less. And this seems like an own goal that we don’t need.

“[Prospective investors] will factor [the CGT] into whether they invest in Australia or not, whether they proceed with projects or not. …And they’ll just look at the books and question whether Australia is the right destination to make that investment.”

Merzian also questions the justification for the reforms, which Treasury says is to even up the tax regime. Rather, he says, it threatens to create a two-tier system where foreign investors, who have so far underpinned Australia’s energy transition, will face double the tax rate of most local investors post-2030.

“It won’t raise much by way of revenue,” Merzian tells Energy Insiders, “but it could dissuade a fair bit of investment.

“And at a time when Treasury’s building up and trying to promote this Front Door for clean energy [a newly announced fast-track program for pioneering decarbonisation projects], this could be a back door that will leak it right out.”

If you wish to support independent media, and accurate information, please consider making a one off donation or becoming a regular supporter of Renew Economy. Please click here. Your support is invaluable.