Bills Digest No. 33 2003-04
Energy Grants (Cleaner Fuels) Scheme Bill
2003
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
Energy Grants (Cleaner
Fuels) Scheme Bill 2003
Date Introduced:
11 September 2003
House: House of Representatives
Portfolio: Treasury
Commencement:
On 18 September
2003.(1)
To establish the cleaner fuels grants scheme
which provides for grants to importers and manufacturers of cleaner
fuels.
Background
From 18 September 2003 biodiesel(2)
is due to become subject to excise and customs duty.(3)
However, under the Energy Grants (Cleaner Fuels) Scheme Bill 2003
(the Bill), a grant equivalent to the amount of duty will be
available to importers and manufacturers, giving an effective zero
excise / customs rate. The Bill and the Energy Grants (Cleaner
Fuels) Scheme (Consequential Amendments) Bill 2003 set up the
machinery for the grants scheme.
The origin of the Bill can be traced back to
Government s Measures for a Better Environment statement
in May 1999. In this statement, the Government undertook to
introduce an energy credit scheme that would provide price
incentives and funding for conversion from the dirtiest to the most
appropriate and cleanest fuels. The scheme's objectives were later
refined, as set out in subsection 4(2) of the Diesel and
Alternative Fuels Grants Scheme Act 1999:(4)
The purpose of the Energy Grants (Credits) Scheme
will be to provide active encouragement for the move to the use of
cleaner fuels by measures additional to those under this Act, while
at the same time maintaining entitlements that are equivalent to
those under this Act and the Diesel Fuel Rebate Scheme, including
for the use of alternative fuels.
In March 2001, the Prime Minister announced
that the Government was establishing an inquiry into the total
structure of fuel taxation in Australia.(5) The Inquiry
handed down its recommendations in March 2002. It recommended,
among other things, that excise and customs duty should apply to
all liquid fuels, irrespective of their derivation.(6)
Whilst the Government initially rejected this recommendation, at
least partly on the basis of it being contrary to the Government's
election commitment to maintain excise exemptions for fuel ethanol
and biodiesel ,(7) it subsequently reversed this
position in the 2003-04 budget. However this reversal was
accompanied by decisions regarding offsetting grant programs. In
relation to biodiesel, which is the initial focus of the Bill, the
Government said:
From 18 September 2003, the Government will apply
excise duty to biodiesel at the current rate of the excise duty on
diesel fuel - 38.143 cents per litre. Grants will then be provided
for production or importation of biodiesel, such that the current
effective excise rate of zero for pure biodiesel is continued, with
this being extended to the biodiesel component of blends, until
30 June 2008. These grants will be reduced in five even
annual instalments from 1 July 2008 to
1 July 2012.(8)
Note that as of the date of this Digest (15
September), neither an Excise Tariff or Customs Tariff proposal had
yet been released by the Treasurer. These proposals are necessary
in order for the duty foreshadowed by the Government to be
collected. Presumably they will tabled in Parliament before 18
September.
As mentioned, grants in relation to biodiesel
apply from 18 September 2003. According to the Explanatory
Memorandum, grants will also become available under the
cleaner fuels grants scheme for ethanol manufacture and importation
once existing ethanol subsidy arrangements expire in
2008.(9) Grants will also be available in relation to
the manufacture and importation of low sulphur fuels from 2006 and
low sulphur diesel from 2007.(10)
The
Explanatory Memorandum states that the estimated cost of
the biodiesel grants will $15 million in 2003-2004, $44 million in
2004-2005, $76 million in 2005-2006 and $99 million in 2006-2007.
The costs involved in providing the grant in respect of the low
sulphur fuels is $1 million in 2005-2006 and $41 million in
2006-2007.(11) These figures do not take into account
the revenue to be raised by the imposition of excise and customs
duty.
New section 3 provides that
the Commissioner of Taxation has general administration of the
Act.
New section 4 contains
definitions for key terms.
Biodiesel is a fuel used in an
internal combustion engine that is manufactured by chemically
altering vegetable oils or animal fats to form mono-alkyl esters.
Biodiesel can be derived from recycled oils, as long as these oils
are sourced from vegetable oils or animal fats. Biodiesel must also
comply with the relevant fuel standard made under the Fuel
Quality Standards Act 2000.
Cleaner fuel means (i) biodiesel or
(ii) a fuel or fuel blend prescribed by regulations that also
complies with the relevant fuel standard.
A licensed personis a person who is
licensed under the Excise Act 1901 as a manufacturer or
the holder of a storage licence in respect of goods of a kind
including the fuel, or an person specified in a permission given
under the Excise Act 1901 or Customs Act 1901 for
goods of a kind including the fuel.
New sections 5-8 set out the
circumstances in which someone is entitled to a cleaner fuel
grant.
The main conditions that must satisfied for a
provisional entitlement to a grant are set out in new
section 5 and are relatively complex. However, to
paraphrase the Explanatory Memorandum(12) these
conditions essentially mean grant claimants must be either an
importer, manufacturer or a licensed person in respect of the fuel.
A provisional entitlement to a grant will generally arise only in
respect of a cleaner fuel when it is sold into the market in its
final form. Provisional entitlement to a grant will therefore arise
when fuel is sold by an importer, manufacturer or licensed person
to an end user outside the excise system.
New
section 6 provides that claimants for grants must be
registered under section 9 of the Product Grants and Benefits
Administration Act 2000 for the purposes of entitlement to a
cleaner fuel grant. Section 9 of that Act is itself amended by
item 3 in Schedule 1 of the Energy Grants (Cleaner
Fuels) Scheme (Consequential Amendments) Bill 2003.
New section 7 sets out the
circumstances in which a person meeting the various conditions
under new section 6 may be disqualified from
having provisional entitlement. These circumstances include selling
the fuel to a licensed person(13) or including the fuel
in a fuel blend, or where the Tax Commissioner makes a
determination under subsection 34(1) of the Product Grants and
Benefits Administration Act 2000 that a person has taken a
course of action for the sole or dominant purpose of enabling a
particular act or transaction to be taken into account in
determining a grant or benefit .(14) Regulations may
also prescribe further disqualifying circumstances.
The actual amount that a claimant is entitled
to is to be worked out in accordance with the regulations:
new subsection 8(1). The Explanatory
Memorandum comments:
Claimants will be required to
self-assess(15) their entitlements to a cleaner fuel
grant. The regulations will prescribe different amounts of grant
for different cleaner fuels and blends of fuels, including that the
amount of grant may be nil. The regulations will also prescribe a
basic rule for working out the amount of the grant payable and how
the grant will be calculated if the regulations set out different
amounts in respect of blends. (16)
The amount the grant may be reduced if any
drawback, refund, rebate or remission of customs or excise duty
applies to the fuel. The Explanatory Memorandum implies
that the benefit from the drawback etc would go to the claimant in
which case there would be no net effect for the claimant. No
details are provided how this would work in practice.
New section 9 contains a
standard regulation-making power.
Whilst this legislation was flagged under
2003-04 budget measures, it is notable it has been introduced only
three sitting days before the relevant grant scheme is due to come
into effect. The Bill is to have retrospective effect if it is not
passed by 18 September 2003.
-
The Bill will have retrospective operation if passed after 18
September.
-
Biodiesel is manufactured from vegetable oils and animal
fats.
-
However, as noted later in this Digest, as of 15 September
neither an Excise Tariff or Custom Tariff proposal had yet been
released by the Treasurer. Thus the imposition of duty from 18
September is still only policy, not a legal fact.
-
Note that the Diesel and Alternative Fuels Grants Scheme and the
Diesel Fuel Rebate Scheme have been replaced with the Energy Grants
(Credits) Scheme. The Energy Grants (Credits) Scheme Bill 2003 was
introduced in February 2003 and passed the Senate in late June. It
commenced on 1 July 2003.
-
See http://fueltaxinquiry.treasury.gov.au/content/welcome.asp
-
Fuel Taxation Overview Report, Summary of Recommendations, p.
29. See
http://fueltaxinquiry.treasury.gov.au/content/report/downloads/Overview.pdf
-
Hon. Peter Costello, Treasurer, 'Report of the Fuel taxation
Inquiry', Press Release No. 27, 14 May 2002. See
http://www.treasurer.gov.au/tsr/content/pressreleases/2002/027.
-
Hon. Peter Costello, Treasurer, 'Fuel Tax Reform for the
Future', Press Release No. 31, 13 May 2003. See
http://www.treasurer.gov.au/tsr/content/pressreleases/2003/031.asp
-
P. 3.
-
Ibid
-
P. 5.
-
P. 8.
-
The buyer must be a licensed person for the type of fuel being
sold.
-
The occurrence of fraud or failure to keep proper records may
also lead to disqualification.
-
Self-assessment of grant or other entitlements is standard for
the various schemes administered under the Product Grants and
Benefits Administration Act 2000.
-
P. 10.
Angus Martyn
15 September 2003
Bills Digest Service
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ISSN 1328-8091
© Commonwealth of Australia 2003
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