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Excise Tariff (Fuel Rates Amendments) Bill 1997
Date Introduced: 25 June 1997
House: House of Representatives
Portfolio: Industry, Science and Tourism
Commencement: On a day to be fixed by Proclamation, or if no date
is fixed, six months after the Bill receives Royal Assent.
To amend the Excise Tariff Act 1921 so as to define the petroleum products to which a prescribed fuel marker must be added, prior to their distribution for home consumption.
Excise is a tax on goods which is administered by the Australian Customs Service.It includes a tax on petroleum products which is levied at a differential rate depending upon the intended end use of the product.Currently a rate of 34.697 cents per litre is payable on fuels intended for on-road use, such as diesel fuel and unleaded petrol.Fuels sold for non-transport uses, such as heating oils and kerosene, are taxed at a concessional rate of excise duty, at present 7.2 cents per litre.Petroleum products sold for non-fuel use, such as solvents, do not attract any excise duty.(1) The chemical composition of the petroleum products taxed at concessional rates may be similar or identical to the more highly taxed road transport fuels.(2)
For a number of years, the Australian Customs Service (ACS) has been drawing attention to the practice of avoiding excise duty on transport fuels through the substitution or unauthorised blending of lower rated petroleum products.(3) It was estimated in the 1997-98 Budget that the practice could deprive the Government of as much as $25 million a year in uncollected excise duty.(4)
It has also been stated in Parliament that the practice of blending or substituting fuels for on-road use is potentially dangerous and can cause damage to vehicle engines.(5) This is because the blends containing substituted fuel may have a much lower flashpoint than diesel fuel.(6)
In 1993 Parliament passed amendments to the Excise Act 1901 and the Excise Tariff Act 1921 to address the revenue loss resulting from the substitution of excise free or low duty products for petroleum fuels.(7) The 1993 legislation requires all premises, including refineries, service stations and other businesses that blend petroleum and oil products, to be licensed, and to pay duty on the blended substances at either the diesel or leaded petrol rate.(8)
The current legislative package consists of the following seven bills:
This package of Bills is intended to extend and strengthen the 1993 legislation by making it easier for the Australian Customs Service to determine when people are not complying with existing legislation.
The Government announced in the 1997-98 Budget that a chemical tracer (a marker dye or a colourless marker) would be added to fuels which attract a concessional rate of excise duty.This will happen just prior to the fuels leaving Customs' control and entering the petroleum distribution system.(9) This will make it easier for the Australian Customs Service to detect when these products are blended with, or substituted for, excisable fuel. (10)It will provide a standard of proof to enable prosecution of people found using, selling, or illegally blending fuels for on-road use.(11)
Dyes and colourless markers are already used successfully in some European countries to enable authorities to differentiate fuel uses for excise purposes.(12) The composition of the chemical tracer has not yet been decided.(13) On 29 May 1997 the Government announced the formation of a Technical Implementation Group which will include representatives of the four major oil companies and the Australian Institute of Petroleum, State Revenue Offices, and motoring and consumer organisations, to advise on practical ways to implement the new requirements.(14)
As noted above, when announced in the 1997-98 Budget, the measure was estimated to raise an additional $25 million per year.Against this amount must be off-set implementation costs of $5.97 million over four years and additional, annual running costs of $1.54 million.(15) The Explanatory Memorandum to the Bill notes that since the announcement of the measure, industry has indicated that the amount of revenue raised could be twice the Budget estimate.
There are also differences in the estimated cost of the measure, with the Explanatory Memorandum listing the Government's estimate at around 0.004 cents per litre, while industry's estimate is listed as approximately 0.15 centre per litre.As the cost will be borne by the major oil companies, it can be expected that this additional cost will be passed on to users.
The Excise Tariff (Fuel Rates Amendments) Bill 1997 amends the Excise Tariff Act 1921 (the Principal Act).
The addition of a chemical tracer (referred to in the legislation as a 'marker') to certain petroleum products for home consumption is the cornerstone of the proposed measures to monitor blending or substitution.Item 7 of Schedule 1 allows regulations to be made which prescribe the marker and the proportion of the marker which will be required to be added to certain petroleum products before their distribution for home consumption.
The effect of Item 5 which redefines 'onshore field' is to make production of onshore stabilised crude oil above a threshold amount subject to excise duty.Item 6 inserts a definition of 'pre-threshold onshore oil' of which the first 4767.3 megalitres of stabilised crude petroleum is exempt from excise duty (Item 17).Item 18 brings petroleum condensate into the excise regime but does not impose any excise duty on it.The purpose of these amendments is to stop diversion of potential substitute fuels into the transport fuel market without payment of the correct amount of excise duty.
Item 15 amends the Schedule to the Excise Tariff Act 1921 by repealing the current Items 11 and 12 and substituting new items 11 and 12.It also introduces a new structure for Item 11.The new subitems of the Schedule generally retain the three-tiered excise tariff based on the intended use of the products.Where certain products for use other than as fuels in internal combustion engines are marketed in containers not exceeding 210 litres, the addition of the marker is not required and the prescribed rate of excise duty is payable. Item 15 also inserts a new Subitem 11(I) into the Schedule of the Principal Act.This new subsection covers a range of products not previously subject to excise duty, but which have a potential for use as fuel substitutes.The products include diesel fuel and gasoline recovered from waste oils by a recycling process and other refined or partly refined petroleum products such as naphthas and certain white spirits.No additional duty is payable on recycled petroleum products provided they either contain the marker and are used other than as a fuel in an internal combustion engine, or, customs or excise duty has already been aid on them.
Rosemary Bell
4 September 1997
Bills Digest Service
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This Digest does not have any official legal status. Other sources should be consulted to determine whether the Bill has been enacted and, if so, whether the subsequent Act reflects further amendments.
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ISSN 1328-8091
© Commonwealth of Australia 1997
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Published by the Department of the Parliamentary Library, 1997.
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Last updated: 9 September 1997