Explanatory Memorandum(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)
The following abbreviations and acronyms are used throughout this explanatory memorandum.
|Collector||Commissioner of Taxation collecting excise|
|Commissioner||Commissioner of Taxation|
|EG(CF)S||Energy Grants (Cleaner Fuels) Scheme|
|PGBAA||Products Grants and Benefits Administration Act 2000|
General outline and financial impact
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.
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.
Chapter 1 - Energy Grants (Cleaner Fuels) Scheme
1.1 This chapter explains the Energy Grants (Cleaner Fuels) Scheme Bill 2003 that determines entitlement to a cleaner fuel grant.
1.2 Important terms used in this bill are listed and in some cases defined in Part 1. These definitions are generally self-explanatory.
1.3 Cleaner fuel is defined to mean biodiesel and other fuels including particular blends of fuels as are prescribed by regulation. In keeping with the progressive nature of the scheme the regulations will prescribe fuels as they become eligible for a grant. It is proposed that the regulations will prescribe ethanol, premium unleaded petrol with less than 50 parts per million sulphur and diesel with less than 10 parts per million sulphur as cleaner fuels at a future date. [Clause 4]
1.4 In order to be eligible for a grant the fuel in respect of which the grant is claimed must meet the relevant fuel standard as determined by the Department of the Environment and Heritage under the Fuel Quality Standards Act 2000. A grant will not be paid in respect of a cleaner fuel that does not comply with the fuel standard or conditions that are specified in the regulations. [Clause 4]
1.5 Biodiesel is the first cleaner fuel to be specified for the purposes of this bill. The term biodiesel is broadly defined in clause 4, however in order to be eligible for a grant biodiesel must meet the applicable fuel standard. [Clause 4]
Becoming provisionally entitled to a grant
1.6 The provisions in Part 2 of this bill specify the requirements that give rise to an entitlement to a cleaner fuel grant. The provisional requirements for entitlement to a grant are provided in clause 5. These basically require that a claimant for a cleaner fuel grant be an importer, manufacturer or a licensed person in respect of the fuel. A grant will be payable in respect of a cleaner fuel that is imported or manufactured in Australia.
1.7 In order to qualify for a grant the fuel must be entered. The term enter the fuel as defined in Clause 4 means to enter or deliver the fuel into home consumption in accordance with the relevant provisions of the Customs Act 1901 or the Excise Act 1901 [Clause 5, subparagraph 5(1)(c)(i)]. The entry or delivery must occur before the last day that a provisional entitlement can arise for the fuel in respect of which the grant is claimed. The last day on which entitlement for the fuel can arise will be prescribed in the regulations [Clause 5, paragraph 5(1)(d)].
1.8 A provisional entitlement to a grant will generally arise only in respect of a cleaner fuel when it is sold into the market in its final form. Provisional entitlement to a grant will therefore arise when fuel is sold by an importer, manufacturer or licensed person to an end user outside the excise system.
1.9 An importer or manufacturer of a cleaner fuel will therefore not be eligible for a grant where the fuel is sold to another licensed person because the final product will not have entered the market as a final fuel. Conversely where fuel is bought from an entity that is not a licensed person or importer, the sale will have taken place outside of the excise system and a grant will not be payable in respect of that fuel.
1.10 A licensed person is an entity who is licensed under the Excise Act 1901 as a manufacturer or the holder of a storage licence in respect of goods of a kind including the fuel, or an entity specified in a permission given under the Excise Act 1901 or Customs Act 1901 for goods of a kind including the fuel. [Clause 4]
1.11 Provisional entitlement to a grant will also arise where a licensed person consumes or finally sells the fuel that has already been entered. This must also occur before the last day that a provisional entitlement for the fuel can arise. [Clause 5, subparagraph 5(1)(c)(ii)]
1.12 In order to be eligible for a grant, a cleaner fuel must be imported into Australia or manufactured in Australia on or after the fuel's start day [Clause 5, subparagraphs 5(1)(a)(i) and (ii)]. For biodiesel the fuel's start day will be the day that this bill commences. For other cleaner fuels the start day will be the day prescribed by the regulations as the start day for that cleaner fuel [Clause 4].
1.13 Under the provisions of this bill the term manufacture includes petroleum blending as described in section 77H of the Excise Act 1901 [Clause 4]. A grant will be paid on the importation or manufacture of fuel blends only if the blend or the cleaner fuel component of the blend complies with the determined fuel standard for the cleaner fuel, or the cleaner fuel component of the blend as the case may be.
1.14 The claimant may be entitled to a grant if they import cleaner fuel into Australia or manufacture cleaner fuel in Australia [Clause 5, subparagraph 5(1)(b)(i) and (ii)]. Entitlement to a grant may also arise if the claimant is a licensed person for the fuel who buys cleaner fuel from an importer or manufacturer or a licensed person for the fuel [Clause 5, subparagraphs 5(1)(b)(iii) and (iv)]. If the claimant has a contractual arrangement for fuel to be manufactured in Australia on their behalf they may also be entitled to a grant [Clause 5, subparagraph 5(1)(b)(v)].
1.15 If the claimant decides that the fuel which has previously been entered by another entity will be consumed by them in carrying on their enterprise, they will become entitled to a grant provided that the fuel is not used by them to manufacture a fuel blend, or is not sold or otherwise provided to another entity. [Clause 5, subparagraph 5(1)(c)(ii); Clause 5, Subclause 5(4)]
1.16 If the fuel is entered for home consumption, duty will be paid at the time the fuel is entered and entitlement to a grant will provisionally arise at that time. If the importer or the licensed person is the holder of a permission to deliver the fuel into home consumption, a provisional entitlement to a grant will arise at the time of delivery, although the settlement of duty may occur later in accordance with the conditions of the permission to deliver the fuel.
1.17 A provisional entitlement to a grant will be disqualified where a previous provisional entitlement has arisen in respect of that particular cleaner fuel before the time that the fuel was entered by the claimant, or before the claimant consumed or finally sold the fuel [Clause 5, paragraph 5(1)(h)]. Similarly the claimant will not be entitled to a grant if the fuel contained a blend of one or more cleaner fuels at the time the fuel was entered by the claimant, or before the claimant consumed or finally sold the fuel, and for each of those cleaner fuels a provisional entitlement had arisen [Clause 5, Subclause 5(2)].
Becoming entitled to a cleaner fuel grant
1.18 Provided claimants meet the requirements for a provisional grant in clause 5 they may be entitled to a cleaner fuel grant. In order to be entitled to a grant the claimant must be registered under section 9 of the PGBAA in respect of entitlement to a cleaner fuel grant. The claimant will not be entitled to a grant unless they make a claim for payment of the grant in respect of the fuel for which the grant arose. [Clause 6]
1.19 A provisional entitlement to a grant may be disqualified by a subsequent action such as selling the fuel to a licensed person for the fuel or including the fuel in a fuel blend. The claimant will not be entitled and will be taken never to have been entitled to a grant if any of the disqualifying circumstances apply to them. The regulations may prescribe circumstances, additional to those provided for in clause 7, that will disqualify a claimant from entitlement to a grant. [Clause 7]
1.20 The amount of the claimant's cleaner fuel grant is worked out in accordance with the regulations. Claimants will be required to self-assess their entitlements to a cleaner fuel grant. The regulations will prescribe different amounts of grant for different cleaner fuels and blends of fuels, including that the amount of grant may be nil. The regulations will also prescribe a basic rule for working out the amount of the grant payable and how the grant will be calculated if the regulations set out different amounts in respect of blends. [Clause 8, Subclause 8(1)]
1.21 In certain circumstances a claimant may be entitled to a drawback, refund, rebate or remission of duty under the provisions of the Customs Act 1901 or the Excise Act 1901 for the fuel in respect of which they also qualify for a grant. Where this is the case the amount of cleaner fuel grant payable will be reduced by the amount of any drawback, refund, rebate or remission of duty paid to the claimant. [Clause 8]
Chapter 2 - Consequential amendments
2.1 This chapter explains the consequential amendments to the PGBAA, the Excise Act 1901 and the Fuel Quality Standards Act 2000 made by Schedules 1 and 2 to the Energy Grants (Cleaner Fuels) Scheme (Consequential Amendments) Bill 2003.
2.2 The amendments make changes to the PGBAA to accommodate the requirement that claimants for a cleaner fuel grant register and claim under the existing provisions of that Act. Some additional amendments to the PGBAA and the amendments to the Excise Act 1901 and the Fuel Quality Standards Act 2000 make provision for information gathering and information sharing. These measures will ensure the protection of the revenue and appropriate compliance with the scheme.
Registration of grants and benefits
2.3 The specific requirement for registration for a cleaner fuel grant is that the claimant is a licensed manufacturer under the Excise Act 1901, holds a storage licence under the Excise Act 1901 for goods of a kind including a cleaner fuel, imports or proposes to import cleaner fuel into Australia or is an entity who has been granted a permission under section 61C of the Excise Act 1901 or section 69A of the Customs Act 1901 for goods of a kind including a cleaner fuel. [Schedule 1, item 3]
Payment of grants and benefits
2.4 The amount of any grant claimed for the importation or manufacture of a cleaner fuel must take into account any reduction in the effective excise paid on the fuel due to the receipt of a drawback, refund, rebate or remission of duty. Claimants are required to notify the Commissioner of any such payment. A refusal or failure to notify the Commissioner is an offence under section 8C of the Taxation Administration Act 1953. [Schedule 1, items 4 to 9]
2.5 An entity who claims a cleaner fuel grant must notify the Commissioner of any disqualifying circumstances. Failure to notify the Commissioner of any disqualifying circumstances for cleaner fuel is an offence under paragraph 8C(1)(d) of the Taxation Administration Act 1953. [Schedule 1, item 10]
Information gathering powers
2.6 An entity who has made a claim for entitlement to a grant may be required by the Commissioner to demonstrate the method and operation of any record keeping or accounting system operated by and on behalf of the claimant, and used to arrive at particulars or estimates included in the claim. An entity may also be required to demonstrate the method and operation of any manufacturing process. [Schedule 1, items 11 and 12]
Protection of confidentiality of information
2.7 It is not an offence for the Commissioner, a Deputy Commissioner or an entity authorised by them, to disclose information relating to cleaner fuel grants to the Secretary to the Department of the Environment and Heritage. [Schedule 1, items 13 and 14]
2.8 Applicants for an excise licence in respect of goods that were previously free from excise duty are allowed a minimum period of two months from the day on which the excise tariff or excise tariff alteration is proposed in the Parliament to comply with the provisions of the Excise Act 1901 relating to licences. If, in that two month period, an entity has applied for a licence in respect of the manufacture of the goods, and the Collector has not decided whether to grant or refuse to grant the licence, a further period may apply to allow the person to continue to manufacture the goods until the Collector grants, or refuses to grant a licence. This additional period may not exceed 12 months. The Collector may issue a general determination setting a transition period of between two and 12 months. [Schedule 2, items 1 to 3]
Conditions and duration of licences
2.9 The Collector may amend licences on the initiative of the Collector. The amendment of a licence may include varying or revoking a condition of the licence or imposing an additional condition for the licence. Where the Collector initiates the amendment of a licence a written notice must be given to the licence holder and the Collector must be satisfied that the amendment is necessary to protect the revenue or ensure compliance with the Excise Act 1901.
2.10 The types of conditions that may be imposed on a licence include maintenance of certain records, maintenance of certain security measures and practices, accountability and identification measures regarding goods, and quantity limitations on the level of access to product on which excise has not been paid in accordance with demonstrated legitimate business requirements.
2.11 Where the Collector has given notification that an amendment has been made to a licence the notice must advise that it may be an offence for a licence holder to contravene the licence condition.
2.12 A decision by the Collector to amend a licence is subject to review under Part IVC of the Taxation Administration Act 1953. [Schedule 2, item 5]
2.13 The existing subsection 39D(4) is amended to update the terminology in accordance with clause 39DA. [Schedule 2, item 4]
Protection of confidentiality of information
2.14 It is not an offence for the Commissioner or a Deputy Commissioner or an entity authorised by them to release information to an entity who is a licensed manufacturer, a holder of a storage licence under the Excise Act 1901 or a person specified in a permission given under section 61C of the Excise Act 1901 for goods of a kind including a cleaner fuel. The licence information must be in respect of determining the third party's entitlement to a grant under the Energy Grants (Cleaner Fuels) Scheme Bill 2003 and may include information concerning whether the third party holds a licence or permission under the Excise Act 1901 and the conditions of that licence or permission. [Schedule 2, items 6 to 9]
2.15 The Secretary to the Department of the Environment and Heritage may disclose information collected under the Fuel Quality Standards Act 2000 to the Commissioner for use in relation to cleaner fuel scheme grants. An example of the kind of information that may be collected by the Department of the Environment and Heritage and disclosed to the Commissioner is any information collected under the Fuels Quality Standards Act 2000 that has indicated non-compliance with a determined fuel standard. [Schedule 2, item 10]
|Bill reference||Paragraph number|
|Clause 4||1.3, 1.4, 1.5, 1.11, 1.15, 2.13|
|Clause 5, subparagraphs 5(1)(a)(i) and 5(1)(a)(ii)||1.11|
|Clause 5, subparagraphs 5(1)(b)(iii) and 5(1)(b)(iv)||1.13|
|Clause 5, subparagraph 5(1)(b)(vi)||1.13|
|Clause 5, subparagraph 5(1)(c)(i)||1.7|
|Clause 5, subparagraph 5(1)(c)(ii)||1.10, 1.14|
|Clause 5, paragraph 5(1)(e)||1.7|
|Clause 5, paragraph 5(1)(h)||1.17|
|Clause 5, Subclause 5(2)||1.17|
|Clause 5, Subclause 5(4)||1.14|
|Clause 8, subclause 8(1)||1.20|
|Bill reference||Paragraph number|
|Items 4 to 9||2.4|
|Items 11 and 12||2.6|
|Items 13 and 14||2.7|
|Bill reference||Paragraph number|
|Items 1 to 3||2.8|
|Items 6 to 9||2.14|