Explanatory Memorandum(Circulated by the authority of the Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP and the Minister for Home Affairs, the Hon Brendan O'Connor MP)
General outline and financial impact
Taxation of alternative fuels
The four Bills contained in the package are the Taxation of Alternative Fuels Legislation Amendment Bill 2011, the Excise Tariff Amendment (Taxation of Alternative Fuels) Bill 2011, the Customs Tariff Amendment (Taxation of Alternative Fuels) Bill 2011 and the Energy Grants (Cleaner Fuels) Scheme Amendment Bill 2011.
These Bills bring certain alternative fuels used for transport purposes into the fuel taxation regime and make them subject to excise duty or excise-equivalent customs duty. The fuels affected are liquefied petroleum gas (LPG), liquefied natural gas (LNG) and compressed natural gas (CNG). The rates for these fuels are based on the energy content of the specific fuels and discounted by 50 per cent to reflect the potential benefits of these alternative fuels. The changes are phased in over a transition period to allow affected parties time to adjust to the changes.
The Taxation of Alternative Fuels Legislation Amendment Bill 2011 amends the Excise Act 1901 , the Fuel Tax Act 2006 , the Product Grants and Benefits Administration Act 2000 and the Taxation Administration Act 1953 . The Bill deals with the taxation of LPG, LNG and CNG in particular, establishes LPG reporting requirements, fuel tax credit entitlements and penalties concerning unauthorised excise-free LPG sale or use. The Bill also sets out transitional excise licensing requirements for the gaseous fuels (LPG, LNG and CNG).
The Excise Tariff Amendment (Taxation of Alternative Fuels) Bill 2011 amends the Excise Tariff Act 1921 to set the excise rates applying to certain alternative fuels from 1 December 2011, and to calculate the duty payable on blended goods.
The Customs Tariff Amendment (Taxation of Alternative Fuels) Bill 2011 amends the Customs Tariff Act 1995 to set the excise-equivalent customs duty rates applying to certain alternative fuels from 1 December 2011.
The Energy Grants (Cleaner Fuels) Scheme Amendment Bill 2011 extends the operation of the existing provisions of the Energy Grants (Cleaner Fuels) Scheme Act 2004 .
Date of effect : These amendments apply, in general, to fuel acquired, manufactured or imported on or after 1 December 2011. The extension of the current operation of the Energy Grants (Cleaner Fuels) Scheme Act 2004 applies from 1 July 2011, with further changes applying to it from 1 December 2011.
This measure includes four Bills. As each Bill is part of the package, if any Bill does not receive Royal Assent, none of the Bills commence operation.
Proposal announced : The implementation by the Government of the longstanding policy to tax alternative fuels was announced in the then Assistant Treasurer and the Minister for Resources and Energy's joint Media Release No. 099 of 13 May 2010. The date of effect of the new tax changes was extended from 1 July 2011 to 1 December 2011 and announced in the Assistant Treasurer and Minister for Financial Services and Superannuation's Media Release No. 017 of 24 January 2011. The Government announced on 12 May 2011 that there will be a 10-year moratorium on changes to the taxation and grant arrangements for ethanol, biodiesel, renewable diesel and methanol. After the 10-year period, there will be a review of the arrangements.
Financial impact : This measure is estimated to have a gain to Budget revenue over the forward estimates period of $518.5 million comprising:
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Summary of regulation impact statement
Regulation impact on business
Impact : The Bills improve the operation of the fuel market by enhancing market efficiency and economic choice and providing certainty for industry.
- Taxing the alternative fuels improves the operation of the fuel market by enhancing competition between the different types of fuels, improving market efficiency, economic choice and the consequent allocation of resources.
- Although the taxation based advantage of alternative fuels will be reduced, the tax changes continue to provide support to the alternative fuels industry in recognition of the potential environmental, fuel security and regional benefits that these industries can generate.
- The changes deliver certainty for business so that industry is able to make decisions confident in the knowledge of the tax arrangements that apply.