Excise on biofuels
Biofuels are liquid fuels that you derive from materials such as waste plant and animal matter. The two main types of biofuels currently in production in Australia are biodiesel and fuel ethanol.
You need to understand your excise obligations if your business deals in biofuels.
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Biodiesel is derived from animal or vegetable fats or oils (whether or not that oil is already used or recycled) to form mono-alkyl esters of fatty acids, which can be used as a fuel.
Licensed excise manufacturers generally blend biodiesel with diesel to create blended petroleum products.
The most common biodiesel blends are:
- B5 (5% biodiesel and 95% diesel)
- B20 (20% biodiesel and 80% diesel).
If you have paid excise duty on both components of the blend, then you don't need to hold an excise licence to undertake the blending process.
Ethanol becomes fuel ethanol when it's denatured for use in an internal combustion engine.
Denatured means the ethanol is chemically treated, according to an approved formula, to make it unfit for human consumption.
Manufacturing fuel ethanol
We consider the process of manufacturing fuel ethanol to be the manufacture of a petroleum product. It isn't the manufacture of a methylated spirit, as industrial ethanol is. Therefore, the purchase of fuel ethanol from a manufacturer is subject to excise duty as it isn't regulated under the concessional spirits permit scheme.
Blending of ethanol with petrol or diesel
Licensed excise manufacturers can also further blend fuel ethanol with petrol to create blended petroleum products. You can also use diesel (instead of petrol) but this is less common.
The most common fuel ethanol blends are:
- E10 (10% fuel ethanol and 90% petrol)
- E85 (85% fuel ethanol and 15% petrol).
If you have paid excise duty on both components of the blend you don't need to hold an excise licence to undertake the blending process.
If you blend duty paid fuel with non-duty paid underbond fuel, it's considered manufacture for excise purposes and you will need to hold a licence.
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Unlike other fuels, when you import a biofuel (biodiesel or fuel ethanol) and use it in excise manufacture (including blending with other biofuels), within a dual excise and customs licensed premise, you must still pay the customs duty liability. The customs liability will be payable at the time the biofuel is blended.
When delivered from the licensed premise into the Australian market, the entire biofuel blend will still be subject to excise duty. However, when calculating your excise duty liability on the blended biofuel, you can deduct an amount equal to the excise duty that would have been payable on the portion of imported biofuel, as if it had been manufactured in Australia.
If your business manufactures, produces or stores underbond biofuel in Australia, you will need:
- an excise manufacturer licence
- to lodge an excise return and pay excise duty
- to keep complete and accurate records of all excisable goods you manufacture.
If you move underbond excisable goods between licensed premises, you will need our permission.
Generally, you need to lodge an excise return and pay excise duty before you deliver the excisable goods into the Australian domestic market. However, if you have a periodic settlement permission (PSP) from us, you can defer lodgment and payment until after you deliver the excisable goods into the Australian domestic market. Delivery into the Australian domestic market also occurs when you use excisable goods at the licensed premises.
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Changing excise rates
We will phase in the rates of excise duty on biodiesel and fuel ethanol. The full rates will apply from:
- 1 July 2020 for fuel ethanol
- 1 July 2030 for biodiesel.
We will base the final rates on a percentage of the rates that apply to:
- petrol (32.77% for fuel ethanol)
- diesel (50% for biodiesel).
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