What are biofuels
Biofuels are liquid fuels derived from materials such as waste plant and animal matter. The 2 main types of biofuels currently produced in Australia are:
Biodiesel
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 already paid excise duty on both components of the blend, you don't need to hold an excise licence to undertake the blending process.
Synthetic diesel is a hydrocarbon diesel fuel that is manufactured from any source materials except petroleum crude oil. It can be used as a direct substitute for refined petroleum diesel fuel. When synthetic diesel is manufactured from materials such as plant oils, animal fats, wood chips, and other renewable waste streams, it is known as renewable diesel. Synthetic and renewable diesel do not meet the legislated definition of biodiesel, they are classified and treated as petroleum diesel for excise purposes.
Fuel ethanol
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.
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 (denatured alcohol) such as industrial ethanol.
You need to pay excise duty if you purchase fuel ethanol from a manufacturer as it isn't regulated under the concessional spirits permit scheme.
For details of concessional spirits that are free of excise duty, see EXC 2016/10 – Excise (Denatured spirits) Determination 2016 (No.3).
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. You will need to hold an excise licence.
Importing biofuel
Unlike other fuels, you must pay customs duty when you import a biofuel (biodiesel or fuel ethanol) if you use it:
- in excise manufacture (including blending with other biofuels)
- within a dual excise and customs licensed premise.
The biofuel is an excise equivalent good (import). The customs liability will be payable at the time the biofuel is blended.
The entire biofuel blend will be subject to excise duty when it is delivered from the licensed premises into the Australian market. However, when calculating your excise duty 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.
Excise obligations
If your business manufactures, produces or stores underbond biofuel in Australia, you will need to:
- hold an excise manufacturer licence
- lodge an excise return and pay excise duty
- keep complete and accurate records of all excisable goods you manufacture.
You will also need our permission to move underbond excisable goods between licensed premises.
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 of the excisable products you have delivered into the Australian domestic market, until the end of the period specified in the PSP. This includes when you use the excisable goods at the licensed premises.
Changing excise rates
We are phasing in the rates of excise duty on biodiesel and fuel ethanol. The full rates apply from:
- 1 July 2020 for fuel ethanol
- 1 July 2030 for biodiesel.
We base the final rates on a percentage of the rates that apply to:
- petrol (32.77% for fuel ethanol)
- diesel (50% for biodiesel).
See current excise duty rates.
Understand your excise obligations for biofuels, including biodiesel and fuel ethanol, blends and imports.