Bills Digest No. 20 1999-2000 Customs and Excise Amendment (Diesel Fuel Rebate Scheme) Bill 1999


Numerical Index | Alphabetical Index

WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

CONTENTS

Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details

Passage History

Customs and Excise Amendment (Diesel Fuel Rebate Scheme) Bill 1999

Date Introduced: 22 June 1999

House: House of Representatives

Portfolio: Treasury

Commencement: The proposed Customs and Excise Amendment (Diesel Fuel Rebate Scheme) Act 1999 commences after all the provisions in five A New Tax System Acts listed in subclause 2(2) have commenced, and on the last day on which any of those provisions commenced.

Purpose

The measures in this Bill (the Rebates Bill) and in the Diesel and Alternative Fuels Grants Scheme Bill 1999 (the Grants Bill) implement the proposal in the A New Tax System (ANTS)(1) as modified by the agreement between the Government and the Australian Democrats:

  • to provide assistance to regional areas, by a Diesel and Alternative Fuels Grants Scheme (DAFGS) to reduce the cost of diesel and certain other fuels used in transporting goods and passengers, and
  • to extend the Diesel Fuel Rebate Scheme (DFRS) to additional activities and other fuels, and to allow the full rebate to activities now receiving only a part rebate.

Background

The background to the Rebates Bill and the Grants Bill is considered in the Bills Digest on the Grants Bill. Readers are therefore invited to refer to the Bills Digest on the Grants Bill for information on the background to this Bill.

Main Provisions

Schedule 1 of the Rebates Bill has measures to amend the Customs Act 1901.

Schedule 2 of the Rebates Bill has measures to amend the Excise Act 1901.

Extension of rebate to fuels other than diesel fuel

Item 1 of Schedule 1 and Item 1 of Schedule 2 insert a definition of diesel fuel into section 4(1) of the Customs Act 1901 and section 4(1) of the Excise Act 1901 respectively. It includes any other like fuel of a kind that is prescribed by regulations.

In the Grants Bill, clause 5 provides that diesel fuel has the meaning given by the regulations. Further, alternative fuel is defined in clause 5 of the Grants Bill to mean:

(a)  compressed natural gas

(b)  liquefied petroleum gas

(c)  recycled waste oil

(d)  ethanol oil

(e)  canola oil

(f)  such other fuel as is specified in the regulations.

Thus there is scope for the alignment of definitions of diesel fuel in the Grants Act and the Rebates Act so that both definitions include the fuels listed under alternative fuels or prescribed in regulations.

100 per cent rebate for duty paid on diesel for rail transport and marine use

Item 3 of Schedule 1 inserts proposed subparagraph 164(1)(ab) and proposed subparagraph 164(1)(ac) into the Customs Act 1901 to enable a rebate of customs duty to be granted to a person who purchases diesel fuel for use in rail transport or marine use respectively in the course of carrying on an enterprise. Item 3 of Schedule 2 inserts proposed subparagraph 78(1)(ab) and proposed subparagraph 78(1)(ac) into the Excise Act 1901 to achieve a similar result in respect of excise duty.

The definition of 'rail transport' inserted by Item 10 of Schedule 1 into subsection 164(7) of the Customs Act 1901 includes light rail transport and transport by tram, but does not include any rail transport relating to forestry. The definition of 'marine use' inserted by Item 9 of Schedule 1 into subsection 164(7) of the Customs Act 1901 includes the use of vehicles in or on fresh water, but does not include any use relating to forestry. Item 8 of Schedule 2 amends section 78A(7) of the Excise Act 1901 to provide for the application of the definition of 'rail transport' and 'marine use' in subsection 164(7) of the Customs Act 1901 for the purposes of section 78.

The rebate is not applicable for diesel fuel purchased for the purpose of propelling a road vehicle on a public road.

Item 5 of Schedule 1 inserts proposed paragraphs 164(5)(ba) and paragraphs 164(5)(bb) into the Customs Act 1901 to enable the entire duty paid on diesel fuel purchased for rail transport or marine use to be given as a rebate. Item 5 of Schedule 2 inserts proposed paragraphs 78A(5)(ba) and paragraphs 78A(5)(bb) into the Excise Act 1901 to achieve a similar result.

Varying of rebate by the Minister for diesel used in primary production

Under section 164(5A) the Minister may by notice in writing declare that the rate of rebate payable under subsection 164(1) in respect of any diesel fuel may be a rate higher than the rate specified in subsection 164(5).

Item 6 of Schedule 1 inserts proposed subsection 164(5AAA) to the Customs Act 1901 to provide that the Minister may declare a different rate for use of diesel fuel in primary production other than forestry and a different rate for use of diesel fuel in forestry. However, the rate declared by the Minister for use of diesel fuel in forestry must be 35/43 of the rate declared for use of diesel fuel in primary production other than forestry.

The excise on diesel as from 1 February 1999 is 43.355 cents per litre. The rate of rebate used in primary production - which includes forestry - is 35.027 cents per litre. The rate of 35/43 thus derives from the existing treatment of forestry. However, under the Bill, forestry will be disadvantaged relative to primary production other than forestry. Currently, agriculture, fishing and forestry are eligible for the same amount of rebate, that is, 35.027 cents per litre. Under the new scheme, the parity between forestry and agriculture will be removed because of the application of the rate of 35/43 to forestry but not to other forms of primary production. To restore parity between forestry and primary production other than forestry would require the same amount of rebate for both.

Item 6 of Schedule 2 inserts proposed subsection 78(5AAA) to the Excise Act 1901 to achieve a similar result.

Termination of DFRS

Item 2 of Schedule 1 inserts proposed subsection 164(1AB) to provide that the rebate is not payable:

  • for a purchase of diesel fuel on or after 1 July 2002, or
  • as a result of an application for a rebate received more than 5 months after 1 July 2002.

Item 2 of Schedule 2 inserts proposed subsection 78A(1AA) to achieve a similar result.

On the termination of the DFRS and the DAFGS, the Government intends to combine the DFRS and the DAFGS into one scheme - the Energy Grants (Credits) Scheme as stated in clause 4 of the Grants Bill. The stated purposes of the latter scheme - as set out in subclauses 4(2) and (3) of the Grants Bill - are to encourage the use of 'cleaner' fuels, 'maintain entitlements' under the DFRS and DAFGS and, in the case of diesel, to restrict entitlements to ultra low sulphur fuel from 1 January 2006.

Concluding Comments

The measures in the Rebates Bill and the Grants Bill on the face of it provide for two schemes for reducing the cost of customs and excise duty on diesel - the DFRS for off-road use, and the DAFGS proposed in the Grants Bill for on-road use in regional areas. However, on one view, the DFRS and the DAFGS must be considered together in the overall scheme for the imposition of diesel fuel customs and excise duty as these two schemes have the effect of reducing the customs and excise duty on diesel fuel and alternative fuels. They cannot be considered as two independent schemes as they provide rebates and grants which reduce the duty payable on diesel fuel under the Customs Act 1901 and the Excise Act 1901.

Eligibility for the grants under the Grants Bill would be limited to vehicles weighing between 4.5 and 20 tonnes travelling 'in service of regional areas', and to all vehicles weighing more than 20 tonnes. 'Regional areas' excludes 'metropolitan areas'. Clause 10 of the Grants Bill specifies that diesel used in major metropolitan areas is not subject to the grant. However, the definition of 'metropolitan area' in clause 6 of the Grants Bill excludes the Hobart metropolitan area and in consequence the whole of Tasmania falls within the regional areas assisted by the DAFGS.

The classification of the whole of Tasmania for grants under DAFGS raises the question whether in the overall application of the customs and excise duty on diesel fuel the requirements in section 51(ii) of the Constitution that there should be no discrimination between States have been complied with.

The alternative view is that the DAFGS is an independent scheme outside the tax system for the imposition of customs and excise duties on diesel fuel. In this view the measures in the Grants Bill regulate transport using diesel or alternative fuels and is probably based on the trade and commerce power in section 51(i) of the Constitution. Here again, section 99 of the Constitution requires that any law or regulation with respect to trade and commerce shall not give preference to one State or any part thereof. The classification of the whole of Tasmania as a regional area in the Grants Bill may be construed as showing a preference in breach of section 99.

The reader is referred to the Concluding Comments in the Bills Digest on the Grants Bill where these issues are examined.

Endnotes

  1. Tax Reform: not a new tax; a new tax system: The Howard Government's Plan for a New Tax System (ANTS); circulated by the Hon. Peter Costello MP, Treasurer of the Commonwealth of Australia (AGPS) August 1998.

Contact Officer and Copyright Details

Bernard Pulle and Richard Webb
6 August 1999
Bills Digest Service
Information and Research Services

This paper has been prepared for general distribution to Senators and Members of the Australian Parliament. While great care is taken to ensure that the paper is accurate and balanced, the paper is written using information publicly available at the time of production. The views expressed are those of the author and should not be attributed to the Information and Research Services (IRS). Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion. Readers are reminded that the paper is not an official parliamentary or Australian government document.

IRS staff are available to discuss the paper's contents with Senators and Members
and their staff but not with members of the public.

ISSN 1328-8091
© Commonwealth of Australia 1999

Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by Members of the Australian Parliament in the course of their official duties.

Published by the Department of the Parliamentary Library, 1999.

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