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Tuesday, 14 June 2011
Page: 5925


Mr SHORTEN (MaribyrnongAssistant Treasurer and Minister for Financial Services and Superannuation) (20:42): I would like to acknowledge all the members who participated in this debate. Even if I did not agree with all of the contributions of those opposite, I do not doubt the sincerity of their views. The taxation of alternative fuels bills that we have debated today propose to bring liquefied petroleum gas, liquefied natural gas and compressed natural gas used for transport purposes into the fuel taxation regime and make them subject to excise duty or excise equivalent customs duty. The tax rates for these fuels are based on the energy content of the fuels and are discounted by 50 per cent to reflect the potential environmental, regional development and fuel security benefits of their use. The changes are phased in over a transition period of five years to allow affected parties time to adjust to the changes.

I should also acknowledge the good policy work done by the coalition government when they were in government of flagging the intention to include alternative fuels in the excise system in the 2003 budget and the 2004 budget, and any number of public statements since. These bills will finish the journey commenced by the coalition, commenced by former Prime Minister Howard and former Treasurer Costello, concerning the taxation arrangements for alternative fuels. They will also ensure that the overtaxation of the biofuels that would result from 1 July 2011 under the legislation put in place by the Howard government does not occur. The key objectives of this policy are exactly the same as in 2003 when the Howard government put them in the forward estimates and announced them publicly on any number of occasions throughout 2003. To remind some who have contributed and who have conveniently forgotten that this was coalition policy for the best part of seven years, these objectives are to introduce greater consistency in the taxation of fuels used for transport purposes, to provide certainty for industry and to phase in the new fuel tax arrangements while providing support to the alternative fuels industry in recognition of the potential environmental fuel security and regional development benefits that these industries can generate.

This is good policy. I understand from media reports, including in the Sydney Morning Herald, that a number of people in the coalition thought so as recently as a recent coalition party meeting. We know without doubt that Senator Minchin thinks it is a good policy. Despite all the rampant opportunism, populism and obstructionism, some opposite, I know, actually do have a bit of regard for good public policy or policy purity. Sadly, though, the Leader of the Opposition will take pragmatism every time. In other words: in whatever direction the prevailing political wind is blowing he will sail the opposition ship. It is an indictment of the Leader of the Opposition that he will not lead, will not follow and will not get out of the way of good policy.

While the government has not made any final decisions about the treatment of fuel in the carbon price arrangements, a principle of carbon pricing is to apply a price that reflects the emissions of different activities. The government is committed to addressing the relative emissions generated by these fuels as part of its consideration of arrangements for fuel under the carbon price. We are indebted to members of the crossbench, along with regional MPs and those most interested in carbon pricing, for helping to ensure that this commitment has been made. As industry has pointed out, LPG has the potential to deliver 13 per cent less in emissions than regular unleaded petrol. These bills, I know the member for Grey will be pleased to hear, deliver a full 50 per cent tax discount in recognition of the potential environmental and other benefits that LPG and other gaseous fuels can deliver. We are taxing them at less than their carbon content.

I would add again that Australia has not gone it alone in proposing to apply taxation arrangements to LPG autogas—most countries in the OECD already apply fuel tax to LPG autogas. Even with the introduction of these tax arrangements, Australian LPG autogas prices will still be amongst the lowest in the OECD. Any attempt to delay passage of this good policy in these bills will add to ongoing industry uncertainty and undermine the potential for future investment in Australia's alternative fuels industry. The passage of these bills will remove this uncertainty and ensure that investment decisions can be made with certainty for the future. And so that I am not accused of plagiarism, I cite that that last sentence was drafted not by me, but by none other than Peter Costello when he was Treasurer. What he said in 2003 is still relevant today.

I will briefly outline the key elements of each bill in this legislative package. The Taxation of Alternative Fuels Legislation Amendment Bill 2011 deals with the taxation of LPG, CNG and LNG when used for transport purposes. It establishes simplified reporting and excise-licensing requirements for industry to make the transition to the excise system as smooth as possible. I am indebted to LPG Australia, who provided the understanding and the mechanism by which we can put the excise requirements. The Excise Tariff Amendment (Taxation of Alternative Fuels) Bill 2011 amends the Excise Tariff Act 1921 to set the excise rates applying to alternative fuels from 1 December 2011 and to calculate the duty payable on branded goods. The Customs Tariff Amendment (Taxation of Alternative Fuels) Bill 2011 amends the Customs Tariff Act 1995 to set the excise equivalent customs duty rates applying to alternative fuels from 1 December 2011. The Energy Grants (Cleaner Fuels) Scheme Amendment Bill 2011 extends the operations of the existing provisions of the Energy Grants (Cleaner Fuels Scheme) Act 2004.

The bills reflect the results of widespread consultation and negotiations with members of parliament, including crossbench members, and industry. Reflecting these discussions, the bills also extend the current taxation and grant arrangements for 10 years for ethanol, biodiesel, renewable diesel and methanol. After 30 June 2021 the taxation and grant settings for these fuels will be reviewed. These arrangements deliver long-term policy certainty for biofuels. They are supported by the Biofuels Association and will encourage a growing, sustainable Australian biofuels industry into the future. The opposition has claimed that these bills will be the death knell of the LPG industry and the taxi industry.

Mr Baldwin interjecting

Mr SHORTEN: I find these comments a little bit rich, coming as they do from the coalition who put this tax in the forward estimates in the first place in 2003.

Mr Baldwin interjecting

The DEPUTY SPEAKER ( Hon. Peter Slipper ): The honourable member for Paterson will remain silent.

Mr SHORTEN: The member for Paterson does not like hearing what his predecessors, when they were in government, said they were going to do. We are finishing the job. We are finishing the business that they did not. They put the propositions forward and we are finishing the business.

Mr Baldwin interjecting

The DEPUTY SPEAKER: The honourable member for Paterson will not defy the chair. He will remain silent. He will not say one word until this debate concludes, which might be difficult for him.

Mr SHORTEN: I also find it a bit rich as the facts do not support the assertion. LPG will continue to exhibit a significant price advantage over regular unleaded petrol. The effect on taxi fares of including LPG in the excise system depends on decisions by state and territory regulators. If the excise is passed on in full, the 2½c per litre excise that would apply from 1 December 2011 would add approximately 3.5c to the average metro taxi trip fare. When fully phased in, the final excise of 12½c per litre from 1 July 2015 would mean approximately 19c for the average taxi trip fare if passed on in full.

It should also be recognised that the cost of LPG, including excise that will apply, can be claimed as an income tax deduction by taxi operators and other business operators. This again reduces the price impact of the new excise arrangements for LPG. I also believe it is important to recognise that the impact of the LPG changes on the Tasmanian taxi industry will not be as dramatic as has been suggested. Australian Taxi Industry Association data shows that only 28 in every hundred taxis in Tasmania use LPG fuel, so, for the other 72 in every hundred of the Tasmanian taxi fleet that use other fuels, there will be no impact. More generally, LPG is cheaper and more cost-effective than petrol with, on average, a saving of around 37 per cent, or $7.44 per 100 kilometres driven. On 1 December 2011, when the excise is introduced, LPG will still have savings of around 35 per cent, or $6.94 per 100 kilometres driven. In July 2015, when fully phased in at 12½c per litre, LPG will still retain an average 25 per cent cost advantage over unleaded petrol. In addition, there will be a review after 1 July 2015, once the tax has been fully implemented, which will consider the impact of the tax, its interaction with the carbon price, and market demand for these fuels.

These bills recognise that it is appropriate that there be some contribution towards the maintenance and construction of our road system not just by the users of petrol and diesel through the excise system but also by users of other alternative fuels such as LPG. However, these bills also recognise that alternative fuels are potentially more environmentally attractive, have regional development benefits and improve Australia's fuel security. These bills get the balance right.

I commend the bill to the House.

Question put:

That this bill be now read a second time.

The House divided. [20:57]

(The Speaker—Mr Harry Jenkins)

Question agreed to.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.