This Bills Digest replaces the preliminary Bills Digest published on 24 May 2024 to assist in early consideration of the Bill.

Purpose of the Bill

The purpose of the Excise and Customs Legislation Amendment (Streamlining Administration) Bill 2024 (the Bill) is to:

•    amend the Excise Act 1901 to streamline licence application and renewal requirements for businesses that hold or seek to hold excise licences that authorise the manufacturing or storage of fuel and alcohol products
•    amend the Customs Act 1901 to streamline licence application and renewal requirements for businesses that hold or seek to hold customs licences that authorise the warehousing of excise-equivalent goods (EEGs)[1]
•    amend the Excise Act and the Customs Act to create a public register of all excise and customs licensees that manufacture, store and warehouse fuel and alcohol products.[2]

To achieve this, the Bill has 4 Parts:

•    Part 1 – Warehouse and excise licensing
•    Part 2 – Removing goods from licensed premises to other licensed premises
•    Part 3 – The Excise and Excise-Equivalent Warehouse Licences Register
•    Part 4 – Removing licence requirements for certain producers of crude oil and condensate.

Background

Overview of Australia’s excise system

Businesses that manufacture fuel, alcohol and tobacco products in Australia are required to pay excise duty to the Australian Taxation Office (ATO).[3] Products subject to excise duty are known as ‘excisable goods’. This Bill deals with fuel and alcohol products only.

Businesses that import excisable goods are required to pay excise-equivalent customs duty to the Australian Border Force (ABF).[4] The purpose of the customs duty is to ensure that imported products do not undercut locally produced goods.

Excise duty and excise-equivalent customs duty on fuel and alcohol raise about $30 billion annually in government revenue.[5] For simplicity, both taxes are referred to as ‘excise duties’ in this Bills Digest.

Businesses that manufacture, store or move excisable goods are required to hold specific licences.[6] These licences include:

•    Manufacturer licence: Businesses that manufacture fuel and alcohol products in Australia must hold this licence.[7] In other words, the licence holder is authorised to manufacture excisable goods on the premises specified by the licence.
•    Storage licence: Businesses that store and transport underbond excisable goods[8] are required to hold this licence. Goods where excise duties have been paid must be stored separately from goods that are being stored free of duty.[9]
•    Customs warehouse licence: Businesses that store imported EEGs in a warehouse are required to hold this licence.[10]
•    Customs depot licence: This licence is issued to operators of facilities where imported goods are temporarily stored before they are processed through customs.[11]

The purpose of the licensing requirements is to ensure regulatory compliance, facilitate tax collection, enforce safety standards, combat illicit trade, et cetera. Depending on the type of licences involved, a business may need to pay application and renewal fees.[12]

Regulatory burdens for businesses

In December 2020, the Morrison Government commissioned a Deregulation Taskforce to review Australia’s excise system in relation to fuel and alcohol products.[13] In July 2021, the Taskforce published a report titled Streamlining excise administration for fuel and alcohol. The Taskforce found that many businesses are concerned by the regulatory burdens imposed by Australia’s excise system[14]:

For over a decade, key stakeholders (including refiners, distillers, brewers, distributors, and freight and logistics businesses) have argued Australia’s excise and excise-equivalent goods (EEGs) duty system (‘excise system’) could be more efficient. In particular, they have focused on unnecessarily complex, cumbersome, and duplicative processes that impose demands on business resources that would otherwise be focused on productive, jobs-and growth-generating, activities. Business has suggested that inefficiencies in the excise system are likely also to impose unnecessary time burdens on skilled officials from the ATO and the ABF, detracting from a focus on high-risk compliance.[15] [emphasis added]

Businesses have identified the following examples of regulatory burdens:

•    Complex licensing requirements – Businesses have to apply for and renew licences on a site-by-site basis, which can be cumbersome and time-consuming. For instance, if a business has multiple manufacturing or storage locations, each site requires a separate licence and permission must be sought to move excisable goods between these sites.[16]
•    Dealing with multiple government agencies – Businesses need to deal with multiple agencies (for example, the ATO or ABF) for similar issues, which can lead to inefficiencies and potential confusion.[17]
•    Restrictive refund periods – Businesses can claim a refund of excise duties under certain circumstances (for example, overpayment, duty drawbacks). However, there are strict deadlines for when a refund claim must be lodged and differing timeframes under the customs and excise frameworks. Particularly in relation to excise, businesses must detect and rectify refund issues within tight deadlines to be eligible for refunds.[18]
•    Lack of digitisation – Businesses have observed that the excise system is based on outdated technologies, with many manual and sometimes paper-based processes.[19] This adds to the administrative burden for businesses.

Consequently, the Deregulation Taskforce’s report identified a number of potential opportunities to improve the excise system through both administrative and legislative reforms.[20]

Budget measures

In the March 2022–23 Budget, the Morrison Government announced a package of deregulatory measures to streamline the administration of fuel and alcohol excise.[21] The policy package was intended to take effect on 1 July 2023. Two measures from the policy package were legislated as part of the Treasury Laws Amendment (Refining and Improving our Tax System) Act 2023 and took effect on 1 July 2023.

In the 2023–24 Budget, the Albanese Government deferred the start date for the remaining measures of the package from 1 July 2023 to 1 July 2024 to ‘provide greater certainty to taxpayers’.[22] This Bill, together with amendments to subordinate legislation, implements the remaining measures of the package. In March 2024, the Department of Treasury released an Exposure Draft of the Bill for stakeholder feedback.

Key provisions and issues

Implementation of deregulation measures

The Bill implements the following measures:

•    Removal of licensing renewal requirement – the Bill removes the requirement for businesses to renew their excise or customs warehouse licences. In other words, licences are ongoing until they are cancelled. This eliminates renewal fees and provides immediate cash savings for these businesses.
•    Consolidation of multiple licences – the Bill simplifies licensing processes by allowing businesses with multiple sites to consolidate their various licences into a single entity-level licence.
•    Freer movement of goods – the Bill allows for freer movement of excisable goods between licenced sites without requiring repeated regulatory permissions.
•    Establishment of a public register for licenced entities – the Bill establishes a public register (to be published on an ATO website) that lists licenced entities and includes important details such as the licence holder’s name and Australian Business Number (ABN).
•    Removal of licensing requirement for onshore oil producers – the Bill removes the requirement for onshore producers of crude oil and condensate[23] to hold a licence where the cumulative production threshold from a particular field is less than the threshold of 30 million barrels.[24]

As noted earlier, the Australian Government imposes excise duty on fuel products such as petroleum oil and condensate. However, the excise duty is payable only if the relevant oil field surpasses cumulative production of 4767.3 megalitres of stabilised crude petroleum oil and condensate (which is equivalent to 30 million barrels) over the life of the fields.[25] Put simply, excise duty is not payable on the first 30 million barrels of crude oil produced from an oil field.[26]

Currently, no onshore oil producer in Australia has an oil field that surpasses the 4767.3 megalitres or 30 million barrels threshold.[27] This means at the time of writing, onshore oil producers do not pay excise duty in relation to their production of petroleum oil and condensate.

According to the Explanatory Memorandum for the Bill:

Broadly, a person must hold an excise licence in order to manufacture excisable goods, as defined under the Act. This means that onshore producers are required to hold an excise licence even if no duty is payable. The requirements prior to the amendments imposed an unnecessary regulatory burden on onshore producers where no revenue was collected.[28]

As noted earlier, the purpose of licensing requirements is to ensure regulatory compliance, facilitate tax collection, enforce safety standards, and combat illicit trade. Notwithstanding the removal of the licensing requirements, the Treasury confirms that onshore oil producers are still required to comply with a broad number of both Federal and state and territory legislative requirements, including (but not limited to) various environmental, safety and public health, and corporate income tax requirements.[29] According to Treasury, these other legislative requirements will ensure both Federal and state and territory governments have broad oversight of onshore crude oil and condensate production in Australia.[30]

Delegated legislation

Some components of the deregulation package will be delivered through delegated legislation rather than the Bill. Existing section 163 of the Customs Act and existing section 78 of the ExciseAct provide that regulations may provide for matters in relation to refunds of excise duties, including the means of determining the amount of any refund and the manner in which approvals may be granted.

During the consultation process for the Exposure Draft Bill, Treasury also released Exposure Drafts of the Customs Amendment Regulations 2024 and the Excise Amendment Regulations 2024. The amendments to be delivered by delegated legislation relate to refunds or remissions of excise duties. The amendments extend the time limit for excise duty refunds, streamline the refund process and introduce new refund circumstances.[31]

Treasury officials argue delegated legislation is the most effective mechanism to deliver the proposed refunds because the regulatory arrangements for refunds are well-understood by industry. Further, as the amendments are predominantly beneficial for the industry, Treasury does not anticipate the amendments to be controversial.[32]

Although Treasury has released Exposure Drafts of delegated legislation, the amendments to the relevant regulations have not yet been made. Once they are made and registered on the Federal Register of Legislation, the legislative instruments and the accompanying explanatory statements will be tabled in Parliament consistent with the Legislation Act 2003. It is currently intended that the legislative instruments be registered and commence before 1 July 2024, however this is subject to Government decision.[33]

Committee consideration

Senate Standing Committee for the Selection of Bills

At its meeting on 16 May 2024, the Senate Standing Selection of Bills Committee deferred consideration of the Bill until its next meeting.[34]

Senate Standing Committee for the Scrutiny of Bills

The Senate Standing Committee for the Scrutiny of Bills has yet to consider the Bill.[35]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[36]

Parliamentary Joint Committee on Human Rights

At the time of writing, the Parliamentary Joint Committee on Human Rights has yet to consider this Bill.

Policy position of non-government parties/independents

The Bill has received bipartisan support. In his second reading speech for the Bill, Shadow Assistant Treasurer Luke Howarth expressed support for the Bill:

I rise to speak in support of the Excise and Customs Legislation (Streamlining Administration) Bill 2024. This bill represents a critical step in implementing the final elements of the former coalition government’s deregulation agenda, as laid out in the March 2022 budget.

Despite being delayed by the current Labor government, which postponed its implementation until 1 July 2024, this legislation is essential for reducing red tape and fostering economic growth.[37]

The position of other parties and Independents could not be identified at the time of writing.

Position of major interest groups

The position of major interest groups could not be identified at the time of writing. Treasury officials indicate they plan to publish stakeholders’ written submissions regarding the Exposure Draft Bill in due course.[38]

Financial implications

According to the Bill’s Explanatory Memorandum:

The Bill is expected to have a negative impact on the underlying cash balance of $3.3 million over the 4 years from 2023–24. This is due to the removal of licence charges for customs warehouse licences authorised to store excise-equivalent goods.[39]