Consequential and Transitional Provisions) Bill 2006 is a
companion bill to the Fuel Tax Bill 2006 and:
Provides for the phased implementation of the fuel tax credit
system to particular uses of fuel at certain times from 1 July 2006 to 1 July 2012, when the final changes are in place.[3]
2.5
Schedules 1 to 3 of the Fuel
Tax (Consequential and Transitional Provisions) Bill 2006 amend the:
-
Fuel Sales
Grants Act 2000;
-
Energy
Grants (Credits) Scheme Act 2003;
-
Products
Grants and Benefits Administration Act 2000;
-
States
Grants (Petroleum Products) Act 1965; and
-
Fuel Tax Bill 2006.[4]
2.6
The Government anticipates that
the introduction of a single fuel tax system to replace the current complex
system of fuel tax concessions will:
Lower compliance costs, reduce tax on business and remove the
burden of fuel tax from thousands of individual businesses and households.
Under fuel tax reform the effective application of fuel tax will be limited to:
- business use of fuel in on-road applications in
motor vehicles with a gross vehicle mass of 4.5 tonnes or less;
- business use on-road in motor vehicles with a
gross vehicle mass of more than 4.5 tonnes (with the exception of a carve-out
intending to preserve previous entitlements for eligible fuel use in vehicles
with a gross vehicle mass of 4.5 tonnes) but only to the extent of the
road-user charge;
- for private use on-road in motor vehicles and in
certain off-road applications; and
- aviation fuels (where tax is imposed for cost
recovery reasons).[5]
Existing schemes of fuel tax relief
2.7
The Energy Grants (Credits)
Scheme (EGCS) was introduced to help reduce the costs for businesses who use
diesel and alternative fuels. To be eligible to claim a grant under the scheme
businesses must undertake an eligible activity using an eligible fuel.
2.8
The Fuel Sales Grants Scheme is
a grant to fuel retailers for the sale of petrol and diesel to consumers in
regional and remote areas where fuel prices are generally higher.
2.9
The States Grants (Petroleum Products) Act 1965 gives financial
assistance to users of petroleum-based fuels in designated remote regional and
rural locations in Australia who would otherwise have to pay higher prices for
fuels due to the additional costs in transport and distributing fuel to those
locations.[6]
Changes to the existing system
2.10
The entitlement to an energy
grant for diesel under the EGCS will only apply to fuel purchased or imported
before 1 July
2006. Fuel purchased after this time will
be subject to excise which businesses can claim back through their Business
Activity Statements (BAS).
2.11
Similarly, the entitlement to a
fuel sales grant under the Fuel Sales Grants Scheme will only apply to fuel
sales before 1
July 2006.
2.12
The States and Territories
administered Petroleum Products Freight Subsidy Scheme will cease to apply to
fuel sales and deliveries of petroleum products after 30 June 2006.
2.13
The States Grants (Petroleum Products) Act 1965 will be repealed on 1 July 2007, thereby allowing outstanding claims to be made until 30 June 2007.
Excise payable on fuel used other than in an internal combustion engine
2.14
The Explanatory Memorandum
explains:
All fuels acquired or manufactured in, or imported into, Australia
for use other than in an internal combustion engine will be effectively fuel
tax-free from 1 July 2006.
Use of fuel other than in an internal combustion engine includes:
- fuel used in burner applications such as heating
(use as a fuel);
- diesel fuel used in the manufacture of
explosives, in the calcination process for the production of alumina and as a
flocculent in coal washeries; and
- non-fuel uses such as use as a solvent or in the
manufacture of products such as paint and certain solvents, cleaning agents and
the like.[7]
2.15
Under the fuel tax credit
system, fuel tax will apply to all petroleum products suitable for use in an
internal combustion engine. Effective fuel tax-free treatment for products
which will be used other than in an internal combustion engine will be
delivered by a fuel tax credit to either the user of the fuel, or at another
point in the supply chain, depending on whether the use is business or private.[8]
2.16
For example, when a petroleum
product is used as an ingredient in the manufacture of another product that
cannot be used as a fuel in an internal combustion engine, for example paint
and certain solvents, printing inks, cleaning agents, adhesives and the like,
the manufacturer can claim a fuel tax credit on the petroleum component.[9]
2.17
The direct result of this
change is that some users of fuel products who were not required to pay excise
on their purchase of petroleum products will now be required to pay excise up
front and then claim it back through their BAS.
Alternative fuels
2.18
Alternative fuels which are
currently excise free (liquefied petroleum gas, compressed natural gas and
liquefied natural gas) or effectively so, (biodiesel and ethanol) will lose
their excise-free status, and will be subject to excise from 1 July 2011.[10] The Explanatory Memorandum explains:
Fuel tax will be
applied to currently untaxed fuels from 1 July 2011. Effective fuel tax on these fuels will
phase in over five equal annual steps commencing on 1 July 2011 and ending on 1 July 2015. The final fuel tax rate applying to these
fuels will incorporate a 50 per cent discount on the energy content fuel tax
rates that would otherwise apply.[11]
2.19 The Explanatory
Memorandum sets out the effective fuel tax rates
applicable to alternative fuels during the period from 1 July 2011 to 1 July 2015.[12]