Petrol and diesel excise and duty
Excise is a tax on fuel and petroleum products produced or manufactured in Australia. Entities that manufacture or store excisable goods must hold an appropriate excise licence and report to us and pay duty on goods delivered into the Australian domestic market.
Imported fuel and petroleum products are subject to customs duty at a rate equivalent to excise to ensure they are treated consistently with goods manufactured in Australia. These imported goods are referred to as excise equivalent goods (EEGs).
Excise is calculated on a volume basis, rather than value basis.
Petrol and diesel excise is jointly administered by the ATO and the Department of Border Protection and Immigration:
- The ATO collects excise on petrol and diesel products and administers the warehousing system that stores these products. The combination of excise collection with warehousing controls gives the ATO a high degree of oversight over the industry.
- The Department of Immigration and Border Protection administers an EEG levy at a rate identical to excise for product that is imported and enters home consumption directly instead of being warehoused.
Fuel indexation was recommenced in 2015, and is adjusted twice a year in line with the Consumer Price Index.
The petrol and diesel excise and duty gap is difference between the amount of petrol and diesel excise and duty if all taxpayers complied with the law (theoretical petrol and diesel excise and duty), and the actual excise and duty collected for a defined period, typically a financial year.
To estimate the gap, we use a top-down approach that relies on the following data sources:
- Australian petroleum statistics from the Department of Industry, Innovation and Science
- data compiled by the Department of Immigration and Border Protection and ATO data
- the excise tariff rates published on our website.
We assume that volumes are subject to excise because they are not part of stocks. Depending on how stocks are defined, it is possible that some of the volumes produced may not be subject to excise. This would occur if they were stored within an excise licensed facility but not counted as part of stocks.
The petrol and diesel excise and duty gap is estimated using a top-down approach. We estimate the volume of fuel sales during the year that were subject to excise, and ascertain the average excise rate that applied to those sales. We compare production estimates to the quantities reported to us on which excise or duty has been paid.
Our methodology estimates excisable volume and the average excise rate. The gaps for petrol and diesel are estimated separately, and then brought together to give the combined gap estimate.
First we estimate the excisable volume. We do this in the following manner for each income year:
- Estimate the volume imported.
- Add the volume produced in Australia.
- Remove the volume exported from Australia.
- Add the volume held in inventory at the end of the previous income year.
- Remove the volume held in inventory at the end of the current income year.
- Remove the volume not subject to excise.
We then estimate average excise rates. We use two excise rates.
- For years prior to 2014–15, a standard excise rate of 0.38143 cents per litre applies for petrol and diesel.
- With indexation restored from 10 November 2014, for 2014–15 and future years, we estimate the average excise rate for the year. This is done by taking actual revenue for the year and dividing it by actual volumes. However, before doing this, we need to account for volumes that have been counted twice. This is a feature of the excise system, as there are certain situations where volumes are meant to be reported twice.
We apply the excise rates to the excisable volume, then multiply the final volume amount by the average excise rate to calculate the theoretical total liability excise amount.
We add Department of Immigration and Border Protection excise equivalent goods duty paid amounts to the ATO excise and duty payments. This yields the total petrol and diesel excise amounts paid. This is then compared to the theoretical total liability excise and duty amount to yield the gap.