Bills Digest no. 118 2005–06
Fuel Tax (Consequential and Transitional Provisions)
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
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(Consequential and Transitional Provisions) Bill
Date introduced: 29 March 2006
House: House of
Commencement: Various dates as set out in clause 2.
To amend and repeal various acts consequent to the introduction
of the fuel tax credits scheme under the Fuel Tax Bill 2006.
For additional background, see the Bills Digest for the Fuel Tax
The Fuel Tax Bill 2006 proposes a single system of fuel tax
credits. The system will replace the existing systems of grants and
rebates, and will apply to fuel bought, imported and manufactured
on or after 1 July 2006.
There are currently three fuel grants schemes:
- the Energy Grants (Credits) Scheme (EGCS)
- the Fuel Sales Grants Scheme, and
- the Petroleum Products Freight Subsidy Scheme.
The Fuel Sales Grants Scheme and the Petroleum Products Freight
Subsidy Scheme are administered under the
Product Grants Benefits Administration Act 2000.
The EGCS is the main scheme. In 2005-06, expenditure is
estimated to be more than $3.7 billion under the EGCS, $270 million
under the Fuel Sales Grants Scheme, and $3.5 million under the
Petroleum Products Freight Subsidy Scheme.
The reforms envisage transitional and phasing measures
- from 1 July 2006 to 30 June 2012, activities eligible under the
EGCS will remain eligible under the fuel tax credits scheme
- the EGCS will phase out from 1 July 2006 until 30 June 2012 and
cease to apply from 1 July 2012
- grants for diesel under the EGCS used on-road or off-road apply
only to purchases before 1 July 2006
- claimants have until 30 June 2007 to claim grants under the
EGCS for diesel bought before 1 July 2006
- in the case of alternative fuels, which are eligible under the
on-road component of the EGCS, the fuels must be bought before 1
July 2010 to be entitled to receive a grant
- the reason for the 1 July 2010 cut-off is that until 30 June
2010, effective excise rates that is excise less fuel tax credits
on alternative fuels will be zero. On 1 July 2010, effective rates
will begin to be positive . For example, from 1 July 2006 to 30
June 2011, the effective rate of excise on biodiesel will be zero;
on 1 July 2011, the effective rate will be 3.8 cents per
- from 1 July 2006, fuel tax credits can be claimed for all
taxable fuels used for eligible on-road activities in
vehicles with a gross vehicle mass of over 4.5 tonnes
- from 1 July 2008, fuel tax credits will be available for petrol
used in an eligible off-road activities
- from 1 July 2008, eligibility for fuel tax credits will be
extended to activities currently ineligible under the EGCS
- but the claimable amount will be only 50 per cent of the fuel
tax credit until 30 June 2012
- the full credit will cut in on 1 July 2012
- from 1 July 2011, alternative fuels used off-road will
be eligible for fuel tax credits, which will be gradually
- entitlements under the Fuel Sales Grants Scheme will cease on
30 June 2006, that is, the Scheme will cease to apply to fuel sales
and deliveries after 30 June 2006
- the Scheme itself will cease operating on 1 January 2007
- claimants have six months (from 1 July 2006 to 31 December
2006) in which to make claims
- entitlements under the Petroleum Products Freight Subsidy
Scheme will also cease on 30 June 2006
- the Scheme will cease on 1 July 2007.
The following summarises the excise reform timetable.
Table: Excise reform timetable
1 July 2006
Excise on burner fuels
will be removed.
A full credit will be
provided for all fuels used in power generation.
Excise on heavy vehicles
will be converted to a road user charge.
Excise relief will be
provided for petrol and all other taxable fuels used for business
purposes in heavy vehicles.
will be removed.
Spending under the Fuel
Sales Grants Scheme will be converted to road funding.
The Petroleum Products
Freight Subsidy Scheme will end.
Access to excise credits
for those claiming more than $3 million per year will be linked to
participation in the Greenhouse Challenge programme.
Access to on-road credits
for heavy diesel vehicles will be linked with meeting one of five
emissions performance criteria designed to ensure vehicles meet the
emission standard set under the Diesel National Environment
1 July 2008
A 50 per cent credit will
be introduced for the off-road business use of taxable fuels in
activities not previously eligible for credits.
1 July 2011
Effective excise will
apply to all fuels used in an internal combustion engine, including
concessional excise for biodiesel, ethanol, liquefied petroleum
gas, liquefied natural gas and compressed natural gas. The
effective excise rates will increase over five equal annual steps,
reaching their final rates on 1 July 2015.
1 July 2012
Full credit will be
extended to all business use of all taxable fuels in all off-road
1 July 2015
Final effective fuel
excise rates will apply to all taxable fuels, including a 50 per
cent discount for alternative fuels.
Source: Australian Government, Securing Australia s Energy
Future, Canberra 2004, p. 102.
The Fuel Tax (Consequential and Transitional Provisions) Bill
2006 (the Bill) amends a number of Acts and repeals others. The
amended Acts are:
- A New Tax System (Goods and Service Tax) Act 1999
- A New Tax System (Luxury Car Tax) Act 1999
- A New Tax System (Wine Equalisation Tax) Act 1999
- Crimes (Taxation Offences) Act 1980, the Freedom of
Information Act 1982
- Energy Grants (Credits) Scheme Act 2003
- Fuel Sales Grants Act 2000
- Income Tax Assessment Act 1936
- Income Tax Assessment Act 1997
- Product Grants and Benefits Administration Act
- States Grants (Petroleum Products) Act 1965
- Taxation Administration Act 1953, and
- Taxation (Interest on Overpayments and Early Payments) Act
The Bill 2006 also repeals the:
Part 3 deals with the repeal of the Fuel
Sales Grants Act 2000. Item 8 repeals the
this Act on 1 January 2007.
Part 3 deals with fuel tax credit arising
between 1 July 2006 and 30 June 2012. Division 1
deals with credits arising between 1 July 2006 and 30 June 2008,
while Division 2 deals with credits arising
between 1 July 2006 and 30 June 2012.
Item 10 Fuels acquired, manufactured or
imported between 1 July 2006 and 30 June 2008 and item
11 Fuel acquired, manufactured or imported between 1 July
2008 and 30 June 2012, deal with the phasing in of new credit
entitlements. These items are discussed in paragraphs 3.38 to 3.45
of the Explanatory Memorandum.
Item 2 has the effect of excluding from the
definition of a mining operation the extraction of materials used
in building, road making, landscaping, construction or similar
purposes. The Explanatory Memorandum notes:
3.49 After 30 June 2008, however, a broadening of the fuel tax
credit eligibility criteria affords quarrying, manufacturing and
construction industries a 50 per cent fuel tax credit. By 1 July
2012, when the fuel tax reforms have been fully implemented, fuel
tax for fuel used in off-road business uses is fully offset by a
The Explanatory Memorandum notes:
4.8 Schedule 5 to the Fuel Tax (Consequential and
Transitional Provisions) Bill 2006 applies the administrative rules
applying to other indirect tax laws, to the proposed fuel tax
Most of the amendments are to the
Taxation Administration Act 1953. In particular:
4.9 The amendments to the Taxation Administration
Act 1953 incorporate a rewrite of Part VI (administration of GST,
wine equalisation tax and luxury car tax) in the Tax Law
Improvement Project drafting style. The rewritten version
simplifies the expression of the law, making it easier to
understand and comply with.(4)
As its title suggests, the Bill amends several Acts in order to
implement the fuel tax credits scheme. The amendments should
generally simplify administration of the existing system of grants
for fuel use. The move to apply the administrative rules applying
to other indirect tax laws to the proposed fuel tax credits scheme
should also assist administration.
- Explanatory Memorandum, Table 1.2, p. 14.
- Explanatory Memorandum, pp. 77 78.
- Explanatory Memorandum, p. 82.
Economics, Commerce and Industrial Relations Section
4 May 2006
Bills Digest Service
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© Commonwealth of Australia 2006
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Published by the Parliamentary Library, 2006.
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