LI 2024/21 - Explanatory statement
Excise Act 1901
Explanatory Statement
General outline of instrument1. This instrument is made under subsection 77H(4) of the Excise Act 1901 (Excise Act).
2. This instrument specifies circumstances in which blends of excisable fuels, with or without other substances, are taken not to be excisable goods. This has the effect that excise duty is payable on the components of these blends (where applicable), but not on the blends themselves.
3. The instrument is a legislative instrument for the purposes of the Legislation Act 2003.
4. Under subsection 33(3) of the Acts Interpretation Act 1901, where an Act confers a power to make, grant or issue any instrument of a legislative or administrative character (including rules, regulations or by-laws) the power shall be construed as including a power exercisable in the like manner and subject to the like conditions (if any) to repeal, rescind, revoke, amend, or vary any such instrument.
Date of effect5. This instrument commences on the day after it is registered on the Federal Register of Legislation.
Effect of this instrument6. Section 77G of the Excise Act provides that fuel blending to produce goods covered by paragraph 10(g) of the Schedule to the Excise Tariff Act 1921 (Excise Tariff Schedule) constitutes the manufacture of those goods, which means the resultant blends are excisable. Section 77H exempts certain fuel blends from being covered by section 10(g) of the Excise Tariff Schedule, meaning they are not taken to have been manufactured for the purposes of section 77G. Section 77H also allows the Commissioner of Taxation to specify by legislative instrument other circumstances in which fuel blends are not taken to be goods covered by paragraph 10(g) of the Excise Tariff Schedule.
7. This instrument specifies those other circumstances in which blends of excisable fuels, with or without other substances, are taken not to be excisable goods. This has the effect that excise duty is payable on the components of these blends (where applicable), but not on the blends themselves.
8. Paragraph 6(a) of this instrument provides an exemption for two-stroke gasoline (that is, petrol).
9. Paragraph 6(b) of this instrument exempts incidental blending within a storage tank or a vehicle's fuel tank. This exemption applies where there is no intention to benefit from the blend and practical considerations prevent the complete emptying of a tank of a relatively small quantity of product before filling it with the same product or another product. It is a matter of fact and degree whether the contents of a tank should be regarded as 'remnants' and therefore whether the resulting blend should be regarded as an 'incidental' blend.
10. Paragraph 6(c) of this instrument provides an exemption for stabilised crude petroleum oil. Stabilised crude petroleum oil used in an oil refinery in refining (not in an internal combustion engine) is excluded from paragraph 10(a) of the Excise Tariff Schedule and is therefore not dutiable. A blend of such stabilised crude petroleum oil and diesel or biodiesel is excluded from paragraph 10(g). Excise duty is payable only on the diesel or biodiesel component.
11. Paragraph 6(d) of this instrument provides an exemption for 'eligible goods' on which excise duty has been paid that are blended with a dye. 'Eligible goods' in this instrument has the same meaning as the definition in subsection 77H(5) of the Excise Act. They include excisable fuels (such as petrol, diesel and kerosene) and are covered by paragraph 10(a), (b), (c), (d), (da), (db), (dc), (e) or (f) of the Excise Tariff Schedule.
12. Paragraph 6(e) of this instrument relates to the addition of certain kinds of performance enhancing or engine maintenance additives to fuel. In all cases, the prepared additives must not be methanol or eligible goods (or their imported equivalents), because those substances are essentially fuels and not additives. Where bulk blending occurs (that is, for packages that are more than 10 litres capacity), the total amount of all prepared additives in the blend must not exceed a concentration of 0.5% volume per volume (v/v). This reflects the maximum concentration of additives being used by industry.
13. Paragraph 6(f) of this instrument provides an exemption for blending amounts of liquified petroleum gas (LPG) where any applicable excise duty or an excise equivalent duty of customs has been paid and the blending occurs in a 'prescribed container or tank' as defined in this instrument. This ensures that LPG for non-transport use is not subject to excise duty. The exemption is not available where the tank in which the blending occurs is for use in a system for supplying fuel to an internal combustion engine of a motor vehicle or vessel.
14. In paragraph 6(f) of this instrument, the term 'motor vehicle' does not include a vehicle designed merely to move goods with a forklift that is for use primarily off public roads, or a vehicle of a kind prescribed by regulations made for the purposes of paragraph 41-10(4)(b) of the Fuel Tax Act 2006. This exclusion ensures that LPG for non-transport use is not subject to excise duty.
Compliance cost assessment15. Compliance cost impact: Minor – There will be no additional regulatory impacts as the instrument is minor and machinery in nature (The Office of Impact Analysis reference: OIA24-07516).
Background16. The previous instrument – Excise (Blending Exemptions) Determination 2014 (No. 1) (2014 Determination) – was developed to provide equal treatment for all taxpayers, as it allowed for a more inclusive regime of bulk additive preparations whilst still limiting the risk of substitution by regulating the amount of additive in the blend.
17. This instrument continues this general approach. It repeals and replaces the 2014 Determination, which would otherwise sunset on 1 October 2024, but is intended to achieve the same policy outcome.
Consultation18. Subsection 17(1) of the Legislation Act 2003 requires the Commissioner to be satisfied that appropriate and reasonably practicable consultation has been undertaken before they make a legislative instrument.
19. Public consultation was undertaken from 1 May 2024 until 29 May 2024 on drafts of this instrument and explanatory statement.
20. The draft instrument and draft explanatory statement were published on the ATO Legal database and publicised on the database's 'What's new' page. Major tax and superannuation publishers and associations commonly monitor these pages and usually include the details in the daily and weekly alerts and newsletters to their subscribers and members. Information on the draft instrument and consultation period was included in an edition of the ATO's Business Bulletins, and tailored communications were issued to impacted stakeholder industry groups, notifying them of the consultation period.
21. One submission was received during consultation. The submission suggested a minor amendment in relation to the abbreviation of 'volume per volume' (v/v). The instrument was updated to incorporate the suggestion (see definition of "v/v" in section 4 of the instrument).
Statement of compatibility with human rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Excise (Blending Exemptions) Instrument 2024This legislative instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the legislative instrumentThis legislative instrument specifies circumstances in which blends of excisable fuels, with or without other substances, are taken not to be excisable goods. This has the effect that excise duty is payable on the components of these blends (where applicable), but not on the blends themselves.
Human rights implicationsThis legislative instrument does not engage any of the applicable rights or freedoms as it is considered to be minor or machinery in nature. It provides greater certainty in relation to excise obligations around the blending of fuels.
ConclusionThis legislative instrument is compatible with human rights as it does not raise any human rights issues.
19 August 2024
Ben Kelly
Deputy Commissioner of Taxation
Legislative References:
Acts Interpretation Act 1901
The Act
Excise Act 1901
The Act
Excise Tariff Act 1921
The Act
Fuel Tax Act 2006
The Act
Human Rights (Parliamentary Scrutiny) Act 2011
The Act
Legislation Act 2003
The Act
LI 2024/21 - Legislative Instrument