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
Contact Officer & Copyright Details
Customs and Excise Amendment (Diesel
Fuel Rebate Scheme) Bill 1999
Date Introduced: 22 June 1999
House: House of Representatives
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
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
- 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.
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.
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
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
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
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
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.
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
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
- 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.
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.
© 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
Published by the Department of the Parliamentary Library,
Back to top