Industrial Revenue Bonds in Australia: 2025 Guide to IRBs

Industrial Revenue Bonds (IRBs) are making a comeback in Australia’s financial landscape, offering an alternative route to funding large-scale infrastructure and industrial projects. With the 2025 focus on economic recovery, decarbonisation, and sovereign capability, IRBs are attracting renewed interest from both issuers and investors. Whether you’re a business seeking low-cost capital or an investor scouting for tax-advantaged yields, understanding the current state of IRBs is essential.

What Are Industrial Revenue Bonds?

IRBs are debt securities issued by government entities—usually state or local authorities—specifically to fund projects run by private companies that benefit the public. The bonds are repaid solely from the revenue generated by the project, not from government tax revenue. While IRBs have been a staple in the US for decades, their use in Australia is increasing as states look for innovative ways to finance critical infrastructure such as advanced manufacturing plants, renewable energy facilities, and logistics hubs.

• Issuer: State or local government body

• Beneficiary: Private sector project with public benefit

• Repayment: Revenue from the specific project, not taxpayer funds

• Appeal: Often offers tax incentives to investors

2025 Policy Updates: IRBs in the Spotlight

This year, IRBs are enjoying policy tailwinds as federal and state governments look to accelerate investment in ‘future industries.’ The 2025 Federal Budget expanded eligibility for IRB-style financing to projects supporting Australia’s Net Zero by 2050 ambitions, including green hydrogen, battery manufacturing, and advanced recycling facilities. Notably:

• Clean Energy Priority: The Clean Energy Finance Corporation (CEFC) now partners with states to underwrite IRBs for renewable projects, reducing risk for investors.

• Tax Treatment: The ATO confirmed that, for qualifying IRBs, interest income remains partially exempt from state taxes, providing a yield boost for institutional investors and super funds.

• Streamlined Approvals: States like Victoria and Queensland have introduced ‘fast track’ IRB approval processes for projects meeting job creation and sustainability criteria.

These changes have already led to the launch of several high-profile IRBs in 2025, such as the $1.2 billion Queensland Green Hydrogen Corridor and the $800 million Victoria Advanced Manufacturing Bond.

Why IRBs Matter: Benefits for Investors, Issuers, and the Public

IRBs offer unique advantages in the Australian context, especially as traditional funding sources face higher interest rates and tighter bank lending criteria:

• For Businesses: Access long-term, fixed-rate finance often at lower rates than commercial loans. IRBs also signal government support, which can help attract co-investors.

• For Investors: Attractive yields, partial tax exemptions, and the potential to support nation-building projects. With ESG (Environmental, Social, Governance) mandates rising, IRBs tied to green or social projects are in high demand among super funds and managed investment schemes.

• For Communities: Projects funded by IRBs—like clean energy plants or tech parks—can drive job creation, regional development, and economic resilience without drawing on public coffers.

Example: The 2025 South Australia Advanced Recycling IRB funds a plastics-to-fuel facility in Port Adelaide. The project expects to create over 200 jobs, reduce landfill, and generate its own revenue for bond repayment—delivering a triple win for the state, investors, and the environment.

Risks and Considerations: What to Watch in 2025

IRBs are not without risk. Because repayment relies on project revenues, investors must assess project feasibility and demand. Recent regulatory guidance from ASIC stresses the need for full transparency in IRB disclosures, including:

• Detailed revenue projections and stress testing

• Independent feasibility and environmental impact assessments

• Clear explanations of government support and any guarantees (most IRBs are not government-backed if the project fails)

In 2025, Australia’s first IRB default in over a decade (a small biomass energy plant in NSW) reminded the market of the importance of due diligence. Investors are urged to review prospectuses carefully and monitor ongoing project performance.

The Future of IRBs in Australia

With Australia’s infrastructure pipeline surging and a growing appetite for sustainable investment, IRBs are poised for further growth. As state and federal governments seek to crowd in private capital and accelerate the net zero transition, IRBs are likely to expand beyond traditional manufacturing into sectors like digital infrastructure, water recycling, and agri-tech.

For businesses, now is the time to explore IRBs as part of your capital strategy—especially if your project aligns with government priorities. For investors, IRBs offer a rare blend of yield, impact, and diversification in a changing financial landscape.