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Offsetting business costs associated with the increase in fuel excise—Schedules 4 and 5 of the Tax and Superannuation Laws Amendment (2014 Measures No. 6) Bill 2014


Fuel excise increased on 10 November 2014 as a result of the Government’s tariff proposals (the Excise Tariff Proposal (No. 1) 2014 and Customs Tariff Proposal (No. 1) 2014) that were introduced in the House of Representatives on 30 October 2014. The tariff proposals increased the fuel excise by specific amounts (0.457 cents per litre for liquid fuels on top of the existing 38.143 cents per litre) and also provide for biannual indexation to the consumer price index for excise from 1 February 2015. The tariff proposals are consistent with the announcement in the 2014–15 Budget of the re-introduction of biannual indexation to fuel excise.

To have permanent effect and validate the collection of a higher rate of excise from 10 November 2014, the tariff proposals need to be  replicated by legislative changes within a 12-month period following their introduction. (See pages 24 to 27 of this Bills Digest.)

Schedules 4 and 5 of the Tax and Superannuation Laws Amendment (2014 Measures No. 6) Bill 2014 are intended to pass through to eligible recipients the increase in fuel excise that has been applied through the tariff proposals under the existing fuel tax credit scheme (FTC) and cleaner fuels grants scheme (CFGS):

ž  Under the Fuel Tax Act 2006 (Fuel Tax Act), eligible users are entitled to claim a credit under the FTC scheme from the Australian Taxation Office (ATO) for each litre of fuel used for certain purposes to offset the excise paid by the supplier of the fuel. In 2013–14, around $5.8 billion was paid by the ATO to over 260,000 eligible business users under the scheme.

  • Under the Energy Grants (Cleaner Fuels) Scheme Act 2004 (Energy Grants Scheme Act), eligible producers and importers of biodiesel and renewable diesel are entitled under the CFGS to a grant paid by the ATO for each litre of biodiesel or renewable diesel imported or produced domestically. In 2013–14, $91 million was paid by the ATO to reimburse excise paid on almost 240 million litres of these fuels.

The measures in Schedules 4 and 5 of the Bill reflect similar provisions that were part of a package of Bills introduced to implement the 2014–15 Budget announcement that are currently before the Senate. Missing from this Bill however are provisions included in the Fuel Indexation (Road Funding) Special Account Bill 2014 that would specifically set aside (hypothecate) the proceeds from the raised fuel excise for spending on road infrastructure.

The amendments in the Bill amend the Fuel Tax Act and regulations under the Energy Grants Scheme Act to provide a mechanism for the higher excise that applied from 10 November to be returned to eligible claimants as part of the usual claims process. For the FTC scheme these claims are normally part of the regular monthly/quarterly/annual tax reporting arrangements while for the CFGS claims can be made at any time.

As noted in the Explanatory Memorandum, should the Bill be passed and receive royal assent prior to 21 December 2014, all claimants will be entitled to claim the increased rate of fuel tax credits. However, the Bill also includes provisions that will effectively leave FTC claimants out of pocket for the additional excise paid should the tariff proposals not be ratified within 12 months of their introduction in the House of Representatives. For CFSG claimants, the ATO has advised that claims should be calculated using the existing rate ‘until the associated bill becomes law or the tariff proposals are ratified’.

In their submissions to the Senate Economics Legislation Committee inquiry into the Bill, the Minerals Council of Australia (MCA), the Australian Trucking Association and the Australian Institute of Petroleum supported the proposed changes on the basis that a matched increase in the FTC maintained the principle that a tax should not be imposed on business inputs. The MCA considered that if the Bill is not passed ‘the gap between the real excise rate paid by industry due to the tariff proposals and FTCs claimable would constitute a new tax on every mine in Australia, on rural exports and on regional communities located off the electricity grid’.

The Senate Committee report, tabled on 25 November 2014, recommended that the Bill be passed, although a dissenting report by the Australian Greens recommended that the Bill be amended to remove the eligibility of mining companies for the FTC. The Bill passed the House of Representatives without a division on 25 November 2014 and was introduced the following day in the Senate. A proposed amendment by the Australian Greens to deny the additional FTC imposed by the tariff proposals to taxable fuel used in quarrying and mining activities is included on the Bill’s homepage.

Tags: fuel, taxation
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