Excise Laws Amendment (Fuel Tax Reform and Other Measures) Bill 2006

Second Reading Speech

Senator Kemp (Minister for the Arts and Sport)

I table revised explanatory memoranda relating to the Age Discrimination Amendment Bill 2006 and the Electoral and Referendum Amendment (Electoral Integrity and Other Measures) Bill 2006 and move:

That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

Leave granted.

The speeches read as follows:-

This bill, along with the Excise Tariff Amendment (Fuel Tax Reform and Other Measures) Bill 2006, Customs Tariff Amendment (Fuel Tax Reform and Other Measures) Bill 2006 and Customs Amendment (Fuel Tax Reform and Other Measures) Bill 2006 gives effect to the Government's announcement in its energy white paper Securing Australia's Energy Future of 15 June 2004, that the current complex system of fuel tax concessions will be replaced by a single fuel tax credit system from 1 July 2006. In particular the decision to remove effective excise from burner fuels resulted in the need to amend the excise tariff, and the customs tariff for imported equivalent products.

This bill makes changes to the Excise Act 1901 to so that the mechanism of fuel tax relief for eligible users is through the fuel tax credit system, legislated through the Fuel Tax Bill 2006, and not through concessions within the excise system.

The companion bill, the Excise Tariff Amendment (Fuel Tax Reform and Other Measures) Bill 2006, removes the various rates that applied to fuel and replaces them with only two rates - one for aviation fuels, which are not part of the fuel tax credit system, and one for other fuels. The Customs Tariff Amendment (Fuel Tax Reform and Other Measures) Bill 2006 and Customs Amendment (Fuel Tax Reform and Other Measures) Bill 2006 make complementary changes to Customs legislation so that imported fuels receive the same treatment as locally produced fuel.

Both the Excise and Customs legislation is unlike other taxing legislation, in that a fundamental principle of the legislation is the control of the revenue authority over goods that are in scope. Where possible, and within this constrain, requirements that are redundant or inconsistent with modern business practice are removed. In certain other cases, this concept of control is drawn upon in measures to protect the revenue.

The bill clarifies the arrangements for using imported inputs to excise manufacture. In conjunction with complementary changes in the Customs bills, the import duty that would be payable on imported goods, that would be excisable if manufactured in Australia, is extinguished when the imported goods are used to manufacture, in Australia, excisable goods. The import duty is extinguished when an excise liability is created. This will provide a seamless transition from the Customs regime to the excise regime for imported products used in excise manufacture while protecting the revenue.

The arrangements for concessional spirits, that is spirits that are free of duty because they will be used for certain purposes (other than making excisable beverages) are streamlined. The complex arrangements that are currently contained in the Excise Tariff Act 1921, the Excise Act 1901, the Spirits Act 1906, the Distillation Act 1901 and the relevant regulations are replaced with simpler provisions in the Excise Tariff Act and the Excise Act. The new arrangements do not change the eligible uses of concessional spirit but streamline the administration and clarify the factors under which spirits do not attract excise duty.

Changes are made to the licensing regime so that all excise licences will now have an expiry date and application for renewal must be made. This means some licences that currently do not expire will now expire every three years and that current licences that expire every year will expire every three years. This is a balance between reducing the burden on business and protecting the revenue.

There are also changes to the factors that can be taken into account when deciding to grant or cancel a licence. These factors build on existing factors that are directed at ensuring persons who would be likely to pose a risk in terms of whether all the excisable goods or tobacco leaf is correctly accounted for, are kept out of the excise system. Tobacco plants, leaf and seed are not excisable but their production is directed towards producing excisable tobacco. Controls are necessary to ensure that tobacco does not enter the illicit market. Provisions ensuring that tobacco leaf is correctly accounted for have been amended to provide clarity and alignment with controls on excisable goods.

The bill also amends the Excise Act 1901 in a number of areas to reduce a number of prescriptive and interventionist requirements that are no longer in step with modern administration. For example the current legislation contains complex rules for establishing the volume of beer. This is replaced by a provision that the CEO may make determinations on rules for measuring quantities, weights and strengths of excisable goods. This will allow the ATO to recognise changes in commercial business operations and adopt industry standards for measuring excisable goods. The ATO will actively consult with affected industry in determining such rules.

The bill repeals the following Acts; the Fuel (Penalty Surcharges) Administration Act 1997, the Fuel Blending (Penalty Surcharge) Act 1997, the Fuel Misuse (Penalty Surcharge) Act 1997 and the Fuel Sale (Penalty Surcharge) Act 1997. The introduction of the fuel tax credit system will mean that the penalty surcharges system is no longer required.

The Coal Excise Act 1949 is also repealed. Coal has attracted a free rate of excise since 1992 but coal producers have been required to be licensed and keep records and provide returns relating to coal production. The companion bill Excise Tariff Amendment (Fuel Tax Reform and Other Measures) Bill 2006 removes coal from the schedule of excisable goods and so it is no longer necessary to have the controls provided for in the Coal Excise Act 1949.

The Distillation Act 1901 and the Spirits Act 1906 are also repealed. These acts contain provisions relating to the manufacture of spirits. Many of the provisions are already adequately covered in the Excise Act as the manufacture of spirits also is the manufacture of excisable goods. Certain provisions required to protect the revenue or ensure product standards are inserted into the Excise Act 1901. These include provisions for the maturation of brandy, whisky and rum.

The bill also provides for a grant under the Energy Grants (Cleaner Fuels) Scheme Act 2004 for renewable diesel manufactured through a process of hydrogenating animal fats or vegetable oils. This will ensure that fuel produced by this process will receive the same effective tax treatment as biodiesel.

Full details of the measures in the bill are contained in the explanatory memorandum.