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Diesel and Alternative Fuels Grants Scheme Amendment
Date Introduced: 1 June 2000
House: House of Representatives
Commencement: When it receives the Royal
Assent, except that item 14 of Schedule 1 begins
when item 2 of Schedule 2 to the A New Tax
System (Tax Administration) Act (No. 2) 2000 begins.
To amend the
Diesel and Alternative Fuels Grants Scheme Act 2000 (the
- to ensure that grants are payable for travel from a point
inside a metropolitan area to a point outside metropolitan
- to extend eligibility for grants to: primary producers;
contractors and others who carry passengers and goods on behalf of
primary producers; buses operating in metropolitan as well as
non-metropolitan areas; and emergency vehicles, and
- to make various amendments of an administrative nature to the
The Government as part of its A New Tax
System (ANTS), proposed to reduce the cost of on-road use of
diesel to business by:
- reducing the excise on diesel, and
- providing a 'diesel fuel credit', which would be delivered
through the GST system.(1)
In addition, businesses would be entitled to
claim as an input tax credit the GST on diesel bought. Alternative
fuels were to be excise-free but subject to the GST.
Following the Senate's rejection of the ANTS
legislation, the Government and the Australian Democrats agreed to
the following changes to the ANTS package.
On-Road Diesel Rebate
ANTS proposed reducing the effective diesel
excise paid by on-road vehicles weighing more than 3.5 tonnes to 18
cents a litre. The on-road diesel rebate will be modified with the
result that the effective diesel excise will become 20 cents a
litre for qualifying vehicles as discussed below.
Changes to On-Road Diesel Rebate:
The modified proposal preserves most of the
lower cost benefits of the diesel credits for rural and regional
Australia, where transport costs are more pronounced, while
addressing concerns relating to the environmental impact of diesel
use in large cities by reducing the range of vehicles eligible for
diesel credits. It is proposed to limit access to this credit
all vehicles over 20 tonnes GVM [Gross Vehicle
regional transport vehicles weighing between 4.5
and 20 tonnes GVM that undertake their operations in service of
The regional transport credit would cover all
trucks over 4.5 tonnes operated by a GST registered entity.
Operators would have to identify to the ATO [Australian Taxation
Office] the number, type(s), and registration numbers of vehicles
undertaking rural and regional operations.
Regional would be defined as excluding all
mainland capital cities (except for Darwin) and the large
conurbations of Newcastle - Sydney - Wollongong, Melbourne -
Geelong and the Gold Coast - Brisbane - Sunshine Coast. This means
the concession would cover large regional centres, rural cities (eg
Wagga Wagga), towns and all of Tasmania. Regional transport
operations would include travel between regional centres and
metropolitan areas, as well as intrastate and interstate
operations. Transport operations within a capital city or
conurbation (as outlined above) would be excluded.
Arrangements for claiming the credit will be
determined after further consultation with the industry and the
Democrats, with the objective of simplifying record keeping,
particularly for low volume operators, while limiting the scope for
abuse. A metropolitan based business with regional operations would
be required to keep appropriate records in all cases and would only
be eligible for rural and regional operations.
The Government will put in place rigorous
enforcement measures to police the scheme subject to further
consultations with the Australian Democrats.(2)
Subsequently, the Government converted the
diesel fuel credit proposal into the Diesel and Alternative Fuels
Grants Scheme (DAFGS). Under this scheme, grants will be paid from
1 July 2000 for business-related on-road use of diesel and like
fuels (as well as alternative fuels) to all vehicles over 20 tonnes
GVM, and to transport vehicles weighing between 4.5 and 20 tonnes
GVM that operate in regional areas.(3)
On 6 December 1999, the Senate passed the
Diesel and Alternative Fuels Grants Scheme (Administration and
Compliance) Act 1999. This Act contains details of the
administrative and compliance requirements for the DAFGS scheme.
The main requirements are:
- the applicant must be registered for the scheme, at the time a
grant is claimed, in respect of each vehicle for which the
applicant is claiming a grant
- the applicant must have bought the fuel, and
- the applicant must have used the fuel in operating a vehicle
for the purpose of carrying on an enterprise.
The ATO is responsible for administering the
Three types of journeys are now eligible under
- between a point outside the metropolitan areas and another
point outside the metropolitan areas; or
- between a point outside the metropolitan areas and a point
inside a metropolitan area; or
- between different metropolitan areas.
The current Bill seeks to ensure that a journey
from a point inside a metropolitan area to a point outside
metropolitan areas is also eligible for grant under the scheme.
Details of the boundaries of the metropolitan
areas were released on 12 April 2000.(4)
This Digest should be read in conjunction with
the Digests for the Diesel and Alternative Fuels Grants Scheme Bill
1999(5) and the Diesel and Alternative Fuels Grants
Scheme (Administration and Compliance) Bill 1999.(6)
Basis of policy commitment
On 12 April 2000, the Government announced that
all journeys on public roads by vehicles in the 4.5 to 20 tonne GVM
category would also be eligible for grants when the journeys relate
directly to primary production. Hence journeys within metropolitan
areas would be eligible for grants when undertaken by a primary
producer or by a contractor on behalf of a primary
Position of significant interest groups/press
The extension of the DAFGS scheme to primary
industry in metropolitan areas is, by reducing costs, a production
subsidy. The National Farmers' Federation approved the Government's
decision to extend the scheme as another significant boost for
Item 5 of
Schedule 1 of the Bill inserts a new section 10AA.
Under this section, businesses engaged in primary
production, irrespective of their location, will be entitled to
grants for diesel or alternative fuel provided the vehicle meets
the weight requirement and is used to transport goods or passengers
on a public road.
Item 5 also
inserts a new section 10AB. Under this
section, contractors and others who transport
passengers or goods on behalf of primary producers, will be
entitled to receive a grant.
Item 5 inserts
new section 10AC, which extends eligibility for
the use of alternative fuel to businesses using buses on public
roads. Note that this section does not extend eligibility to the
use of diesel.
Item 5 inserts
10AD, which extends eligibility for the use of
diesel or alternative fuel to enterprises using emergency vehicles
on public roads. As with buses, eligibility for emergency vehicles
does not depend on location in metropolitan or non-metropolitan
areas. The Minister, in his second reading speech, envisaged that
firefighting services would be the principal beneficiaries under
Item 3, new
subsection 6B(1) requires that
applicants must be registered to claim grants. Subsection
6B(2) deals with the timing of claims. It provides that
when a claim is made in respect of a particular vehicle, and that
claim is made after or at the same time that registration is sought
but before the claimant is registered in respect of the vehicle,
the timing of the claim is considered to be immediately after the
applicant is registered in respect of that vehicle.
Item 5, new
section 10AD seeks to prevent
'double dipping' by providing that when a person is eligible to
receive a grant under more than one section, that person is
entitled to only one grant and may make an election.
Standardised rules for debt
Item 8, new subsection 14A(3)
and items 12 to 16 are intended
to ensure that the rules governing tax debt collection are the same
as those applying to other outstanding tax debts. Previously, rules
relating specifically to the DAFGS scheme were written into the
Request for amended
substitutes new clause 15EA. This
entitles an applicant to request an amended assessment. The
Commissioner of Taxation must comply with the request if it is made
within two years after the end of the claim period or such further
period as the Commissioner allows.
Item 12, new
clause 16A allows the Commissioner to deduct from
a grant a debt owing under the scheme. When this happens, the grant
is deemed to be paid in full.
Interest on underpaid
New clause 16B
provides that when it is determined that a grant has been underpaid
following a review, the applicant is entitled to receive interest
on the amount underpaid. The clause specifies the time from when
interest is payable and the method of calculation.
Item 4 of
Schedule 1 inserts a new
paragraph 10(2)(ba). This
provides that a journey between a point inside a metropolitan area
and a point outside the metropolitan areas is covered by the
scheme. Item 4 thus removes an
anomaly, namely, that a journey from a point outside to a point
inside a metropolitan area would be eligible but the same journey
in the opposite direction would be ineligible.
As noted, new section 10AC(2)
extends eligibility for the grant to buses using alternative fuel
while carrying on an 'enterprise' irrespective of whether the
service is in metropolitan or non-metropolitan areas. Thus
commercial bus operators using alternative fuel will benefit while
operators using diesel will have an incentive to switch to
alternative fuel. This could have environmental benefits in
metropolitan areas. While the intention of the legislation seems to
be to ensure that private bus operators will be able to claim the
grant, the question arises whether 'enterprise' also encompasses
organisations, such as State transport authorities, that are
potentially large users of alternative fuels.
The DAFGS scheme has been criticised as
complicated to administer and likely to give rise to unintentional
errors and fraudulent claims. The extension of the scheme to
incorporate new categories of fuel users will further complicate
the scheme's administration.
It is not clear, on economic efficiency grounds,
why primary production in metropolitan areas should be subsidised
through the DAFGS scheme. Increasing industry assistance,
especially when it has no obvious justification and is not subject
to independent review, generally runs against the thrust of policy
of both major political parties, which is to reduce assistance.
While the magnitude of the implicit subsidy may not be great, the
extension of the scheme to primary production in metropolitan areas
places it in a privileged situation relative to other industries in
metropolitan areas, and hence is a move away from a 'level playing
field'. On the other hand, to exclude primary production in
metropolitan areas from eligibility would create an inconsistency
in the scheme in that primary production in non-metropolitan areas
would be eligible for grants while primary production in
metropolitan areas would not be eligible.
- Tax Reform. Not a new tax. A new tax system. The
Howard Government's Plan for a New Tax System, August 1999.
- Prime Minister, 'Changes
to the goods and service tax', 31 May 1999.
- Registration for the scheme is made through applications for an
Australian Business Number.
- See http://www.taxreform.ato.gov.au/general/diesel/diesel_main.htm.
- See Bills Digest no. 034, 1999-2000
- See Bills Digest no. 069, 1999-2000
- Hon. W Truss MP, Minister for Agriculture, Fisheries and
Forestry, 'Farmers to benefit from fuel scheme changes'. Media
release, 12 April 2000.
- National Farmers' Federation Australia, 'Fuel scheme changes to
benefit the country'. News release 52/2000, 12 April
20 June 2000
Bills Digest Service
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