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Monday, 20 June 2011
Page: 3316


Senator SHERRY (TasmaniaMinister Assisting on Deregulation and Public Sector Superannuation, Minister for Small Business and Minister Assisting the Minister for Tourism) (19:40): I would like to thank all the senators who participated in this debate. The bills debated this evening will bring liquefied petroleum gas, liquefied natural gas and compressed natural gas used for transport purposes into Australia's fuel taxation regime so that excise duty or excise equivalent customs duty will apply.

The tax rates for these fuels are based on the energy content of the fuels. However, the tax rates are discounted by 50 per cent in recognition of the potential environmental, regional development and fuel security benefits of their use. This policy was announced by the previous Liberal govern­ment. Yes, the previous Liberal govern­ment—Mr Costello, our then Treasurer—announced this one. It has been in the public domain since 2003, when it was put into the forward estimates by the former Liberal-National Party government. Importantly, the changes are phased in over a transition period of five years to allow affected parties time to adjust to the changes.

The bills provide certainty concerning the taxation arrangements for alternative fuels. They deliver investment certainty to allow industry to finally make decisions in the knowledge that the final legislation is in place. They 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.

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 smoothly as possible.

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 blended 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 operation of the existing provisions of the Energy Grants (Cleaner Fuels) Scheme Act 2004.

The key objectives of this policy are the same as they were in 2003, when the Howard government put it in the forward estimates—that is, certainty for industry, greater consistency in the taxation of fuels used for transport purposes and phasing 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. As industry has pointed out, LPG has the potential to deliver up to 13 per cent less emissions than regular unleaded petrol. These bills, however, 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.

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 fuels as part of its consideration of arrangements for fuel under the carbon price. The bills also represent a move towards a more sustainable taxation system. As market share forecasts provided by industry show, the share of alternative fuels in the transport fuels mix is expected to continue to grow, even with the new tax arrangements. To continue to exempt these fuels from fuel taxation does not provide for a sustainable fuel tax system. This was acknowledged by the former Howard government by the former Treasurer, Mr Peter Costello, and by Mr John Anderson, a former leader of the National Party. It is also acknowledged internationally.

Australia has not gone it alone in proposing to tax LPG autogas. Most countries in the OECD already apply fuel tax to LPG autogas. Even with the new tax arrangements, Australian LPG autogas prices will be amongst the lowest in the OECD. The bills reflect the results of widespread consultation and negotiation with crossbench members and industry. Reflecting these discussions, the bills also extend current taxation and grant arrangements for 10 years for ethanol, biodiesel, renewable diesel and methanol. After 30 June 2021, the taxation and grants settings of these fuels will be reviewed.

These arrangements deliver long-term policy certainty for biofuels and will encourage a growing and sustainable Aust­ralian biofuels industry into the future. On this point I would like to acknowledge the contribution of the Australian Greens, particularly Senator Milne. I can say that the government will work with the Biofuels Association of Australia to introduce self-regulatory sustainability criteria. This will ensure that the production of biofuels in Australia will have no direct impact on food supply or food prices.

In addition, government will work actively along with the Biofuels Association of Australia and with the International Standards Organisation to develop inter­nationally agreed sustainability criteria that can be applied to industry. This action will ensure that support for biofuels does not compromise sustainable production practices but will provide greater impetus for initiatives such as second generation biofuels.

In the course of the debate on these bills, a number of issues have been raised that require further comment. The opposition have claimed that these bills will be the death knell of the LPG industry and the taxi industry. However, it needs to be placed on the record that LPG will continue to exhibit a significant price advantage over regular unleaded petrol going forward.

The effect on taxi fares of including LPG in the excise system depends on decisions made by state and territory regulators. If the excise is passed on in full, the 2.5c per litre excise that applies from 1 December 2011 could add approximately 3.5c to the average metro taxi trip fare. Even when fully phased in, the final excise of 12.5c per litre from 1 July 2015 would mean approximately 19c for the average metro taxi trip fare, if passed on in full.

It should also be recognised that the cost of LPG, including the excise that will apply, can be claimed as an income tax deduction by taxi operators and other business operators. This reduces the impact of the new excise arrangements for LPG.

More generally, LPG is cheaper and more cost-effective than petrol, with an average saving of around 37 per cent, or $7.44, per 100 kilometres driven. On 1 December 2011, when excise is introduced, LPG will still have savings of around 35 per cent, or $6.94, per 100 kilometres. In July 2015, when fully phased in at 12.5c per litre, LPG will still retain an average 25 per cent cost advantage over unleaded petrol.

Notwithstanding this, the government acknowledges that state and territory regulators across Australia are grappling with other issues impacting upon the taxi industry, particularly in terms of driver safety. The government has received representations from Senator Xenophon about driver safety in his state. We will further explore these issues with Senator Xenophon, including whether the Commonwealth can play a role.

The government has received repre­sentations from several members of parliament and senators on behalf of the LPG excise in Tasmania, given claims by the LPG industry about the developing nature of the industry in that state, my home state. The government will closely monitor any impact of the excise arrangements on the LPG industry in Tasmania and will consider any measures that would be required should such claims prove correct.

The government has also received representations from producers of CNG and LNG on the impact of excise on these fuels. The government will consider the impact of these excise arrangements on CNG and LNG once the excise arrangements have applied for 12 months in order to ensure there are no unintended consequences from its imple­mentation. This is in addition to the formal review that will occur after 1 July 2015, once the tax has been fully implemented, which will consider the impact of the tax on LPG, CNG and LNG and its interaction with the carbon price and market demand for these fuels.

The bills provide for greater consistency in the taxation of fuels but acknowledge that uniformity in taxation would not be appropriate and a balance must be struck between policy goals. The bills recognise that it is appropriate that there be some contribution from gaseous fuel users towards the maintenance and construction of our road system. It is not sustainable that users of petrol and diesel are the only contributors through the fuel tax system to the cost of the road system.

However, the 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 for Australia and I commend them to the Senate.

Debate adjourned.

Ordered that the resumption of the debate be made an order of the day for a later hour.