Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)General outline and financial impact
Energy Grants (Cleaner Fuels) Scheme
The EG(CF)S provides a generic framework for the payment of grants for the importation and manufacture of cleaner fuels in accordance with the Government's 2003-2004 Federal Budget announcement concerning fuel tax reform and cleaner fuel measures.
The EG(CF)S will initially allow for the payment of a grant for the importation and domestic production of final fuels containing biodiesel. The grant will offset the excise and customs duty payable on biodiesel from 18 September 2003 and continue the current effective excise rate of zero for 100% biodiesel until 30 June 2008. The grant will also be payable on fuel blends containing biodiesel, extending an effective excise rate of zero to the biodiesel component of fuels blends for the same period.
Under the scheme, grants will also be provided to offset the excise and customs duty on the manufacture and importation of ethanol when the existing subsidy arrangement administered under contract by the Department of Industry, Tourism and Resources finishes on 30 June 2008.
The grants payable for biodiesel and ethanol will be progressively reduced in five even annual instalments beginning 1 July 2008 and ending 1 July 2012 to arrive at a final effective excise rate for these fuels.
The EG(CF)S will also allow for payment of grants to encourage the production of low sulphur fuels. A grant will be paid for the importation and manufacture of premium unleaded petrol with less than 50 parts per million sulphur for a period of two years from 1 January 2006. A similar grant will be implemented for diesel with less than 10 parts per million sulphur from 1 January 2007.
This measure will bring forward production of higher quality fuels before they are mandated under the provisions included in the Fuel Quality Standards Act 2000. The initiative will be reviewed in the period prior to implementation to ensure that it aligns with the timing of new fuel standards and market conditions.
The EG(CF)S will be administered under PGBAA. The PGBAA currently provides the administrative and compliance framework for other grant schemes administered by the Australian Taxation Office, namely the Energy Grants (Credits) Scheme, the Fuels Sales Grants Scheme and the Product Stewardship (oil) arrangements.
Under the PGBAA, claimants will be responsible for correctly self-assessing their entitlements and maintaining records to substantiate their entitlements.
Consequential amendments
The Energy Grants (Cleaner Fuels) Scheme (Consequential Amendments) Bill 2003 amends the PGBAA, the Excise Act 1901 and the Fuel Quality Standards Act 2000 as a consequence of the implementation of the EG(CF)S.
This bill brings the EG(CF)S under the administration of the PGBAA to align it with the compliance and administrative framework of other grant programmes administered by the Commissioner. Claimants for a grant will be required to register and claim under the existing provisions of the PGBAA. The PGBAA will be amended to include some additional measures in respect of information gathering and information sharing.
This bill also amends certain provisions of the Excise Act 1901 to include additional measures for the protection of revenue under the EG(CF)S arrangements.
Finally this bill inserts a provision into the Fuel Quality Standards Act 2000 to allow for information to be provided to the Australian Taxation Office by the Department of the Environment and Heritage.
Date of effect: The EG(CF)S will commence on 18 September 2003.
Proposal announced: The EG(CF)S gives effect to two measures contained in the 2003-2004 Federal Budget concerning the payment of grants for the production and importation of biodiesel and low sulphur fuels. The first of these relates to fuel tax reform and the second to the cleaner fuels component of the EGCFS in line with the Measures for a Better Environment commitment to encourage the conversion from the dirtiest fuels to the most appropriate and cleanest fuels as announced by the Prime Minister on 31 May 1999.
Financial impact: The payment of the grant in respect of biodiesel will cost $15 million in 2003-2004, $44 million in 2004-2005, $76 million in 2005-2006 and $99 million in 2006-2007. The costs involved in providing the grant in respect of the low sulphur fuels is $1 million in 2005-2006 and $41 million in 2006-2007.
Compliance cost impact: It is expected that claimants for a grant will be able to utilise their existing records for the excise collections regime and the Fuel Quality Standards Act 2000 to substantiate their EG(CF)S claims. Therefore it is anticipated that there will not be any additional cost of compliance over and above the records that claimants are already required to maintain to meet their obligations.