House of Representatives

Tax Laws Amendment (2009 Measures No. 2) Bill 2009

Explanatory Memorandum

(Circulated by the authority of the Treasurer, the Hon Wayne Swan MP)

Chapter 7 Removing the Greenhouse Challenge Plus Programme condition for fuel tax credits

Outline of chapter

7.1 Schedule 7 to this Bill amends the Fuel Tax Act 2006 to remove the restriction that businesses may not claim more than $3 million of fuel tax credits in a financial year unless they are a member of the Greenhouse Challenge Plus Programme (GCPP).

Context of amendments

7.2 Under Division 45 of the Fuel Tax Act 2006 , businesses may not claim more than $3 million of fuel tax credits in a financial year unless they are a member of the GCPP, or another program determined by the Minister for the Environment, Heritage and the Arts.

7.3 The GCPP provision in the Fuel Tax Act 2006 was originally included so that large fuel users would monitor and take measures to reduce their carbon emissions. This outcome will be better achieved through the Government's Carbon Pollution Reduction Scheme. The GCPP will cease after 30 June 2009 and a suitable replacement program can not be identified for the purpose of the Fuel Tax Act 2006 .

7.4 Without an amendment removing the GCPP condition from the Fuel Tax Act 2006 , businesses will be unable to claim fuel tax credits in excess of $3 million in a financial year. These businesses will then not be given relief from fuel tax on their inputs, which would be inconsistent with the policy intent of the fuel tax credit system.

Summary of new law

7.5 This measure removes the provision in the Fuel Tax Act 2006 that businesses may not claim more than $3 million of fuel tax credits in a financial year unless they are a member of the GCPP, or another program determined by the Minister for the Environment, Heritage and the Arts.

Comparison of key features of new law and current law

New law Current law
Businesses will be able to claim their fuel tax credit entitlement including for amounts more than $3 million in a financial year. After the termination of the GCPP on 30 June 2009, businesses' fuel tax credits will be capped at $3 million in a financial year regardless of their fuel tax credit entitlement.

Detailed explanation of new law

7.6 This measure removes the provision in Division 45 of the Fuel Tax Act 2006 that specifies that businesses may not claim more than $3 million of fuel tax credits in a financial year unless they are a member of the GCPP, or another program determined by the Minister for the Environment, Heritage and the Arts.

7.7 Currently under the Act, businesses which are not a member of the GCPP (and consequently not able to claim their fuel tax credit entitlements that are in excess of $3 million), can join the GCPP within four years and make a decreasing adjustment to account for these credits. From 1 July 2009 these businesses will be unable to join the GCPP and therefore, to enable them to make a decreasing adjustment for credits prior to 1 July 2009, Part 3 of Schedule 7 deems businesses not a member of the GCPP to be a member of the GCPP immediately prior to its termination.

7.8 Under section 105-55 in Schedule 1 to the Taxation Administration Act 1953 (TAA 1953), businesses will then have four years to make this adjustment - which will remain an adjustment for the June 2009 tax period. It will not matter whether or not the taxpayer has already claimed the original fuel tax credits, as subsections 45-5(1) and 65-5(5) of the Fuel Tax Act 2006 will continue to apply to those credits.

Example 7.1 Bill's Mining Company has monthly tax periods and has fuel tax credit entitlements. Bill's Mining Company's fuel tax credits for the financial year ending 30 June 2009 totals $2,960,000. Bill's Mining Company is not a member of the GCPP.In September 2009 Bill's Mining Company becomes aware it is entitled to half a fuel tax credit entitlement for taxable fuel it acquires for use in its light vehicles used on its mining site. These entitlements arise in the financial year ending June 2009 and totals $100,000. Bill's Mining Company's fuel tax credit entitlements for the financial year exceed $3 million by $60,000.Division 45 of the Fuel Tax Act 2006 continues to apply to the $60,000 in fuel tax credit entitlements that are in excess of the $3 million. Bill's Mining Company must become a member of the GCPP to claim the fuel tax credits as a decreasing fuel tax adjustment.Under the amendments Bill's Mining Company is deemed to be a member of the GCPP as at 30 June 2009.Bill's Mining Company will therefore have a decreasing fuel tax adjustment for the $60,000 in fuel tax credit entitlements. The adjustment is attributable to the tax period ending 30 June 2009.Under section 105-55 in Schedule 1 to the TAA 1953 Bill's Mining Company will have four years from the end of the tax period ending 30 June 2009 to claim the fuel tax credit entitlements to the tax period.

Application and transitional provisions

7.9 Application provisions are outlined in paragraphs 7.7 and 7.8.

Consequential amendments

7.10 As well as the amendments to remove Division 45 and references to Division 45 of the Fuel Tax Act 2006 , minor amendments are required to Schedule 3 to the Fuel Tax (Consequential and transitional Provisions) Act 2006 . [ Schedule 7, Part 2 ]


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