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EXCISE REGULATIONS (AMENDMENT) 1998 NO. 274
EXPLANATORY STATEMENTSTATUTORY RULES 1998 NO. 274
Issued by the authority of the Minister for Customs and Consumer Affairs
Excise Act 1901
Excise Regulations (Amendment)
Section 164 of the Excise Act 1901 (the Act) provides that the Governor-General may make regulations not inconsistent with the Act prescribing all matters which by the Act are required or permitted to be prescribed for giving effect to the Act or as may be necessary or convenient to be prescribed for giving effect to the Act or for the conduct of any business relating to the Excise.
Section 78 of the Act provides that remission, rebate and refunds of excise duty may be allowed in respect of excisable goods in such circumstances and subject to such conditions and restrictions as are prescribed. Regulation 50 of the Excise Regulations prescribes the circumstances in which remission, rebates and refunds of excise duty may be allowed for the purposes of section 78.
Purpose of the Regulations
The purpose of the Regulations is to insert into the Excise Regulations new circumstances for the remission and refund of excise duty where unmarked, fully dutiable recycled waste oil is blended with:
a) "light fuel oil" where the blend is for use, or has been used as a fuel otherwise than in an internal combustion engine (new subregulations 50(1)(zk) and (zl) refer); and
b) fuel oil where the blend is for use, or has been used as a fuel otherwise than in an internal combustion engine (new subregulations 50(1)(zm) and (zn) refer);
Consequential amendments have also been made to regulation 176 of the Excise Regulations to ensure that these blends did not become subject to the provisions of the Act and the Excise Tariff Act 1921 (the Tariff Act) which impose excise duty on blends of petroleum products which do not contain the chemical marker.
Background
In early 1998, the Government's fuel substitution legislation, a package of 9 Acts implementing the Governments Budget decision to combat revenue loss through the minimisation of fuel substitution practices, commenced. The legislation package addresses these practices by providing for the introduction of a chemical marker into concessionally entered fuel, and imposing document keeping and retention obligations, audit powers and sanctions in relation to the acquisition, storage and disposal of fuel. Penalty surcharges are also imposed on certain activities in relation to products containing the chemical marker, including their blending with unmarked, fully duty paid products under the Fuel Blending (Penalty Surcharge) Act 1997.
The package also brought into the excise regime certain petroleum products which were previously not subject to the excise regime but which are potential fuel substitutes. One such petroleum product is recycled waste oil which is now classified under subitem 11(1) of the Schedule to the Tariff Act. It is subject to a "Free" rate of duty if it contains the chemical marker and is for use otherwise than as a fuel in an internal combustion engine. If it does not contain the marker, it is otherwise dutiable at the rate applying to diesel fuel, currently 42.797 cents a litre.
Since the fuel substitution legislation commenced, two uses of recycled waste oil as a blending agent have been identified which required the addition of the new refund and remission circumstances. The first use is where, in order to improve characteristics of recycled waste oil for use as a fuel otherwise than in an internal combustion engine, the recycled waste oil is blended with a diesel product commonly known as "1ight fuel oil" prior to its use. Under the excise regime, "light fuel oil" is classified as diesel fuel and subject to duty at 42.797 cents per litre. Under an existing remission circumstance in subregulation 50(1)(y) of the Excise Regulations, however, where "light fuel oil" is for use as a fuel otherwise than in an internal combustion engine, it is entitled to a remission of excise duty. In this circumstance, the "light fuel oil" does not contain the chemical marker.
The second use of recycled waste oil is where it is blended with fuel oil. Fuel oil is classified under subitem 11 (D) of the Schedule to the Tariff Act. Because of the black colour of this petroleum product (equivalent to the fuel oil containing its own natural marker), it is not required to contain the chemical marker in order to be dutiable at a concessional rate. Similar to above, recycled waste oil is often blended with fuel oil mainly as a means of utilising the waste oil and the resulting blend is also used as a fuel otherwise than in an internal combustion engine.
In order for the above blends of recycled waste oil and "light fuel oil" and recycled waste oil and fuel oil not to be subject to the restriction and penalty surcharge on the blending of marked and unmarked petroleum products referred to above, the recycled waste oil cannot contain the chemical marker. The only way that the recycled waste oil cannot contain the chemical marker is if it is dutiable at the rate applying to diesel fuel. However, if it is fully dutiable, the resultant blends would not be competitive and these methods of disposing of the recycled waste oil would disappear. Therefore, both of these uses of unmarked recycled waste oil have become the subject of the new remission and refund circumstances.
The regulations are explained in greater detail in the Attachment.
The proposed Regulations commenced on gazettal.
ATTACHMENT
Regulation 1 - Commencement
This regulation provides that these Regulations commence on gazettal.
Regulation 2 - Amendment
This regulation provides that the Excise Regulations are amended as set out in these Regulations.
Regulation 3 - Regulation 50 (Circumstances under which remissions, rebates and refund are made)
Subregulation 3.1 amends subregulation 50(1) by inserting new paragraphs (zk). (zl). (zm) and (zn).
New paragraph 50(1)(zk) inserts the new remission circumstance with respect to recycled waste oil which is for use as a blending agent with "light fuel oil" where the blend is for use a fuel otherwise than in an internal combustion engine.
The new remission circumstance applies where duty in payable on fuel that:
a) is classified to sub-subparagraph 11(1)(b)(ii) of the Schedule to the Tariff Act (this is the classification of the recycled waste oil); and
b) is delivered, in accordance with a permission under section 61 C of the Act, for blending with a petroleum product which is eligible for remission, or on which excise duty has been remitted. in accordance with paragraph 50(1)(y) of the Excise Regulations. This is the remission circumstance which applies to the "light fuel oil" where it is for use as a fuel otherwise than in an internal combustion engine; and
c) the blend is for use as a fuel otherwise than in an internal combustion engine.
This new remission circumstance will ensure the continued use of the recycled waste oil in the above circumstances. This circumstance also contains a sunset clause, such that the recycled waste oil must be delivered for home consumption before 1 January 2006.
New paragraph 50(1)(zl) inserts the new remission circumstance with respect to recycled waste oil which is for use as a blending agent with fuel oil where the blend is for use a fuel otherwise than in an internal combustion engine.
The new remission circumstance applies where duty in payable on fuel that:
a) is classified to sub-subparagraph 11(I)(b)(ii) of the Schedule to the Tariff Act (this is the classification of the recycled waste oil); and
b) is delivered, in accordance with a permission under section 61C of the Act, for blending with fuel oil which is classified to subheading 2710.00.60 of the Schedule to the Customs Tariff Act 1995 (ie, imported fuel oil) or sub-item 11(D) of the Schedule to the Tariff Act (ie. locally produced fuel oil); and
c) the blend is for use as a fuel otherwise than in an internal combustion engine.
This new remission circumstance will ensure the continued use of the recycled waste oil in the above circumstances. This circumstance also contains a sunset clause, such that the recycled waste oil must be delivered for home consumption before 1 January 2006.
New paragraph 50(1)(zm) complements new paragraph 50(1)(zk) and inserts the new refund circumstance with respect to recycled waste oil which has been fully duty paid and which has been blended with "light fuel oil" eligible for remission under paragraph 50(1)(y) where the blend has been used as a fuel otherwise than in an internal combustion engine. This refund circumstance has been inserted for the same reasons as the new remission circumstance under paragraph 50(1)(zk) and contains the same sunset clause as paragraph 50(1)(zk).
New paragraph 50(1)(zn) complements new paragraph 50(1)(zl) and inserts the new refund circumstance with respect to recycled waste oil which has been fully duty paid and which has been blended with fuel oil where the blend has been used as a fuel otherwise than in an internal combustion engine. This refund circumstance has been inserted for the same reasons as the new remission circumstance under paragraph 50(1)(zn) and contains the same sunset clause as paragraph 50(1)(zn).
Regulation 4 - Regulation 176 (Exempt blended petroleum products)
Item 12 of the Schedule to the Tariff Act imposes excise duty on excisable blended petroleum products and section 6G of the Tariff Act governs the rate of duty that applies to such blends. The provisions of section 77G of the Act determine what is an excisable blended petroleum product for the purposes of item 12.
Under the new regime to minimise fuel substitution practices, the blending of petroleum products which contain the chemical marker (concessional fuels) with petroleum products which do not contain the chemical marker (fully duty paid fuels) is subject to the imposition of a penalty surcharge under the Fuel Blending (Penalty Surcharge) Act 1997. These blends are no longer covered by item 12 and 77G. However. aspects of the previous blending legislation were retained in order to, inter alia, permit the blending under licence of products which are not required to contain a chemical marker under the new legislation. The rate of excise duty that applies to these blends is currently either the full duty rate that applies to leaded petrol (44.972 cents per litre) or diesel (42.797 cents per litre), depending on the components of the blend.
Section 77J provides that the regulations may specify that an excisable blended petroleum product is an exempt blended petroleum product and therefore not excisable under item 12 of the Schedule to the Tariff Act. Such blends are included in regulation 176 of the Excise Regulations.
Subregulation 4.2 amends subregulation 176(2) by inserting new paragraphs 176(2)(w) and (x). These new paragraphs insert two new exempt blended petroleum products, being:
a) a blend of fuel that is classified to sub-subparagraph 11(I)(b)(ii) of the Schedule to the Tariff Act and a petroleum product which is eligible for remission, or on which excise duty has been remitted. in accordance with paragraph 50(1)(y) of the Excise Regulations where the blend is for use as a fuel otherwise than in an internal combustion engine; and
b) a blend of fuel that is classified to sub-subparagraph 11(I)(b)(ii) of the Schedule to the Tariff Act and fuel oil which is classified to subheading 2710.00.60 of the Schedule to the Customs Tariff Act 1995 or sub-item 11 (D) of the Schedule to the Tariff Act where the blend is for use as a fuel otherwise than in an internal combustion engine.
These new exempt blends complement the new remission and refund circumstances for the recycled waste oil as set out above. As neither of the components of these blends will contain the chemical marker. the blends would otherwise be covered by the narrowed blending provisions referred to above so the blends themselves have been exempted from these provisions.