2008 - 2009

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

SENATE

SUPPLEMENTARY EXPLANATORY MEMORANDUM

Request for amendments to be moved on behalf of the Government

(Circulated by the authority of the

Treasurer, the Hon Wayne Swan MP)

General outline and financial impact............................................................ 5

Chapter 1            CPRS Fuel Credits Program — assistance to the forestry industry          7

Fuel tax adjustment arrangements:  assistance to business

The Carbon Pollution Reduction Scheme (CPRS Fuel Credits) Bill 2009 outlines transitional arrangements to give the agriculture, fishing and heavy on-road transport industries time to adjust to the Carbon Pollution Reduction Scheme (‘the Scheme’).

Businesses in these industries receive fuel tax credits to offset the fuel tax on their business inputs so they do not benefit from the ‘cent-for-cent’ reduction in fuel tax.  The Government therefore is establishing the ‘CPRS fuel credit’ program to provide credits to offset the impact of the Scheme emissions unit charge for these industries. 

These amendments to the Carbon Pollution Reduction Scheme (CPRS Fuel Credits) Bill 2009 extend eligibility for the ‘CPRS fuel credit’ program to the forestry industry.  Forestry activities and incidental forestry activities will be eligible for CPRS fuel credits from 1 July 2011 to 30 June 2014.

Date of effect :  This measure takes effect from 1 July 2011.

Proposal announced :  The amendments have not previously been announced.

Financial impact : 

Compliance cost impact :  Negligible.

Amendments 1, 3, 4, 5, 9 and 12 — extension of entitlement for CPRS fuel credits to the forestry industry

1.1                   Forestry businesses pay no effective fuel tax, and so will not benefit from fuel tax cuts.

1.2                   The amendments extend entitlement for CPRS fuel credits to the forestry industry from 1 July 2011 to 30 June 2014 . ‘ Forestry’ has the same meaning as in the Energy Grants (Credit) Scheme Act 2003. ‘Forestry’ activities that meet the definition will receive a full CPRS fuel credit equal to the fuel tax reductions.     

1.3                   Carbon sequestration activities will not receive CPRS fuel credits as they will benefit from eligibility to opt into the CPRS reforestation scheme.

1.4                   The Government will review this measure after three years as part of the review of the fuel tax adjustment mechanism.   

Amendments 2, 6, 7, 8, 10, 11 and 13 — extension of entitlement for partial CPRS fuel credits to incidental forestry activities

1.5                   Forestry businesses engaged in activities incidental to forestry currently receive a 50 per cent fuel tax credit and therefore, will not receive the full benefit of fuel tax cuts.

1.6                   The amendments extend entitlement for CPRS fuel credits to the incidental forestry activities from 1 July 2011 to 30 June 2014.  Incidental activities currently receive 50 per cent of the fuel tax credit under the Fuel Tax Act 2006 until 30 June 2012 and will receive the full fuel credit thereafter. Therefore, incidental forestry activities will receive a CPRS fuel credit of 50 per cent of the full CPRS fuel while the reduced fuel tax credit applies. Thereafter, these incidental activities will be entitled to the full CPRS fuel credit until the end of the transitional assistance period on 30 June 2014.

1.7                   The Government will review this measure after three years as part of the review of the fuel tax adjustment mechanism.