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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

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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 Posted 28/11/2014 by swobodak

Fuel excise increased on 10 November 2014 as a result of the Government’s tariff proposals

(theExcise 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 2014are 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


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. Aproposed 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.