• Biofuels

    Biofuels are liquid fuels that have been derived 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.

    Biodiesel is derived from animal or vegetable fats or oils (whether or not used) to form mono-alkyl esters of fatty acids which can be used as a fuel.

    Biodiesel is generally blended with diesel by licensed excise manufacturers to create blended petroleum products. The most common biodiesel blends are B5 (5% biodiesel and 95% diesel) and B20 (20% biodiesel and 80% diesel). If excise duty has been paid 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 is 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).

    Fuel ethanol may also be further blended with petrol (diesel can also be used but not commonly) by licensed excise manufacturers to create blended petroleum products. The most common fuel ethanol blends are E10 (10% fuel ethanol and 90% petrol) and E85 (85% fuel ethanol and 15% petrol). If excise duty has been paid on both components of the blend you don't need to hold an excise licence to undertake the blending process.

    The process of manufacturing fuel ethanol is considered to be the manufacture of a petroleum product. It is not the manufacture of a methylated spirit, as industrial ethanol is. Therefore, the purchase of fuel ethanol from a manufacturer is not regulated under the concessional spirits permit scheme.

    Unlike other fuels, when a biofuel is imported and used in excise manufacture (including blending with other biofuels) the customs duty liability is not extinguished.

    The rates of excise duty on biodiesel and fuel ethanol are being phased in with the full rates applying from 1 July 2030 for biodiesel and 1 July 2020 for fuel ethanol. The final rates will be based on a percentage of the rates that apply to diesel (50% for biodiesel) and petrol (32.77% for fuel ethanol).

    See also:

    Last modified: 04 Jan 2016QC 47687