Bills Digest No.
109, 2019–20
PDF version [550KB]
Sophie Power
Science, Technology, Environment and Resources Section
29
June 2020
Contents
Purpose of the Bills
Background
Committee consideration
Policy position of non-government
parties/independents
Position of major interest groups
Financial implications
Statement of Compatibility with Human
Rights
Key issues and provisions
Date introduced: 14
May 2020
House: House of
Representatives
Portfolio: Environment
Commencement: The
day after Royal Assent
Links: The links to the
Bills, Explanatory Memoranda and second reading speeches can be found on the
home pages for the Product
Stewardship (Oil) Amendment Bill 2020 and the Excise
Tariff Amendment Bill 2020, or through the Australian
Parliament website.
When Bills have been passed and have received Royal Assent,
they become Acts, which can be found at the Federal Register of Legislation
website.
All hyperlinks in this Bills Digest are correct as
at June 2020.
Purpose of
the Bills
The purpose of the Product
Stewardship (Oil) Amendment Bill 2020 (the PSO Bill) is to amend the Product Stewardship
(Oil) Act 2000 (the PSO Act) to clarify the definition of oils
for the purposes of the Product Stewardship for Oil Scheme following a recent Federal
Court decision.[1]
The purpose of the Excise
Tariff Amendment Bill 2020 is to amend the Excise Tariff Act
1921 to clarify that diesel, and other goods ordinarily used as fuels, are
excluded from the excise tariff item that applies to oils and grease. This is also
in response to the recent Federal Court decision.[2]
Background
Product
Stewardship for Oil Scheme (PSO)
The Product
Stewardship for Oil Scheme (PSO Scheme) was established in 2001 to provide
incentives to increase used oil recycling. The scheme aims to ‘encourage the
environmentally sustainable management and re-refining of used oil and its
re-use’.[3]
The PSO Scheme is a levy-benefit system, where an 8.5
cents per litre levy is collected on the import and manufacture of new oil (and
some recycled oils). This levy helps fund benefit payments to used oil
recyclers.[4]
The benefits paid vary, depending on the extent of processing and the end
product—‘the more sophisticated the treatment the higher the benefit rate’.[5]
The aim of these arrangements is to provide incentives to increase used oil
recycling in the Australian community.[6]
The PSO Act
establishes the general framework for the PSO Scheme, and the levy rate is set under
the Excise
Tariff Act and the Customs Tariff Act
1995.[7]
The Department of Agriculture, Water and the Environment (the Department) has
policy responsibility for the program, while the Australian Taxation Office is
responsible for implementation and administration of the scheme.[8]
The levy rate was last increased in 2014,[9]
following the third
independent review of the PSO Act, which was completed in 2013.[10]
Section 36 of the PSO Act requires an independent review of the
operation of the PSO Act every four years. Given the last review was
completed in 2013, the fourth review of the PSO Act is therefore now
well overdue, although the Department has advised that it will commence in
2020.[11]
Caltex case
In June 2016, Caltex made a claim for PSO benefits of
over AU$8 million relating to the recycling of used diesel at Caltex’s oil
refineries at Kurnell in New South Wales and Lytton in Queensland.[12]
Caltex used the diesel in several processes at its refinery, including as a
cleaning solvent and to flush and inspect pipelines at its refineries.[13]
The used diesel became contaminated during these processes, but was then
processed and refined. Once refined, the diesel complied with the Fuel Standard
(Automotive Diesel) Determination 2001[14]
and was able to be used or sold as diesel fuel.[15]
Caltex’s claim for the PSO benefit was disallowed by the Commissioner of
Taxation.[16]
Caltex subsequently appealed that decision to the Federal Court.
The Federal Court allowed that appeal. At issue was the
definition of ‘oils’ in the PSO Act, and in particular, whether the
definition included petroleum based oils (such as recycled diesel) that are
used primarily as a fuel, and not just lubricating oils and greases.[17]
In short, the Federal Court found that, as a matter of statutory
interpretation, diesel is a ‘petroleum based oil’ within the meaning of
subsection 6(1) of the PSO Act, and that there was no reason to exclude
recycled diesel from the scope of the PSO Act on the basis that its
primary purpose was for use as fuel.[18]
The Explanatory Memorandum states the Federal Court’s
decision in the Caltex case:
... gave a broad interpretation of the definition of oils in
the PSO Act that included diesel. The effect of the decision was to allow
benefit payments for the recycling of goods for which excise and excise‑equivalent
customs duty had not been imposed under the Excise Tariff Act and Customs
Tariff Act as an oil. Another potential consequence of the Caltex case is that
the duty collected under the Excise Tariff Act to fund the PSO Scheme could
apply to diesel.[19]
Committee
consideration
Environment and
Communications Legislation Committee
The PSO Bill and the Excise Tariff Amendment Bill have been
referred to the Senate Environment and Communications Legislation Committee for
inquiry and report by 30 July 2020.[20]
Details of the inquiry are at the inquiry
homepage.
Senate
Standing Committee for the Scrutiny of Bills
The Senate Scrutiny of Bills Committee had no comment on the
Bills.[21]
Policy
position of non-government parties/independents
At the time of writing, non-government parties and
independents do not appear to have commented on the Bills. However, Centre
Alliance MP Ms Sharkie and Senator Patrick have asked questions about the overdue
review of the PSO Act.[22]
Position of
major interest groups
At the time of writing, major interest groups do not
appear to have commented on the Bills.
Financial
implications
According to the Explanatory Memorandum:
The Bills are estimated to reduce the Commonwealth’s
underlying cash balance by $4 million over the forward estimates to 2023–24.
This is based on a reduction in payments of benefits resulting in a saving of
$21 million and a reduction in excise collections of $25 million.[23]
Statement of Compatibility with Human Rights
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the
Bills’ compatibility with the human rights and freedoms recognised or declared
in the international instruments listed in section 3 of that Act. The
Government considers that the Bills are compatible.[24]
Parliamentary
Joint Committee on Human Rights
The Parliamentary Joint Committee on Human Rights made no
comment on the Bills.[25]
Key issues
and provisions
Product Stewardship (Oil) Amendment Bill 2020
Under section 9 of the PSO Act, a person is entitled
to a PSO benefit for the sale or consumption of recycled oil that the person
has recycled in Australia, or for the consumption in Australia of gazetted oil
for a gazetted use.[26]
In order to be eligible for a benefit under the PSO Act, the recycled
oil must meet the definition of ‘oils’ set out in subsection 6(1) of the PSO
Act.
Currently, the Dictionary in subsection 6(1) of the PSO
Act sets out the following definition of oils:
(a) petroleum
based oils (including lubricant base oils; prepared lubricant additives
containing carrier oils; lubricants for engines, gear sets, pumps and bearings;
greases; hydraulic fluids; brake fluids; transmission oils; and transformer and
heat transfer oils);
(b) synthetic equivalents of goods covered by
paragraph (a);
(c) any other goods prescribed for the purposes of
this definition.
Item 1 of Schedule 1 of the PSO Bill proposes to
repeal this definition and replace it with a new definition of oils. Proposed
paragraphs (a) and (b) of the new definition provides that ‘oils’
means petroleum based oils, and synthetic equivalents of petroleum based oils,
that are:
- lubricant
base oils
- prepared
lubricant additives containing carrier oils
- lubricants
for engines, gear sets, pumps and bearings
- greases
- hydraulic
fluids
- brake
fluids
- transmission
oils or
- transformer
and heat transfer oils.
Proposed paragraph (c) of the new definition of
oils again provides for Regulations to be made to prescribe ‘any other goods’ in
order to enable additional kinds of oils to be covered by the PSO Scheme.
Proposed paragraphs (d) to (f) specifically exclude
certain products from the definition of oil:
- diesel
- blends
of diesel and any other goods and
- goods
ordinarily used as a fuel.
Proposed paragraph (g) enables Regulations to be
made to exclude additional goods from the definition of oils.
In short, the proposed amended definition of ‘oils’ means
that the PSO Scheme will apply to lubricant oils, fluid oils and other oils and
greases manufactured from base oils, but will exclude diesel and other fuels.
The new note inserted by item 1 states that
the definition of oils has been substituted in response to the decision of the
Federal Court in the Caltex case. The Explanatory Memorandum suggests that this
amended definition also reflects ‘the original intention of the PSO Scheme’,
which was that diesel ‘was not intended to qualify for a benefit under the PSO
Scheme’.[27]
The Minister also noted in her second reading speech that ‘this is consistent
with how the scheme has been administered since it was established’.[28]
Item 2 of the PSO Bill provides that the amendments
to the definition of oil apply to claims made for a PSO Scheme benefit made on
or after 14 May 2020 (that is, the date the Bill was introduced into the House
of Representatives).[29]
Excise
Tariff Amendment Bill
For the purposes of the PSO Scheme, the Excise Tariff
Act imposes a duty on certain petroleum based oils, greases, and their
synthetic equivalents, that are manufactured or produced in Australia, of
$0.085 per litre or $0.085 per kilogram, depending on the product type.[30]
As noted in the Background section of this Digest, the levy is designed to
offset the benefits paid to oil recyclers using revenue collected through the Excise
Tariff Act and the Customs Tariff Act from refineries and oil
importers.[31]
As the Explanatory Memorandum states:
To achieve this intention, items were added to the Schedules
of those Acts to impose duties on the import and manufacture of petroleum-based
oils and their synthetic equivalents, intended to be the same types of oils as
those covered by the PSO Scheme.[32]
However, the Federal Court’s interpretation of the
definition of oils in the PSO Act in the Caltex case effectively allowed
benefit payments for the recycling of oils that were not subject to duties for
the purposes of the PSO Scheme under the Excise Tariff Act and the Customs
Tariff Act.[33]
The Explanatory Memorandum states that ‘another potential consequence of the
Caltex case is that the duty collected under the Excise Tariff Act to
fund the PSO Scheme could apply to diesel’.[34]
The products that are subject to the excise duty for the
purposes of the PSO Scheme are listed in item 15 of Schedule 1 of the Excise
Tariff Act. Item 15 currently states that ‘goods for use as a fuel’ and
‘exempt oils and hydraulic fluids’ are not subject to the duty in item 15.[35]
The Explanatory Memorandum states that item 15 ‘was inserted into the Excise
Tariff Act for the purpose of levying oils for the PSO Scheme and did not
historically include duties on diesel and other fuels’.[36]
Item 1 of Schedule 1 of the Excise Tariff Amendment
Bill repeals and replaces item 15 to clarify that diesel, blends of diesel, other
goods for use as a fuel, or that are ordinarily used as a fuel, are not subject
to excise duty under item 15.[37]
Proposed paragraph (f) of new item 15 also allows other goods to
be excluded by regulations.
Lubricant, fluid and oil products (that are not fuels) and
greases continue to be subject to excise duty at a rate of $0.085 cents per
litre or $0.085 cents per kilogram for greases.
Note that the Bill does not amend item 10 in Schedule 1 of
the Excise Tariff Act, which means diesel and other fuels will continue
to be subject to excise duty under the Excise Tariff Act.[38]
[1]. Caltex
Petroleum Pty Ltd v Commissioner of Taxation [2019]
FCA 1849 (Caltex case).
[2]. Ibid.;
Explanatory
Memorandum, Product Stewardship (Oil) Amendment Bill 2020 and Excise Tariff
Amendment Bill 2020, p. 2.
[3]. Department
of Agriculture, Water and the Environment (DAWE), ‘Product
Stewardship for Oil Scheme (PSO)’, DAWE website.
[4]. Ibid.
[5]. Australian
Taxation Office (ATO), ‘Rates’,
ATO website; see also DAWE, ‘Product
stewardship benefits’, DAWE website and the Product Stewardship (Oil)
Regulations 2000.
[6]. DAWE,
‘Product
Stewardship for Oil Scheme (PSO)’, DAWE website.
[7]. The
Product Grants
and Benefits Administration Act 2000 establishes eligibility
criteria and the administrative mechanisms used to pay benefits to those recyclers.
[8]. ATO,
‘Product
stewardship for oil program’, ATO website. For statistics on the incentives
paid under the scheme, see ATO, ‘Table
5 Excise: product stewardship for Oil program and cleaner fuel grants scheme – benefits
paid, 2001–02 to 2017–18 financial years’, Taxation Statistics 2016–17, ATO
website.
[9]. As
a result of the Customs
Tariff Amendment (Product Stewardship for Oil) Act 2014 and the Excise Tariff
Amendment (Product Stewardship for Oil) Act 2014.
[10]. Aither, Third
independent review of the Product Stewardship (Oil) Act 2000: final report,
Aither Consultants/Department of the Environment, Melbourne, September 2013.
[11]. Senate
Environment and Communications Legislation Committee, Official
committee Hansard, 2 March 2020, p. 116; see also Senate Environment
and Communications Legislation Committee, Answers to Questions on Notice, Agriculture,
Water and the Environment Portfolio, Additional Budget Estimates, 2019–20, 2
March 2020, Question
118.
[12]. Caltex
case, op. cit. at [16].
[13]. Ibid
at [17–18].
[14]. This
determination is no longer in force as it was repealed by the Legislative
Instruments (Fuel Standards Instruments) Sunset‑altering
Declaration 2016 and replaced by the Fuel Quality
Standards (Automotive Diesel) Determination 2019.
[15]. Caltex
case, op. cit., at [18].
[16]. Ibid
at [16].
[17]. Ibid
at [2].
[18]. Ibid.
[19]. Explanatory
Memorandum, Product Stewardship (Oil) Amendment Bill 2020 and Excise Tariff
Amendment Bill 2020, p. 2.
[20]. Senate
Standing Committee for the Selection of Bills, Report,
5, The Senate, Canberra, 12 June 2020.
[21]. Senate
Standing Committee for the Scrutiny of Bills, Scrutiny
digest, 7, 2020, 10 June 2020, p. 34.
[22]. S
Ley, ‘Answer
to Question in Writing: Environment’, [Questioner: R Sharkie], Question
233, House of Representatives, Debates, 4 February 2020, p. 127; Senate
Environment and Communications Legislation Committee, Official
committee Hansard, 2 March 2020, p. 116; see also Senate Environment
and Communications Legislation Committee, Answers to Questions on Notice, op.
cit., Question
118.
[23]. Explanatory
Memorandum, Product Stewardship (Oil) Amendment Bill 2020 and Excise Tariff
Amendment Bill 2020, p. 2.
[24]. The
Statements of Compatibility with Human Rights can be found at pages 3–6 of the Explanatory
Memorandum to the Bills.
[25]. Parliamentary
Joint Committee on Human Rights, Scrutiny
report, 6, 2020, 20 May 2020, pp. 21–22.
[26]. Gazetted
oils and gazetted uses are set out in the Product Stewardship
(Oil) Declaration 2003.
[27]. Ibid.,
pp. 2 and 8.
[28]. S
Ley, ‘Second
reading speech: Product Stewardship (Oil) Amendment Bill 2020’, House of
Representatives, Debates, 14 May 2020, p. 3440.
[29]. However,
the amended definition does not apply to claims determined by the Commissioner
of Taxation before item 2 commences.
[30]. Excise-equivalent
customs duty similarly applies under the Customs Tariff Act 1995 to the
importation of such products: see Explanatory
Memorandum, Product Stewardship (Oil) Amendment Bill 2020 and Excise Tariff
Amendment Bill 2020, p. 2.
[31]. DAWE,
‘Product
Stewardship Levy (excise)’, DAWE website; Explanatory
Memorandum, Excise Tariff Amendment (Product Stewardship for Waste Oil)
Bill 2000, p. 1.
[32]. Explanatory
Memorandum, Product Stewardship (Oil) Amendment Bill 2020 and Excise Tariff
Amendment Bill 2020, p. 7.
[33]. Ibid.,
p. 2.
[34]. Ibid.
[35]. ‘Exempt
oils and hydraulic fluids’ are set out in subsection 3(6) of the Excise
Tariff Act.
[36]. Explanatory
Memorandum, Product Stewardship (Oil) Amendment Bill 2020 and Excise Tariff
Amendment Bill 2020, p. 2.
[37]. Note
that ‘exempt oils and hydraulic fluids’ also remain on the list as not subject
to the duty at proposed paragraph (e).
[38]. Explanatory
Memorandum, Product Stewardship (Oil) Amendment Bill 2020 and Excise Tariff
Amendment Bill 2020, p. 2.
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