Explanatory Memorandum(Circulated by the authority of the Treasurer, the Hon J. B. Hockey MP and the Minister for Immigration and Border Protection, the Hon Peter Dutton MP)
General outline and financial impact
CPI indexation of fuel excise and excise-equivalent customs duty
The Excise Tariff Amendment (Fuel Indexation) Bill 2015 and the Customs Tariff Amendment (Fuel Indexation) Bill 2015 amend the Excise Tariff Act 1921 and the Customs Tariff Act 1995 to index the rate of excise and excise-equivalent customs duty applying to fuels (other than aviation fuels) to assist in funding investment in road infrastructure.
The effect of the Excise Tariff Amendment (Fuel Indexation) Bill 2015 and the Customs Tariff Amendment (Fuel Indexation) Bill 2015 is to validate the Excise Tariff Proposal (No. 1) 2014 and Customs Tariff Proposal (No. 1) 2014 (Tariff Proposals) that were tabled in the House of Representatives on 30 October 2014 to index fuel duty to the consumer price index (CPI) from 10 November 2014.
The Fuel Indexation (Road Funding) Special Account Bill 2015 establishes a special account to ensure that the net additional revenue from the reintroduction of fuel indexation is used for road infrastructure funding.
The Fuel Indexation (Road Funding) Bill 2015 makes consequential amendments, including amending the Fuel Tax Act 2006 to ensure that the road user charge rate that is determined is rounded in the same way as fuel duty rates are rounded.
Date of effect: The amendments apply to duty on domestically manufactured and imported fuel with effect from 10 November 2014.
The provisions which establish a special account for the net additional revenue from fuel indexation are linked to the commencement of the amendments to duty on fuel. The special account is first credited after the end of the 2014-15 financial year once the net revenue collected for that financial year can be calculated.
Proposal announced: The measure to reintroduce fuel indexation from 1 August 2014 was announced by the Treasurer in the 2014-15 Budget on 13 May 2014.
In the then Acting Assistant Treasurer's Media Release (MC 107/14) of 28 October 2014, it was announced that Tariff Proposals would be used to give practical effect to the Budget measure, with a delayed start date of 10 November 2014.
The Tariff Proposals were tabled in Parliament on 30 October 2014.
Financial impact: The measure is estimated to result in a gain to revenue in net terms over the forward estimates period of $3,598 million in underlying cash balance terms, comprising:
Note: financial impacts are in underlying cash balance terms.
Human rights implications: These Bills do not raise any human rights issues. See Statement of Compatibility with Human Rights - Chapter 1, paragraphs 1.98 to 1.113.
Compliance cost impact: The measure imposes a moderate increase in compliance costs for fuel manufacturers and importers, as well as fuel tax credit claimants.
Summary of regulation impact statement
The regulation impact statement in Chapter 2 is the same regulation impact statement that was included in the Explanatory Memorandum for the Excise Tariff Amendment (Fuel Indexation) Bill 2014, the Customs Tariff Amendment (Fuel Indexation) Bill 2014, the Fuel Indexation (Road Funding) Special Account Bill 2014 and the Fuel Indexation (Road Funding) Bill 2014, that were introduced to Parliament on 19 June 2014. The policy intent of this package of Bills to index fuel duty to the CPI remains the same.
Regulation impact on business
- Some of the fuel manufacturers and importers in the Australian market are likely to require an update to their systems in order to accommodate the biannual indexation of fuel duty rates.
- There will also be ongoing costs associated with the twice-yearly change in the fuel duty rate for all remitters of fuel excise and excise-equivalent customs duty.
- The majority of the change in the compliance costs for businesses with entitlements to fuel tax credits is borne by entities who submit their Business Activity Statements on a quarterly or annual basis. These entities will be required to organise purchases of fuels between purchases before and after the indexation date, in order to properly account for their fuel tax credit entitlement.