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ATO Interpretative Decision

ATO ID 2001/128

Excise

Excise status of blends of biodiesel with diesel for use as a fuel
FOI status: may be released

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CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Whether a blend of biodiesel (a product manufactured by the transesterification of vegetable oils or animal fats) and diesel is a good on which excise duty is imposed under section 5 of the Excise Tariff Act 1921 (the Act).

Decision

When biodiesel is blended with petroleum product in any quantity, the entire volume of the blend is subject to excise duty.

Facts

Biodiesel is a product manufactured by the transesterification of vegetable oils or animal fats for use as a fuel.

Biodiesel is usually marketed as a blend with conventional diesel in a mixture ranging from 5% to 20%.

Reasons for Decision

Goods which are produced or manufactured in Australia and on which excise duty is imposed are called "excisable goods". Section 5 of the Act imposes the duties of excise on the goods, which are described in the Schedule to the Act (the Excise Tariff Schedule).

All products subject to excise duty are listed in the Excise Tariff Schedule. Particular products otherwise covered by a general listing are specifically mentioned where they are non-excisable.

The goods described in the Excise Tariff Schedule fall into three broad categories, being petroleum, alcohol and tobacco. Items 11 and 12 of the Excise Tariff Schedule set down the rate of excise duty on petroleum products for use as fuel.

Unblended biodiesel (a product manufactured by the transesterification of vegetable oils or animal fats) does not fall into any classification within the Excise Tariff Schedule and is therefore not an excisable good.

A blend of biodiesel and conventional diesel falls within the definition of a "blended petroleum product" in section 77G of the Excise Act 1901 (the Excise Act).

Under section 77G, a blended petroleum product may be either an "excisable blended petroleum product" or an "exempt blended petroleum product".

Section 77J of the Excise Act allows the regulations to specify a particular petroleum product as an exempt blended petroleum product.

Excise Regulation 176 prescribes the blended petroleum products which are exempt blended petroleum products. A blend of biodiesel and diesel is not specified in Regulation 176 as an exempt blended petroleum product.

As a blend of biodiesel and diesel falls within the definition of blended petroleum product in section 77G, but is not an exempt blended petroleum product under section 77J, it consequently falls within the definition of an "excisable blended petroleum product" in section 77G and is subject to excise duty.

[NOTE 1: Item 12 of the Excise Tariff Schedule sets out the rate of excise duty on "excisable blended petroleum product". The current rate for Item 12 is "the amount of duty worked out in accordance with section 6G" of the Act. That section provides that the diesel rate of duty applies to the entire volume of the blend. The diesel rate of duty is set down in Item 11.]
[NOTE 2: Only licensed manufacturers and producers can legally manufacture or produce excisable goods. Severe penalties can be imposed on an unlicensed person who manufactures or produces excisable goods.

It should be noted that section 77H of the Excise Act provides that the process of blending an "excisable blended petroleum product" is taken to constitute the manufacture of that product. This means that only a manufacturer who holds a licence under the Excise Act may blend biodiesel with a petroleum product. The manufacture of the product must be carried out in accordance with the Excise Act and any conditions imposed by the ATO.]

Date of decision:  26 July 2001

Legislative References:
Excise Tariff Act 1921
   Section 5
   Section 6G
   Schedule, item 11
   Schedule, item 12

Excise Act 1901
   Section 77G
   Section 77H
   Section 77J

Excise Regulations 1925
   Regulation 176

Related ATO Interpretative Decisions
ATO Interpretive Decision 2001/129

Keywords
Excise
Diesel
Excisable goods
Excise Tariff
Fuel
Fuel blending

Business Line:  Excise

Date of publication:  27 July 2001

ISSN: 1445-2782

history
  Date: Version:
You are here 26 July 2001 Original statement
  22 October 2003 Archived

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