Senate

Supplementary Explanatory Memorandum

(Circulated by the authority of the Treasurer, the Hon J. B. Hockey MP)

Amendment to the Excise Tariff Amendment (Ethanol and Biodiesel) Bill 2015

Outline of chapter

1.1 This amendment (the Senate amendment) to the Excise Tariff Amendment (Ethanol and Biodiesel) Bill 2015 (the Bill) ensures that the excise duty on biodiesel increases in equal amounts annually from 1 July 2016 until reaching a final rate of 50 per cent of the diesel rate in the 2030-31 financial year and later financial years.

Detailed explanation of new law

Amendment - Excise duty on biodiesel

Biodiesel excise duty

1.2 The rate of excise and excise-equivalent customs duty that currently applies to biodiesel under the Excise Tariff Act 1921 and Customs Tariff Act 1995 is the same as the rate of excise and excise-equivalent customs duty that applies to petrol and diesel. Australian manufacturers and importers of biodiesel into Australia are entitled to claim a grant under the Energy Grants (Cleaner Fuels) Scheme Act 2004 (EGCFS 2004) equal to the amount of duty payable.

Revised transition period for biodiesel excise duty

1.3 The Bill, as introduced, would repeal the entitlement for grants for biodiesel under the EGCFS 2004 from 1 July 2015 and revise the rate of excise duty that applies from 1 July 2015 to zero, increasing progressively to 50 per cent of the diesel excise rate for the 2020-21 financial year and later financial years.

1.4 An amendment made to the Bill in the House of Representatives would change the period over which biodiesel excise duty transitions to a final rate of 50 per cent of the diesel excise rate. The amendment made by the House of Representatives would provide that the excise duty on biodiesel:

•

is imposed at the same excise duty rate as fuel ethanol in the period from 1 July 2015 until 30 June 2021; and

•

then increases by equal amounts over a ten year period until reaching a final rate of 50 per cent of the diesel rate for the 2030-31 financial year and later financial years.

1.5 By contrast, the Senate amendment changes the rate at which excise duty that is imposed on biodiesel phases in over the period from 1 July 2016 until 30 June 2030. Under the Senate amendment, the rate of excise duty on biodiesel increases by equal amounts annually from 1 July 2016 until the final rate of 50 per cent of the diesel excise rate applies for the 2030-31 financial year and later financial years.

1.6 The rates of excise duty for biodiesel that apply under the Senate amendment are as follows:

# the excise duty rate for the financial year 2015-16 remains unchanged (nil rate) consistent with the Bill as introduced and as amended by the House of Representatives.

* percentage of diesel excise duty rate.

* percentage of diesel excise duty rate.

^ the biodiesel excise duty rate of 50 per cent of the diesel excise duty rate applies for the 2030-31 financial year and later financial years.

1.7 The Senate amendment applies to the excise duty rate imposed on biodiesel from 1 July 2016. The rate of duty on biodiesel for the 2015-16 financial year (nil) applies in accordance with the Bill as introduced and as amended by the House of Representatives.

1.8 The Senate amendment does not change the rate of duty for fuel ethanol that applies under the Bill as introduced.