FSAF minutes, April 2009

4. Administrative impacts of CPRS fuel credits

For businesses and fuels that do not pay effective fuel tax, the Government wants to offset the CPRS cost impact on fuel for one or three years.
Largest impact will be on 1 July 2010.
The cost impacts for fuel used in agriculture and fishing businesses will be offset for the first three years by way of a CPRS fuel credit.
The cost impacts for fuel used in heavy on-road transport will be offset for one year through availability of a CPRS fuel credit.
The cost impact for LPG will be offset for three years.
The cost impact for LNG and CNG will be for one year.
All CPRS fuel assistance measures will be administered by the Tax Office.
CPRS fuel credits will be claimed as per Fuel Tax Credits through the same labels on BAS. Private rulings/objections use the same process as Fuel Tax Credits.
No additional registration will be required to access the CPRS fuel credit entitlements.
CPRS fuel assistance measures will require new legislation or amendments to existing legislation.
Legislation:

Excise Tariff Amendment (Carbon Pollution Reduction Scheme) Bill 2009 and Customs Tariff Amendment (Carbon Pollution Reduction Scheme) Bill 2009 - Households and businesses will be given time to adjust to the fuel price impact of CPRS. This will be done by a cent for cent reduction of fuel tax for the increase in fuel process due to the CPRS carbon permit process.
Carbon Pollution Reduction Scheme (CPRS Fuel Credits) Bill 2009 - Agriculture, fishery, heavy on-road transport industries and gaseous fuels will receive assistance for the price effects of CPRS.
Carbon Pollution Reduction Scheme (CPRS Fuel Credits) (Consequential Amendments) Bill 2009 - Addresses required amendments to the Fuel Tax Act 2006; the Income Tax Assessment Act 1997 and the Taxation Administration Act 1953.

Four specific CPRS fuel assistance measures.

General measure for fuels dutiable at 38.143 cents per litre. Measure in place for three years.

Government will reduce excise and excise equivalent customs duty on 1 July 2010 for all fuels subject to the general rate of 38.143 cents.
The reduction on 1 July 2010 will be based on the carbon pollution permit price established in the first half of 2010 through auctions and market transactions.
A one month lag will occur between the date the new fuel duty rate is calculated and the date it takes effect. This will give the Tax Office time to communicate the CPRS rate to businesses and allow time for businesses to adjust their claiming systems.
The fuel duty rate will not increase if the emission price falls. The Government will only reduce the fuel duty rate not increase it. Therefore the CPRS fuel credit rate will not decrease over the first three years.
CPRS fuel credit rates may change every six months for three years from 1 July 2010.

Specific measure to assist agriculture and fishing. Measure will be in place for three years (1 July 2010 - June 2013).

These industries pay no effective fuel duty due to the availability of Fuel Tax Credits, so will not benefit from fuel duty reductions. Instead they will receive a CPRS fuel credit which will equal the amount of the reduction in the Fuel Tax Credit. Amount will be aligned with six monthly fuel duty rate changes.

Specific measure for heavy on-road vehicles. Measure will be in place for one year (1 July 2010 - 30 June 2011):

These businesses are eligible for Fuel Tax Credits of 38.143 cents per litre less the road user charge (currently 21 cents per litre). Businesses undertaking heavy on-road transport activities will be able to claim CPRS fuel credit, equal to the reduction in the fuel duty rates.

Specific measures for LPG, CNG and LNG transport fuels. The CPRS fuel credit for LPG will be in place for three years, ceasing 30 June 2013. For CNG and LNG it will be in place for one year, ceasing 30 June 2011.

These fuels are not currently subject to customs or excise duty so users will not benefit from reduction in duty rates. CPRS fuel credit will be available to producers or marketers of the fuels. Reduced rates of CPRS fuel credits will apply to gaseous fuels. LPG will receive 67% of the full CPRS fuel credit rate. CNG and LNG will receive 78% and 50% respectively.

Fuel duty rates will be adjusted (if necessary) every six months on 1 January and 1 July.

Points raised from the floor in discussions:

The CPRS fuel credit rate is linked to date of acquisition. This differs from the Fuel Tax Credit rate which links the calculation of the entitlement to the rate applicable at the start of the tax period in which the Fuel Tax Credit is attributable. Large businesses may use substituted accounting periods which do not commence on the first day of a calendar month. Therefore they may have a tax period commencing in late December as an example. The Fuel Tax Credit entitlement will be linked to rate applicable at the start of the tax period (late December) but the CPRS fuel credit will be linked to rate applicable on the date of acquisition, manufacture or importation. This rate may change on 1 January. Therefore these entities may need to use two different rates in the one tax period for calculation of the CPRS entitlement.
As the CPRS fuel credit calculation is linked to the date of acquisition, manufacture or importation, all businesses claiming the CPRS fuel credit will be required to identify when fuel was acquired etc. Many systems may not have this specific tracking ability which may cause difficulties for claimants.
Where fuel blends containing ethanol or bio-diesel do not meet the Fuel Quality Standards Act 2000, the claimant needs to reduce the claim by the amount of the ethanol or bio-diesel contained in the blend. There may be problems for end users knowing how much bio-diesel or ethanol is in the blend or even whether it meets the required fuel standard. Therefore claimants may not be aware their entitlement is to be reduced or how to work out the amount of the reduction. This is further complicated by the variation issued by the Department of Environment Heritage and the Arts around bio-diesel blends allowing blends up to 20% to meet the diesel standard where the blend is produced by specified entities. Claimants won't necessarily know the source of the fuel they have acquired.
Information about the CPRS fuel credit rates will need to be available to claimants, but they will only have a short period of time to adjust claiming systems to take account of the rate. The timing of BAS lodgements post the end of the tax period will however provide some relief to this issue provided calculation of entitlements is not linked to system coded rates (the rate is manually applied after the end of the period based on the number of litres acquired).

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Last Modified: Wednesday, 27 June 2012