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Diesel and Alternative Fuels Grants Scheme Amendment Bill 2000



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Bills Digest No. 191  1999-2000

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Diesel and Alternative Fuels Grants Scheme Amendment Bill 2000

Warning:

This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have a ny official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

Contents

 

 

Passage History

Diesel and Alternative Fuels Grants Scheme Amendment Bill 2000

Date Introduced:   1 June 2000

House:   House of Representatives

Portfolio:   Treasury

Commencement:   When it receives the Royal Assent, except that item 14 of Schedule 1 begins when item 2 of Schedule 2 to the A New Tax System (Tax Administration) Act (No. 2) 2000 begins.

Purpose

To amend the Diesel and Alternative Fuels Grants Scheme Act 2000 (the Act):

  • to ensure that grants are payable for travel from a point inside a metropolitan area to a point outside metropolitan areas
  • to extend eligibility for grants to: primary producers; contractors and others who carry passengers and goods on behalf of primary producers; buses operating in metropolitan as well as non-metropolitan areas; and emergency vehicles, and
  • to make various amendments of an administrative nature to the Act.

Background

The Government as part of its A New Tax System (ANTS), proposed to reduce the cost of on-road use of diesel to business by:

  • reducing the excise on diesel, and
  • providing a 'diesel fuel credit', which would be delivered through the GST system. (1)

In addition, businesses would be entitled to claim as an input tax credit the GST on diesel bought. Alternative fuels were to be excise-free but subject to the GST.

Following the Senate's rejection of the ANTS legislation, the Government and the Australian Democrats agreed to the following changes to the ANTS package.

On-Road Diesel Rebate

ANTS proposed reducing the effective diesel excise paid by on-road vehicles weighing more than 3.5 tonnes to 18 cents a litre. The on-road diesel rebate will be modified with the result that the effective diesel excise will become 20 cents a litre for qualifying vehicles as discussed below.

Changes to On-Road Diesel Rebate: Qualifying Vehicles

The modified proposal preserves most of the lower cost benefits of the diesel credits for rural and regional Australia, where transport costs are more pronounced, while addressing concerns relating to the environmental impact of diesel use in large cities by reducing the range of vehicles eligible for diesel credits. It is proposed to limit access to this credit to:

• all vehicles over 20 tonnes GVM [Gross Vehicle Mass]; and

• regional transport vehicles weighing between 4.5 and 20 tonnes GVM that undertake their operations in service of regional areas.

The regional transport credit would cover all trucks over 4.5 tonnes operated by a GST registered entity. Operators would have to identify to the ATO [Australian Taxation Office] the number, type(s), and registration numbers of vehicles undertaking rural and regional operations.

Regional would be defined as excluding all mainland capital cities (except for Darwin) and the large conurbations of Newcastle - Sydney - Wollongong, Melbourne - Geelong and the Gold Coast - Brisbane - Sunshine Coast. This means the concession would cover large regional centres, rural cities (eg Wagga Wagga), towns and all of Tasmania. Regional transport operations would include travel between regional centres and metropolitan areas, as well as intrastate and interstate operations. Transport operations within a capital city or conurbation (as outlined above) would be excluded.

Arrangements for claiming the credit will be determined after further consultation with the industry and the Democrats, with the objective of simplifying record keeping, particularly for low volume operators, while limiting the scope for abuse. A metropolitan based business with regional operations would be required to keep appropriate records in all cases and would only be eligible for rural and regional operations.

The Government will put in place rigorous enforcement measures to police the scheme subject to further consultations with the Australian Democrats. (2)

Subsequently, the Government converted the diesel fuel credit proposal into the Diesel and Alternative Fuels Grants Scheme (DAFGS). Under this scheme, grants will be paid from 1 July 2000 for busi ness-related on-road use of diesel and like fuels (as well as alternative fuels) to all vehicles over 20 tonnes GVM, and to transport vehicles weighing between 4.5 and 20 tonnes GVM that operate in regional areas. (3)

On 6 December 1999, the Senate passed the Diesel and Alternative Fuels Grants Scheme (Administration and Compliance) Act 1999 . This Act contains details of the administrative and compliance requirements for the DAFGS scheme. The main requirements are:

  • the applicant must be registered for the scheme, at the time a grant is claimed, in respect of each vehicle for which the applicant is claiming a grant
  • the applicant must have bought the fuel, and
  • the applicant must have used the fuel in operating a vehicle for the purpose of carrying on an enterprise.

The ATO is responsible for administering the scheme.

Three types of journeys are now eligible under the scheme:

  • between a point outside the metropolitan areas and another point outside the metropolitan areas; or
  • between a point outside the metropolitan areas and a point inside a metropolitan area; or
  • between different metropolitan areas.

The current Bill seeks to ensure that a journey from a point inside a metropolitan area to a point outside metropolitan areas is also eligible for grant under the scheme.

Details of the boundaries of the metropolitan areas were released on 12 April 2000. (4)

This Digest should be read in conjunction with the Digests for the Diesel and Alternative Fuels Grants Scheme Bill 1999 (5) and the Diesel and Alternative Fuels Grants Scheme (Administration and Compliance) Bill 1999. (6)

Basis of policy commitment

On 12 April 2000, the Government announced that all journeys on public roads by vehicles in the 4.5 to 20 tonne GVM category would also be eligible for grants when the journeys relate directly to primary production. Hence journeys within metropolitan areas would be eligible for grants when undertaken by a primary producer or by a contractor on behalf of a primary producer. (7)

Position of significant interest groups/press commentary

The extension of the DAFGS scheme to primary industry in metropolitan areas is, by reducing costs, a production subsidy. The National Farmers' Federation approved the Government's decision to extend the scheme as another significant boost for a griculture. (8)

Main Provisions

Additional entitlements

Primary production

Item 5 of Schedule 1 of the Bill inserts a new section 10AA . Under this section , businesses engaged in primary production, irrespective of their location, will be entitled to grants for diesel or alternative fuel provided the vehicle meets the weight requirement and is used to transport goods or passengers on a public road.

Item 5 also inserts a new section 10AB . Under this section , contractors and others who transport passengers or goods on behalf of primary producers, will be entitled to receive a grant.

Buses

Item 5 inserts new section 10AC , which extends eligibility for the use of alternative fuel to businesses using buses on public roads. Note that this section does not extend eligibility to the use of diesel.

Emergency vehicles

Item 5 inserts new section 10AD , which extends eligibility for the use of diesel or alternative fuel to enterprises using emergency vehicles on public roads. As with buses, eligibility for emergency vehicles does not depend on location in metropolitan or non-metropolitan areas. The Minister, in his second reading speech, envisaged that firefighting services would be the principal beneficiaries under this section .

Administrative provisions

Registration requirements

Item 3, new subsection 6B(1) requires that applicants must be registered to claim grants. Subsection 6B(2) deals with the timing of claims. It provides that when a claim is made in respect of a particular vehicle, and that claim is made after or at the same time that registration is sought but before the claimant is registered in respect of the vehicle, the timing of the claim is considered to be immediately after the applicant is registered in respect of that vehicle.

Double dipping

Item 5 , new section 10AD seeks to prevent 'double dipping' by providing that when a person is eligible to receive a grant under more than one section, that person is entitled to only one grant and may make an election.

Standardised rules for debt collection

Item 8, new subsection 14A(3) and items 12 to 16 are intended to ensure that the rules governing tax debt collection are the same as those applying to other outstanding tax debts. Previously, rules relating specifically to the DAFGS scheme were written into the legislation.

Request for amended assessment

Item 11 substitutes new clause 15EA . This entitles an applicant to request an amended assessment. The Commissioner of Taxation must comply with the request if it is made within two years after the end of the claim period or such further period as the Commissioner allows.

Recovery by set-off

Item 12 , new clause 16A allows the Commissioner to deduct from a grant a debt owing under the scheme. When this happens, the grant is deemed to be paid in full.

Interest on underpaid grants

New clause 16B provides that when it is determined that a grant has been underpaid following a review, the applicant is entitled to receive interest on the amount underpaid. The clause specifies the time from when interest is payable and the method of calculation.

Eligible journeys

Item 4 of Schedule 1 inserts a new paragraph 10(2)(ba) . This provides that a journey between a point inside a metropolitan area and a point outside the metropolitan areas is covered by the scheme. Item 4 thus removes an anomaly, namely, that a journey from a point outside to a point inside a metropolitan area would be eligible but the same journey in the opposite direction would be ineligible.

Concluding Comments

As noted, n ew section 10AC(2) extends eligibility for the grant to buses using alternative fuel while carrying on an 'enterprise' irrespective of whether the service is in metropolitan or non-metropolitan areas. Thus commercial bus operators using alternative fuel will benefit while operators using diesel will have an incentive to switch to alternative fuel. This could have environmental benefits in metropolitan areas. While the intention of the legislation seems to be to ensure that private bus operators will be able to claim the grant, the question arises whether 'enterprise' also encompasses organisations, such as State transport authorities, that are potentially large users of alternative fuels.

The DAFGS scheme has been criticised as complicated to administer and likely to give rise to unintentional errors and fraudulent claims. The extension of the scheme to incorporate new categories of fuel users will further complicate the scheme's administration.

It is not clear, on economic efficiency grounds, why primary production in metropolitan areas should be subsidised through the DAFGS scheme. Increasing industry assistance, especially when it has no obvious justification and is not subject to independent review, generally runs against the thrust of policy of both major political parties, which is to reduce assistance. While the magnitude of the implicit subsidy may not be great, the extension of the scheme to primary production in metropolitan areas places it in a privileged situation relative to other industries in metropolitan areas, and hence is a move away from a 'level playing field'. On the other hand, to exclude primary production in metropolitan areas from eligibility would create an inconsistency in the scheme in that primary production in non-metropolitan areas would be eligible for grants while primary production in metropolitan areas would not be eligible.

Endnotes

Tax Reform. Not a new tax. A new tax system . The Howard Government's Plan for a New Tax System, August 1999.

2 Prime Minister, 'Changes to the goods and service tax', 31 May 1999. See http://www.pm.gov.au/media/pressrel/index99.htm.

3 Registration for the scheme is made through applications for an Australian Business Number.

4 See http://www.taxreform.ato.gov.au/general/diesel/diesel_main.htm.

5 See Bills Digest no. 034, 1999-2000 
http://www.aph.gov.au/library/pubs/bd/1999-2000/2000BD034.htm .

6 See Bills Digest no. 069, 1999-2000 
http://www.aph.gov.au/library/pubs/bd/1999-2000/2000BD069.htm .

7 Hon. W Truss MP, Minister for Agriculture, Fisheries and Forestry, 'Farmers to benefit from fuel scheme changes'. Media release , 12 April 2000.

8 National Farmers' Federation Australia, 'Fuel scheme changes to benefit the country'. News release 52/2000, 12 April 2000.

Contact Officer

Richard Webb

20 June 2000

Bills Digest Service

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