Excise Tariff Amendment (Fuels) Bill 2004

Second Reading Speech

Senator Troeth (Parliamentary Secretary to the Minister for Agriculture, Fisheries and Forestry)

I move:

That this bill 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

The Excise Tariff Amendment (Fuels) Bill 2004 contains amendments to the Excise Tariff Act 1921 (Excise Tariff Act).

The amendments contained in the bill have been previously tabled as Excise Tariff Proposals Nos 1, 2, 3 and 4 of 2003. The proposals now require incorporation in the Excise Tariff Act.

This bill contains three Government initiatives: the introduction of excise differentials between diesel with high sulphur content and ultra low sulphur diesel, an increase in excise duty rates for aviation fuels, and imposition of an excise duty on biodiesel.

The Prime Minister announced in Measures for a Better Environment on 31 May 1999 the Government's commitment to apply an excise differential of an additional 1 cent per litre on high sulphur diesel from 1 January 2003 and a further 1 cent per litre differential from 1 January 2004. The first excise differential was deferred until 1 July 2003 because of the Government's concern at the possibility of raising costs to diesel users at a time when the farming sector was facing serious drought conditions. The measure gives effect to the Government's decision to encourage the early introduction of ultra low sulphur diesel which will be mandated by 1 January 2006 under the Fuel Quality Standards Act 2000. The bill amends the Excise Tariff Act to incorporate the excise differentials for high sulphur diesel and similar products with high sulphur content that may be used as diesel substitutes.

An increase in duty on aviation fuels was announced by the Government in the 2003-2004 Federal Budget to provide supplementary funding for the Civil Aviation Safety Authority (CASA) in the financial year 2003-2004. Duties on aviation fuels provide a substantial proportion of funding for CASA, which is estimated to receive 11 per cent less than the forecasted revenue due to reduced world-wide demand for air travel, cessation of Ansett operations and the introduction of larger and more fuel-efficient aircraft. The increase in duties will ensure CASA is adequately resourced to continue its safety regulatory responsibilities and maintain Australia's enviable aviation safety record. Amendments in the bill increase the excise duty rate for aviation kerosene and aviation gasoline by 0.306 cents per litre.

The imposition of excise duty on biodiesel was announced by the Government in the 2003-2004 Federal Budget as part of the Government's broader fuel tax reform arrangements that bring all currently untaxed fuels into the excise and customs duty systems. The reform establishes a broad sustainable taxation framework providing increased certainty for investors as well as establishing a fairer and more transparent fuel excise system with improved competitive neutrality between fuels. Amendments in the Bill incorporate biodiesel into the Excise Tariff and apply an excise duty rate to biodiesel of 38.143 cents per litre, equivalent to ultra low sulphur diesel, from 18 September 2003.

The bill also makes a minor amendment to a formula for calculating excise duty on excisable blended petroleum products to allow deduction of previously paid duties for duty paid components of gasoline/fuel ethanol blends.

This bill is drafted with two Schedules as the passage of the Excise Tariff Amendment Bill (No. 1) 2003, pending debate in Parliament, impacts on the provisions of this bill in minor technical references. The second Schedule in the bill is to take effect only if the Excise Tariff Amendment Act (No. 1) 2004 commences.

Complementary changes to the Customs legislation are being addressed through the Customs Tariff Amendment (Fuels) Bill 2004.

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

I commend the bill.

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