Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2013-2014-2015
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
EXCISE TARIFF AMENDMENT (ETHANOL AND BIODIESEL) BILL 2015
ENERGY GRANTS AND OTHER LEGISLATION AMENDMENT (ETHANOL
AND BIODIESEL) BILL 2015
EXPLANATORY MEMORANDUM
(Circulated by the authority of the
Treasurer, the Hon J. B. Hockey MP)
Table of contents
Glossary .................................................................................................. 1
General outline and financial impact ....................................................... 3
Chapter 1 Taxation changes to fuel ethanol and biodiesel ............. 5
Index ..................................................................................................... 23
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
Abbreviation Definition
EGCFS 2004 Energy Grants (Cleaner Fuels) Scheme
Act 2004
EGCS 2003 Energy Grants (Credits) Scheme Act 2003
Energy Grants Amendment Energy Grants and Other Legislation
Bill 2015 Amendment (Ethanol and Biodiesel)
Bill 2015
ETA 1921 Excise Tariff Act 1921
Excise Tariff Amendment Excise Tariff Amendment (Ethanol and
Bill 2015 Biodiesel) Bill 2015
1
General outline and financial impact
Taxation changes to fuel ethanol and biodiesel
The Excise Tariff Amendment (Ethanol and Biodiesel) Bill 2015 amends
the Excise Tariff Act 1921 to reduce the rates of excise for domestically
manufactured biodiesel and fuel ethanol to nil for a one-year period
commencing on 1 July 2015. The excise rates for these fuels then increase
each financial year from 1 July 2016 until 1 July 2020 when the excise
rate for:
• fuel ethanol will be approximately 33 per cent of the excise
rate for petrol; and
• biodiesel will be equivalent to 50 per cent of the excise rate
for diesel.
The Energy Grants and Other Legislation Amendment (Ethanol and
Biodiesel) Bill 2015 repeals the Energy Grants (Cleaner Fuels) Scheme
Act 2004 to remove grants for renewable diesel and biodiesel from
1 July 2015.
Date of effect: The amendments to remove grants for renewable diesel
and biodiesel and reduce the excise rates for domestically manufactured
fuel ethanol and biodiesel to zero apply from 1 July 2015. Excise duty is
then phased in each year commencing 1 July 2016 until the final excise
rate is reached on 1 July 2020.
Proposal announced: These measures were announced by the Treasurer
in the 2014-15 Budget on 13 May 2014.
Financial impact: These measures will result in a net gain to the Budget
of $257 million over the forward estimates period, comprising:
2014-15 2015-16 2016-17 2017-18 2018-19
- $52m $61m $67m $77m
Human rights implications: These Bills do not raise any human rights
issues. See Statement of Compatibility with Human Rights,
paragraphs 1.50 to 1.57.
Compliance cost impact: The phasing in of net rates of excise duty from
1 July 2015 imposes transitional compliance costs for affected excise duty
payers and affected fuel tax credit claimants. The removal of grant
entitlements for fuel ethanol, biodiesel and renewable diesel reduces
compliance costs for grant claimants.
3
Chapter 1
Taxation changes to fuel ethanol and
biodiesel
Outline of chapter
1.1 The Excise Tariff Amendment (Ethanol and Biodiesel) Bill 2015
(Excise Tariff Amendment Bill 2015) amends the Excise Tariff Act 1921
(ETA 1921) to reduce the rates of excise for domestically manufactured
biodiesel and fuel ethanol to nil for a one-year period commencing on
1 July 2015. The excise rates for these fuels then increase each year from
1 July 2016 until 1 July 2020 when the excise rate for:
• fuel ethanol will be approximately 33 per cent of the excise
rate for petrol; and
• biodiesel will be equivalent to 50 per cent of the excise rate
for diesel.
1.2 The Energy Grants and Other Legislation Amendment (Ethanol
and Biodiesel) Bill 2015 (Energy Grants Amendment Bill 2015) repeals
the Energy Grants (Cleaner Fuels) Scheme Act 2004 (EGCFS 2004) to
remove grants for renewable diesel and biodiesel from 1 July 2015.
Context of amendments
1.3 Excise duty is levied on fuel ethanol and biodiesel at the rates
set out in the ETA 1921. References in this chapter to fuel ethanol are to
denatured ethanol for use in an internal combustion engine. References to
biofuels are to fuel ethanol and biodiesel. Currently, the rate of excise for
these biofuels is the same as the rate of excise for petrol and diesel.
1.4 Grants are available for entities that manufacture fuel ethanol,
biodiesel and renewable diesel in Australia. Grants are also available for
entities that import biodiesel and renewable diesel. The rate of the grant
for biodiesel and renewable diesel is equal to the rate of duty for diesel.
The grants scheme for biodiesel and renewable diesel is established under
the EGCFS 2004, while the grant for fuel ethanol is determined
contractually by the Australian Government.
1.5 The measures result in significant Budget savings.
5
Excise Tariff Amendment (Ethanol and Biodiesel) Bill 2015, Energy Grants and Other
Legislation Amendment (Ethanol and Biodiesel) Bill 2015
Summary of new law
1.6 The amendments reduce the rates of excise duty for domestically
manufactured fuel ethanol and biodiesel to nil for one-year from
1 July 2015.
1.7 The rates of excise duty for domestically manufactured fuel
ethanol and biodiesel then increase on 1 July of each subsequent year until
the final rates are reached on 1 July 2020. The final rate of excise duty for
domestically manufactured biodiesel is set so that it will be 50 per cent of
the excise duty rate for diesel. The final excise duty rate for domestically
manufactured fuel ethanol is set so that it will be approximately
33 per cent of the excise duty rate for petrol. No changes are made to the
rates of excise--equivalent customs duty for fuel ethanol and biodiesel.
1.8 The amendments also remove grants for biodiesel and renewable
diesel from 1 July 2015.
Comparison of key features of new law and current law
New law Current law
Changes to excise duty rate for domestically manufactured fuel ethanol
The rate of excise duty for The rate of excise duty for
domestically manufactured fuel domestically manufactured fuel
ethanol is reduced to zero on ethanol is the same as the excise rate
1 July 2015. for petrol.
The excise rate is then set for later
financial years as a percentage of the
excise rate for petrol, as follows:
• 6.554% for the financial year
starting on 1 July 2016;
• 13.108% for the financial year
starting on 1 July 2017;
• 19.662% for the financial year
starting on 1 July 2018;
• 26.216% for the financial year
starting on 1 July 2019; and
• 32.77% for the financial year
starting on 1 July 2020 and later
financial years.
6
Taxation changes to fuel ethanol and biodiesel
New law Current law
Changes to excise duty rate for domestically manufactured biodiesel
The rate of excise duty for The rate of excise duty for
domestically manufactured biodiesel domestically manufactured biodiesel
is reduced to zero on 1 July 2015. is the same as the excise rate
The excise rate is then set in later for diesel.
financial years as a percentage of the
excise rate for diesel, as follows:
• 10% for the financial year starting
on 1 July 2016;
• 20% for the financial year starting
on 1 July 2017;
• 30% for the financial year starting
on 1 July 2018;
• 40% for the financial year starting
on 1 July 2019; and
• 50% for the financial year starting
on 1 July 2020 and later financial
years.
End of grants scheme for biodiesel and renewable diesel
Claimants are only entitled to a grant Claimants are entitled to grants for
for biodiesel or renewable diesel that the manufacture or importation of
has been manufactured in Australia or biodiesel or renewable diesel.
imported into Australia if their
provisional entitlement to the grant
arises before 1 July 2015. For
example, no entitlement arises if
biodiesel or renewable diesel was
entered or delivered into home
consumption after 30 June 2015.
Detailed explanation of new law
Excise duty rates for fuel ethanol and biodiesel
1.9 The Government has announced separate measures changing the
excise treatment of fuel ethanol and biodiesel. These measures reduce the
rates of excise duty for domestically manufactured fuel ethanol and
biodiesel to zero on 1 July 2015.
7
Excise Tariff Amendment (Ethanol and Biodiesel) Bill 2015, Energy Grants and Other
Legislation Amendment (Ethanol and Biodiesel) Bill 2015
1.10 The rates of excise duty for domestically manufactured fuel
ethanol and biodiesel then rise in stages on 1 July of each following
financial year until reaching their final rates on 1 July 2020. The rates of
excise duty are to be calculated as a percentage of the rate of excise duty
for petrol and diesel. [Schedule 1, item 4 of the Excise Tariff Amendment Bill 2015,
subsections 6H(1) and 6J(1) of the ETA 1921]
1.11 The table below shows the rates of excise duty for domestically
manufactured fuel ethanol and biodiesel as a percentage of the excise rate
for petrol and diesel.
Table 1.1: Excise rates for fuel ethanol and biodiesel as a percentage
of the excise rate for petrol and diesel
Financial year Excise rate for Excise rate for
domestically domestically
manufactured fuel manufactured
ethanol as a biodiesel as a
percentage of the percentage of the
excise rate for petrol excise rate for diesel
(%) (%)
1 July 2015 to 30 June 2016 0 0
1 July 2016 to 30 June 2017 6.554 10
1 July 2017 to 30 June 2018 13.108 20
1 July 2018 to 30 June 2019 19.662 30
1 July 2019 to 30 June 2020 26.216 40
1 July 2020 to 30 June 2021 32.770 50
or a later financial year
1.12 The rate of duty that is collected on petrol and diesel is subject
to indexation under Excise Tariff Proposal (No 1) 2014 and Customs
Tariff Proposal (No 1) 2014. Subject to the passage of legislation to ratify
these proposals, indexation will apply to fuel ethanol and biodiesel
because they are set as a percentage of the petrol and diesel rate of duty.
1.13 Under section 59 of the Excise Act 1901 the excise duty that
applies to excisable goods, including domestically manufactured biofuels,
is imposed at the rate in force on the earlier of the day when the goods are
delivered for home consumption under section 61C of the Excise Act 1901
or the day that payment of the duty is made.
8
Taxation changes to fuel ethanol and biodiesel
1.14 The Excise Tariff Amendment Bill 2015 ensures that the
relevant rate of excise duty in force for biofuels on 1 July 2015 is zero.
The rates then increase annually on 1 July as a proportion of the excise
rates for petrol and diesel respectively, until 1 July 2020, when the final
rates for domestically manufactured fuel ethanol and biodiesel apply.
[Schedule 1, item 4 of the Excise Tariff Amendment Bill 2015, subsections 6H(1)
and (2) and 6J(1) and (2) of the ETA 1921]
Example 1.1: Calculating the excise duty rate on biofuels
manufactured after 30 June 2015
An ethanol producer manufactures fuel ethanol in Australia on
30 June 2016 and delivers the fuel ethanol for home consumption on
that day. The producer pays duty after 30 June 2016 using their
periodic settlement permission issued under section 61C of the
Excise Act 1901. A nil rate of excise duty applies to the fuel ethanol.
A biodiesel producer manufactures biodiesel in Australia on
30 June 2017 but does not deliver the biodiesel for home consumption
or pay duty until 10 July 2017. Excise duty applies to the biodiesel at
the rate of 20 per cent of the diesel excise duty rate that applies at the
time of delivery of the biodiesel for home consumption on
10 July 2017.
1.15 On 1 July 2020, the rate of excise duty for fuel ethanol will be
equal to approximately 33 per cent of the rate of excise duty for petrol. On
1 July 2020, the rate of excise duty for domestically manufactured
biodiesel will be set at 50 per cent of the rate of excise duty for diesel. The
rate of excise duty takes into account the energy content of the biofuels,
which are classified into low, medium and high energy content bands.
Petrol, diesel and biodiesel are within the high energy content band. Fuel
ethanol has approximately 65 per cent of the energy content of petrol and
accordingly is within the medium energy content band. [Schedule 1, item 4 of
the Excise Tariff Amendment Bill 2015, table item 6 of subsection 6H(1) and
table item 6 of subsection 6J(1) of the ETA 1921]
1.16 The excise duty rate for domestically manufactured fuel ethanol
and biodiesel is calculated by multiplying the excise duty rate for petrol
and diesel respectively by the relevant factor. The resulting excise duty
rates are then rounded to three decimal places of a dollar (equivalent to
one decimal place of a cent). The third decimal place is rounded up if the
fourth decimal place is five or more. [Schedule 1, item 4, Excise Tariff
Amendment Bill 2015, subsections 6H(1) and 6J(1) of the ETA 1921]
9
Excise Tariff Amendment (Ethanol and Biodiesel) Bill 2015, Energy Grants and Other
Legislation Amendment (Ethanol and Biodiesel) Bill 2015
Example 1.2: Calculating the excise duty rates on 1 July of each year
Assume that on 1 July 2016 the excise duty rate for petrol and diesel is
$0.395 per litre.
The excise duty rate for fuel ethanol applying on 1 July 2016 would be
$0.026 per litre ($0.395 x 0.06554 = $0.0258 per litre, which, rounded
to three decimal places of a dollar, is $0.026).
The excise duty rate for biodiesel commencing on 1 July 2016 would
be $0.04 per litre ($0.395 x 0.1000 = $0.0395 per litre, which rounded
to three decimal places of a dollar is $0.04).
Excise duty for fuel ethanol
1.17 Fuel ethanol continues to be separately classified under the
ETA 1921. The amendments include provisions for working out the
relevant rate of duty that applies. [Schedule 1, items 3, 6 and 8 of the Excise Tariff
Amendment Bill 2015, subsection 6G(1) of the ETA 1921, table subitem 10.11 and cell at
table subitem 10.20 in the column headed 'Rate of Duty' of the Schedule to the
ETA 1921]
1.18 The amendments ensure that, from 1 July 2015, the rate of
excise duty applying to domestically manufactured fuel ethanol is
calculated as a percentage (see rates in Table 1.1 above) of the rate of
excise duty that applies to petrol at that time. The rate is determined by
rounding the duty rate expressed in dollars to three decimal places (the
third decimal place is rounded up if the fourth decimal place is five or
more). [Schedule 1, item 4 of the Excise Tariff Amendment Bill 2015, subsection 6H(1)
of the ETA 1921]
Ethanol Production Grant Program
1.19 The contractually-based Ethanol Production Grant Program
ceases from 1 July 2015.
Excise duty for biodiesel
1.20 The amendments ensure that, from 1 July 2015, the rate of
excise duty applying to domestically manufactured biodiesel is calculated
as a percentage (see rates in Table 1.1 above) of the rate of excise duty
that applies to diesel at that time. [Schedule 1, items 5, 7 and 9 of the
Excise Tariff Amendment Bill 2015, table subitems 10.10, 10.12 and 10.21 of the
Schedule to the ETA 1921]
10
Taxation changes to fuel ethanol and biodiesel
1.21 The rate is determined by rounding the duty rate to three decimal
places of a dollar (the third decimal place is rounded up if the fourth
decimal place is five or more). [Schedule 1, item 4 of the Excise Tariff
Amendment Bill 2015, subsection 6J(1) of the ETA 1921]
Biodiesel -- definition
1.22 The amendments define 'biodiesel' in the ETA 1921 as
mono-alkyl esters of fatty acids of a kind used as a fuel, derived from
animal or vegetable fats or oils whether or not used. That is, the fats or
oils can be new, used or recycled. [Schedule 1, items 1 and 2 of the Excise Tariff
Amendment Bill 2015, definitions of 'biodiesel' and 'diesel' in subsection 3(1) of the
ETA 1921]
1.23 For the purposes of consistency, the definition of 'biodiesel' in
the ETA 1921 aligns with the existing definition in subheading note 5 to
Chapter 27 and note 7 to chapter 38 of the Customs Tariff Act 1995, and
the current international definition developed by the World Customs
Organization.
Biodiesel and renewable diesel grants
1.24 The amendments also repeal the EGCFS 2004. As a result, grant
entitlements under the scheme are no longer available for biodiesel and
renewable diesel manufactured or imported into Australia from
1 July 2015. [Schedule 1, item 13 of the Energy Grants Amendment Bill 2015,
EGCFS 2004]
Blending of imported biofuels
1.25 The amendments do not change the rate of excise-equivalent
customs duty that applies to imported fuel ethanol and biodiesel.
Accordingly, they continue to be subject to the full rate of
excise-equivalent customs duty that applies to diesel and petrol. However,
section 105B of the Customs Act 1901 allows excise-equivalent customs
duty to be extinguished on excise-equivalent goods that are subject to
warehousing broadly if the goods are to be used in excise manufacture.
This reflects that excise duty will instead be payable under the excise
system on the goods.
1.26 The rates of excise-equivalent customs duty that apply to
biofuels are different to the corresponding excise duty rates. Accordingly,
the Energy Grants Amendment Bill 2015 amends the Customs Act 1901 to
ensure that excise-equivalent customs duty cannot be extinguished on
imported fuel ethanol and biodiesel. Similarly, if a blend of fuel is
imported that contains a biofuel, then excise-equivalent customs duty is
payable on the biofuels component of the blend at the rate in force at the
11
Excise Tariff Amendment (Ethanol and Biodiesel) Bill 2015, Energy Grants and Other
Legislation Amendment (Ethanol and Biodiesel) Bill 2015
time of blending in dual licensed premises (premises to which a licence
applies under excise and customs law). [Schedule 1, items 1 to 6 of the Energy
Grants Amendment Bill 2015, subsections 105B(1), (1A), (2) and (3) and
paragraph 105C(2)(b) of the Customs Act 1901]
1.27 This ensures that it is not possible to effectively remove or
reduce the duty liability for biofuels imported from 1 July 2015 by
blending the imported biofuel with excisable fuel.
1.28 However, this does not apply when imported biofuels are
blended with other biofuels or used in the manufacture of fuel blends on
or before 30 June 2015. Where fuels have been blended on or before
30 June 2015, the excise-equivalent customs duty is extinguished and the
relevant domestic rate of duty in force applies to the entire fuel blend on
the day when the goods are delivered for home consumption or the day
duty is paid, if earlier.
1.29 When imported biofuels are blended in Australia with other
biofuels that are either domestically manufactured or imported or the
imported biofuels are used in the manufacture of fuel blends after
30 June 2015, the imported biofuels component of the blend is subject to
the excise-equivalent customs duty rate in force at the time at which the
imported biofuel is blended (see Example 1.4).
1.30 Section 6G of the ETA 1921 applies so that after 30 June 2015,
excise duty is calculated on any locally manufactured fuels that are
blended with imported biofuels on the basis that:
• the domestic fuel component of the blend attracts the relevant
domestic excise duty rate in force on the day when the goods
are delivered for home consumption or the day duty is paid,
if earlier; and
• the imported biofuels component of the blend that has
already been subject to excise-equivalent customs duty is
treated as if the applicable rate of excise duty that applies to
locally manufactured biofuel was paid at the time of blending
with the domestic fuel.
1.31 Treating the biofuels component of a blend that has been subject
to excise-equivalent customs duty upon importation as instead having had
excise duty paid ensures that the operation of section 6G of the ETA 1921
does not result in any reduction in the effective rate of duty that the
imported biofuel has borne.
12
Taxation changes to fuel ethanol and biodiesel
Example 1.3: Calculating the duty rate on the manufacture of fuel
blends made before 1 July 2015 that contain imported biofuels
A fuel manufacturer imports biodiesel into Australia prior to
1 July 2015 and stores the biodiesel under bond in a dual licensed
warehouse. No duty is payable at the time of importation as the
biodiesel is subject to blending and the excise-equivalent customs duty
liability is extinguished at this point. The biodiesel is blended a further
time prior to 1 July 2015 in the warehouse with diesel to produce B20.
The fuel blend is delivered into home consumption on 10 July 2015
and duty is paid after this time. The biodiesel component of the fuel
blend is subject to the zero rate of excise duty that is in force on
10 July 2015 and the diesel component attracts the diesel rate of duty
in force on that day.
Example 1.4: Calculating the duty rate on the manufacture of fuel
blends made after 30 June 2015 that contain imported biofuels
A fuel manufacturer imports biodiesel into Australia on 1 July 2016
and also stores the biodiesel under bond in a dual licensed warehouse
on that date. The biodiesel is subject to the rate of excise-equivalent
customs duty in force on 1 July 2016 when the biodiesel was blended
with locally manufactured biodiesel. The biodiesel is then further
blended in the warehouse with diesel to produce B20. The fuel blend is
delivered into home consumption on 10 July 2016 and excise duty is
paid after this time. For the purposes of calculating the duty liability on
the entire blend, the diesel component of the blend is subject to the
diesel rate of excise duty in force on 10 July 2016 and the biodiesel
component is treated as having had excise duty paid at 10 per cent of
the diesel excise duty rate in force on 10 July 2016.
Blending exemption
1.32 Under subsection 77H(1) of the Excise Act 1901, an exemption
from excise duty applies where fuels (other than biofuels) are blended
together and excise or excise-equivalent customs duty has been paid at the
same rate on the separate fuel components. The amendments remove the
existing requirement that biofuel blends that have been subject to duty
cannot be blended with other duty-paid fuels without being subject to the
operation of section 6G of the ETA 1921. This removes existing
restrictions on the blending of biofuels that have been subject to duty.
[Schedule 1, item 8 of the Energy Grants Amendment Bill 2015, subsection 77H(2) of
the Excise Act 1901]
13
Excise Tariff Amendment (Ethanol and Biodiesel) Bill 2015, Energy Grants and Other
Legislation Amendment (Ethanol and Biodiesel) Bill 2015
1.33 The amendments also ensure that the exemption from the
operation of the blending rule in section 6G also applies where biofuels
have been subject to different rates of duty because of:
• the phase-in of duty rates each year on Australian
manufactured biofuels from 1 July 2016; or
• where no duty is payable on Australian-manufactured
biofuels because they are subject to duty in the period
1 July 2015 to 30 June 2016.
[Schedule 1, items 7 and 8 of the Energy Grants Amendment Bill 2015,
paragraph 77H(1)(a) and subsection 77H(2) of the Excise Act 1901]
Consequential amendments
Calculation of fuel tax credits
Biofuels and higher ratio biofuel blends
1.34 The amendments require that fuel tax credits for fuel ethanol,
and biodiesel and blends including those biofuels that exceed the
prescribed maximum percentage of biofuels are calculated as if these fuels
had been subject to the excise rate of duty, regardless of whether the fuel
was locally manufactured or imported. [Schedule 1, item 9, Energy Grants
Amendment Bill 2015, subsection 43-7(7) of the Fuel Tax Act 2006]
1.35 This ensures consistency with the existing operation of the fuel
tax credit provisions concerning fuel blends containing fuel ethanol. This
approach provides certainty for fuel tax credit claimants.
Example 1.5: Fuel tax credits for higher ratio biodiesel blends
On 4 July 2015, Camille Corporation imports 200 litres of biodiesel
and 200 litres of diesel and then blends both fuels together so that there
are 400 litres of fuel containing 50 per cent biodiesel and 50 per cent
diesel (B50) for use in its off-road mining operations.
Camille Corporation must claim fuel tax credits on the basis that the
biodiesel component of the blend has been subject to excise duty
because it is treated for fuel tax credit purposes as if it was
manufactured in Australia. As a result, Camille Corporation may claim
fuel tax credits for:
14
Taxation changes to fuel ethanol and biodiesel
• the diesel component of the blend at the applicable diesel rate
(assumed to be 38.9 cents for each litre of diesel -- on the basis of
Excise Tariff Proposal (No 1) 2014 and Customs Tariff Proposal
(No 1) 2014 and that legislation is passed ratifying these
proposals); and
• the biodiesel component of the blend at the rate applying to
domestically manufactured biodiesel (nil -- calculated as 0 per cent
of the diesel rate).
In total, Camille Corporation is entitled to fuel tax credits of $77.80 for
the 400 litres of B50 (200 litres of diesel at 38.9 cents per litre and
200 litres of biodiesel at 0 cents per litre).
In September 2016, Camille Corporation imports 2,000 litres of diesel
and 2,000 litres of biodiesel and blends them to produce 4,000 litres of
B50 to run its off-road extraction machinery.
Once again, Camille Corporation must claim fuel tax credits on the
basis that the biodiesel component of the B50 blend had been
manufactured in Australia and is subject to excise rather than
excise-equivalent customs duty. As a result, Camille Corporation may
claim fuel tax credits for:
• the diesel component of the blend at the applicable diesel rate
(assumed to be 40 cents per litre); and
• the biodiesel component of the blend at the applicable excise rate
for domestically manufactured biodiesel (10 per cent of the
applicable diesel rate -- 4 cents per litre).
Accordingly, Camille Corporation is entitled to fuel tax credits of $880
(2,000 litres of diesel at 40 cents per litre and 2,000 litres of biodiesel
at 4 cents per litre).
Example 1.6: Fuel tax credits for lower ratio biodiesel blends
On 1 July 2015, Marguerite Corporation acquires a blend of biodiesel
and diesel containing 80 per cent diesel and 20 per cent biodiesel (B20)
from Fuel Producer Co for use in its off-road seasonal agricultural
activities.
As the amount of biodiesel in the blend does not exceed the prescribed
maximum percentage of 20 per cent, the blend is treated as being
entirely made of diesel for the purpose of claiming fuel tax credits.
Marguerite Corporation can claim fuel tax credits at the fuel tax credit
rate of 38.9 cents per litre applying to diesel acquired between
2 February 2015 and 31 July 2015 (it is assumed that legislation is
enacted ratifying Excise Tariff Proposal (No 1) 2014 and Customs
Tariff Proposal (No 1) 2014). It is not relevant for the purpose of
claiming the fuel tax credits if the biodiesel forming part of the
B20 blend was imported or manufactured in Australia.
15
Excise Tariff Amendment (Ethanol and Biodiesel) Bill 2015, Energy Grants and Other
Legislation Amendment (Ethanol and Biodiesel) Bill 2015
Next year, on 15 July 2016, Marguerite Corporation again acquires a
B20 blend of biodiesel for use in the same off-road seasonal
agricultural activities.
This blend continues to be treated as being entirely made of diesel for
the purpose of claiming fuel tax credits so the rate of excise applying
to locally manufactured biodiesel is not relevant.
Marguerite Corporation can claim fuel tax credits at the relevant duty
rate for diesel that applies on 15 July 2016.
Consequential amendments to the repeal of the Energy Grants (Cleaner
Fuels) Scheme Act 2004
1.36 The amendments remove a reference to the Energy Grants
(Credits) Scheme Act 2003 (EGCS 2003) in the general anti-avoidance
provision in the Fuel Tax Act 2006 as the EGCS 2003 was repealed on
1 July 2012. [Schedule 1, item 10 of the Energy Grants Amendment Bill 2015,
subparagraph 75-15(1)(c)(iv) of the Fuel Tax Act 2006]
1.37 A number of other consequential amendments are made to the
Fuel Tax Act 2006, the Product Grants and Benefits Administration
Act 2000 and the Taxation Administration Act 1953 as a result of the
repeal of the EGCFS 2004. [Schedule 1, items 15 to 24 of the Energy Grants
Amendment Bill 2015, section 43-1 and subsections 43-5(3), 43-10(1), 43-10(2)
and 43-10(6) of the Fuel Tax Act 2006, definition of 'cleaner fuel' in section 5, table
item 4 in section 8, subsection 9(5), sections 16A and 27B of the Product Grants and
Benefits Administration Act 2000 and table item 1 in subsection 355-65(7) in Schedule 1
to the Taxation Administration Act 1953]
Other consequential amendments
1.38 A reference in the Coastal Trading (Revitalising Australian
Shipping) Act 2012 to the definition of biodiesel contained in the
EGCFS 2004 is repealed and replaced with the definition included in the
ETA 1921. [Schedule 1, item 14 of the Energy Grants Amendment Bill 2015,
paragraph (a) of the definition of 'liquid fuel product' in subsection 6(1) of the Coastal
Trading (Revitalising Australian Shipping) Act 2012]
Application and transitional provisions
1.39 The amendments to the ETA 1921 contained in the Excise Tariff
Amendment Bill 2015 apply to goods manufactured on or after
1 July 2015 and also to goods held at licensed premises on 1 July 2015 for
which no duty had been paid prior to that day. The first change in excise
duty rates applies from 1 July 2015. [Schedule 1, item 4 of the Excise Tariff
Amendment Bill 2015, sections 6H and 6J of the ETA 1921]
16
Taxation changes to fuel ethanol and biodiesel
1.40 The removal of the grants for biodiesel and renewable diesel
under the EGCFS 2004 applies from 1 July 2015. Under the transitional
provisions, the EGCFS 2004 and related instruments in force on
30 June 2015 continue to operate for entitlements that arose prior to
1 July 2015. This ensures that entitlement to grants for biodiesel and
renewable diesel continues if provisional entitlement to a cleaner fuel
grant arose before 1 July 2015. [Subclause 2(1) in table item 1 and Schedule 1,
items 13, 26 and 28 of the Energy Grants Amendment Bill 2015]
1.41 Accordingly, claimants of grants for biodiesel and renewable
diesel must have entered or delivered the fuel into home consumption by
30 June 2015 or if another entity has already entered the fuel, the claimant
must have used or sold the fuel by 30 June 2015. This ensures that no
grants are payable for biodiesel or renewable diesel that is subject to duty
(or a zero rate of duty) from 1 July 2015. Fuel is entered or delivered into
home consumption when the fuel is consumed by an importer,
manufacturer or licensed person or sold by them to an end user outside
the excise system.
1.42 Producers and importers who are eligible for grants where
entitlement arises prior to 1 July 2015 are required to submit their claims
for grants to the Commissioner of Taxation by the earlier of:
• the day which is three years after the start of the claim
period; and
• 1 July 2016.
[Schedule 1, items 25 and 27 of the Energy Grants Amendment Bill 2015]
Example 1.7: Final claims under the Energy Grants (Cleaner Fuels)
Scheme
Sebastien makes a claim under the EGCFS 2004 for a grant for
biodiesel that has been imported into Australia and blended with
mineral diesel that has been manufactured in Australia.
Sebastien became provisionally entitled to a grant when the biodiesel
blend is delivered for home consumption on 30 June 2015 -- the point
at which it is delivered from the importer's licensed premises to a
service station for sale.
Provided Sebastien has made his claim before 30 June 2016, he is
entitled to claim the grant under the scheme.
17
Excise Tariff Amendment (Ethanol and Biodiesel) Bill 2015, Energy Grants and Other
Legislation Amendment (Ethanol and Biodiesel) Bill 2015
1.43 The amendments to the Customs Act 1901 that ensure that any
imported biofuels are subject to excise-equivalent customs duty,
regardless of whether they are subject to blending with excisable fuels in
licensed premises, apply to biofuels that are imported either:
• on or after 1 July 2015; or
• before 1 July 2015, if the time for working out the import
duty has not yet arisen on or before 1 July 2015.
[Schedule 1, items 1 to 6 and subitem 11(1) of the Energy Grants Amendment Bill 2015,
subsections 105B(1), (1A), (2) and (3) and paragraph 105C(2)(b) of the
Customs Act 1901]
1.44 The amendments to the existing requirement that biofuels that
have been subject to duty cannot be blended without this being considered
excise manufacture and the related consequential amendments apply to
biofuels that are:
• manufactured in Australia or imported into Australia on or
after 1 July 2015;
• manufactured in Australia before 1 July 2015 but on which
no duty had been paid as the biofuels were either still subject
to Chief Executive Officer (CEO) control on 1 July 2015 or
held in licensed premises on that day; or
• imported before 1 July 2015, if the time for working out the
import duty for the biofuels had not yet arisen on or before
1 July 2015.
[Schedule 1, items 7 and 8 and subitem 11(2) of the Energy Grants Amendment
Bill 2015, paragraph 77H(1)(a) and subsection 77H(2) of the Excise Act 1901]
1.45 The amendments that require fuel tax credits for biofuel blends
exceeding a prescribed maximum percentage to be worked out as if these
fuels had been subject to the excise rate of duty apply to:
• taxable fuels acquired in Australia on or after 1 July 2015;
• taxable fuels manufactured in Australia or imported into
Australia on or after 1 July 2015; and
• taxable fuels manufactured in Australia before 1 July 2015
that on that day are subject to the CEO's control or held or
owned by the fuel manufacturer where no duty had been paid
on the fuel before that day.
[Schedule 1, item 9 and subitem 11(3) of the Energy Grants Amendment Bill 2015,
section 43-1 and subsection 43-7(7) of the Fuel Tax Act 2006]
18
Taxation changes to fuel ethanol and biodiesel
Transitional provisions -- anti-avoidance
1.46 The amendments include a transitional provision concerning the
repeal of the reference to the EGCS 2003 in the general anti-avoidance
provision in the Fuel Tax Act 2006. The transitional provision ensures that
the operation of the anti-avoidance provision is not affected by the repeal
in relation to a fuel tax benefit an entity received for a grant under the
EGCS 2003. [Schedule 1, item 12 of the Energy Grants Amendment Bill 2015]
Commencement
1.47 The Energy Grants Amendment Bill 2015, including the repeal
of the EGCFS 2004, commences on 1 July 2015. [Table item 1 of
subclause 2(1) of the Energy Grants Amendment Bill 2015]
1.48 The Excise Tariff Amendment Bill 2015 also commences on
1 July 2015, which is the date from which the first change in rates of
excise duty for biofuels applies. [Subclause 2(1) of the Excise Tariff Amendment
Bill 2015]
1.49 However, the changes to excise duty rates for biofuels are
contingent on the repeal of the EGCFS 2004. This ensures that the
changes in duty rates commence as a single package. [Table item 2 of
subclause 2(1) of the Excise Tariff Amendment Bill 2015]
19
Excise Tariff Amendment (Ethanol and Biodiesel) Bill 2015, Energy Grants and Other
Legislation Amendment (Ethanol and Biodiesel) Bill 2015
STATEMENT OF COMPATABILITY WITH HUMAN RIGHTS
Prepared in accordance with Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011
Excise Tariff Amendment (Ethanol and Biodiesel) Bill 2015
1.50 This Bill is compatible with the human rights and freedoms
recognised or declared in the international instruments listed in section 3
of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview
1.51 The Excise Tariff Amendment (Ethanol and Biodiesel) Bill 2015
amends the Excise Tariff Act 1921 to reduce the rate of excise for
biodiesel and fuel ethanol to zero for the year commencing on
1 July 2015. Excise rates for biodiesel then phase in each year from
1 July 2016 until the excise rate is equivalent to 50 per cent of the excise
rate for diesel on 1 July 2020. Excise rates for fuel ethanol also phase in
each year from 1 July 2016 until the excise rate is equivalent to
approximately 33 per cent of the excise rate for petrol on 1 July 2020.
Human rights implications
1.52 This Bill does not engage any of the applicable rights or
freedoms.
Conclusion
1.53 This Bill is compatible with human rights as it does not raise any
human rights issues.
Energy Grants and Other Legislation Amendment (Ethanol and Biodiesel)
Bill 2015
1.54 This Bill is compatible with the human rights and freedoms
recognised or declared in the international instruments listed in section 3
of the Human Rights (Parliamentary Scrutiny) Act 2011.
20
Taxation changes to fuel ethanol and biodiesel
Overview
1.55 The Energy Grants and Other Legislation Amendment (Ethanol
and Biodiesel) Bill 2015 repeals the Energy Grants (Cleaner Fuels)
Scheme Act 2004 to remove grants for renewable diesel and biodiesel
from 1 July 2015.
Human rights implications
1.56 This Bill does not engage any of the applicable rights or
freedoms.
Conclusion
1.57 This Bill is compatible with human rights as it does not raise any
human rights issues.
21
Index
Excise Tariff Amendment (Ethanol and Biodiesel) Bill 2015
Clauses
Bill reference Paragraph number
Subclause 2(1) of the Excise Tariff Amendment Bill 2015 1.48
Table item 2 of subclause 2(1) of the Excise Tariff Amendment 1.49
Bill 2015
Schedule 1: Amendments
Bill reference Paragraph number
Items 1 and 2 of the Excise Tariff Amendment Bill 2015, definitions 1.22
of 'biodiesel' and 'diesel' in subsection 3(1) of the ETA 1921
Items 3, 6 and 8 of the Excise Tariff Amendment Bill 2015, 1.17
subsection 6G(1) of the ETA 1921, table subitem 10.11 and cell at
table subitem 10.20 in the column headed 'Rate of Duty' of the
Schedule to the ETA 1921
Item 4 of the Excise Tariff Amendment Bill 2015, sections 6H and 1.39
6J of the ETA 1921
Item 4 of the Excise Tariff Amendment Bill 2015, subsection 6H(1) 1.18
of the ETA 1921
Item 4 of the Excise Tariff Amendment Bill 2015, subsections 6H(1) 1.10, 1.16
and 6J(1) of the ETA 1921
Item 4 of the Excise Tariff Amendment Bill 2015, table item 6 of 1.15
subsection 6H(1) and table item 6 of subsection 6J(1) of the
ETA 1921
Item 4 of the Excise Tariff Amendment Bill 2015, subsections 6H(1) 1.14
and (2) and 6J(1) and (2) of the ETA 1921
Item 4 of the Excise Tariff Amendment Bill 2015, subsection 6J(1) 1.21
of the ETA 1921
Items 5, 7 and 9 of the Excise Tariff Amendment Bill 2015, table 1.20
subitems 10.10, 10.12 and 10.21 of the Schedule to the ETA 1921
23
Excise Tariff Amendment (Ethanol and Biodiesel) Bill 2015, Energy Grants and Other
Legislation Amendment (Ethanol and Biodiesel) Bill 2015
Energy Grants and Other Legislation Amendment (Ethanol
and Biodiesel) Bill 2015
Clauses
Bill reference Paragraph number
Table item 1 in subclause 2(1) of the Energy Grants Amendment 1.47
Bill 2015
Schedule 1: Amendments
Bill reference Paragraph number
Table item 1 in subclause 2(1) of the Energy Grants Amendment 1.47
Bill 2015
Items 1 to 6 of the Energy Grants Amendment Bill 2015, 1.26
subsections 105B(1), (1A), (2) and (3) and paragraph 105C(2)(b) of
the Customs Act 1901
Items 1 to 6 and subitem 11(1) of the Energy Grants 1.43
Amendment Bill 2015, subsections 105B(1), (1A), (2) and (3) and
paragraph 105C(2)(b) of the Customs Act 1901
Items 7 and 8 of the Energy Grants Amendment Bill 2015, 1.33
paragraph 77H(1)(a) and subsection 77H(2) of the Excise Act 1901
Items 7 and 8 and subitem 11(2) of the Energy Grants Amendment 1.44
Bill 2015, paragraph 77H(1)(a) and subsection 77H(2) of the Excise
Act 1901
Item 8 of the Energy Grants Amendment Bill 2015, 1.32
subsection 77H(2) of the Excise Act 1901
Item 9, Energy Grants Amendment Bill 2015, subsection 43-7(7) of 1.34
the Fuel Tax Act 2006
Item 9 and subitem 11(3) of the Energy Grants Amendment Bill 1.45
2015, section 43-1 and subsection 43-7(7) of the Fuel Tax Act 2006
Item 10 of the Energy Grants Amendment Bill 2015, 1.36
subparagraph 75-15(1)(c)(iv) of the Fuel Tax Act 2006
Item 12 of the Energy Grants Amendment Bill 2015 1.46
Item 13 of the Energy Grants Amendment Bill 2015, EGCFS 2004 1.24
Item 14 of the Energy Grants Amendment Bill 2015, paragraph (a) 1.38
of the definition of 'liquid fuel product' in subsection 6(1) of the
Coastal Trading (Revitalising Australian Shipping) Act 2012
Items 15 to 24 of the Energy Grants Amendment Bill 2015, 1.37
section 43-1 and subsections 43-5(3), 43-10(1), 43-10(2)
and 43-10(6) of the Fuel Tax Act 2006, definition of 'cleaner fuel' in
section 5, table item 4 in section 8, subsection 9(5), sections 16A
and 27B of the Product Grants and Benefits Administration Act 2000
and table item 1 in subsection 355-65(7) in Schedule 1 to the
Taxation Administration Act 1953
Items 25 and 27 of the Energy Grants Amendment Bill 2015 1.42
24
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