Today the Government is announcing the details of a comprehensive overhaul of Australia’s fuel excise system.
The changes, which begin to take effect from 1 July 2006, will provide excise relief for a wide range of businesses and households. They ensure that a consistent excise framework will apply to all relevant fuels. Combined with other measures announced in the Government’s Energy White Paper, the changes will result in an integrated policy which addresses economic, transport, environmental and social objectives.
These excise reforms augment the measures for alternative fuels previously announced by the Government.
When fully implemented, these reforms will significantly reduce the excise burden for tens of thousands of businesses and a significant number of households.
Under the new arrangements:
- from 1July2012, all off-road business use of all fuels will be effectively
excise free, removing a range of artificial distortions from the system and
substantially increasing the range of commercial activities eligible for excise
relief
- the Government will introduce this measure in stages, with a credit of half of the fuel excise incurred in all currently-ineligible off-road activities available between 1July2008 and 1 July 2012, and a full credit from 1July2012;
- excise relief will be provided to a range of commercial activities for the first time (for example, tomanufacturing and construction, and to all aspects of quarrying) and other major beneficiaries include primary producers, miners and commercial power generators;
- off-road business use of petrol (for example in utility vehicles and four-wheel motorcycles) will be effectively excise free for the first time;
- from 1 July2006, the on-road credit paid to users of diesel in on-road vehicles weighing over 4.5tonnesGVM will be extended to users of all excisable fuels — benefiting the operators of around 57000 heavy petrol vehicles — and the metropolitan boundaries governing eligibility for this credit will be abolished — making all journeys in these vehicles eligible for the credit;
- the partial excise paid on fuels used in heavy vehicles will be declared an official, non-hypothecated road-user charge from 1 July 2006 (this charge will be set consistent with future determinations of the National Transport Commission);
- all private and business use of all fuels for electricity generation will be effectively excise free from 1 July 2006;
- the excise currently levied on burner fuels —such as heating oil and kerosene — will be effectively removed from 1 July 2006, reducing the excise burden on up to 90,000 households and a range of businesses.
To implement these changes, the Government will introduce a new business credit system. This system will replace all existing rebates and subsidies. Businesses will be able to claim their fuel excise credits through their Business Activity Statement in the same way as they claim their GST credits.
Business will only be required to fill in one form, and will have only one point of contact with the Australian Tax Office.
These reforms, when fully implemented, will dramatically reduce record-keeping requirements for a large number of businesses. They will also substantially reduce the need for wasteful litigation.
The changes include an integrated set of environmental initiatives.
For the first time, eligibility for excise relief will depend on key players meeting appropriate environmental safeguards.
Under the environmental measures, which commence on 1 July 2006:
- firms receiving more than $3 million in business credits will be required to participate in the government’s Greenhouse Challenge Programme; and
- heavy on-road vehicles will be required to meet one of five emissions-performance criteria designed to show they are not a high polluter.
These measures have been designed to deliver real environmental benefits, while minimising the compliance burden on business.
The reforms will coincide with the introduction of new fuel standards for petrol and diesel, which will substantially reduce air pollution in Australia’s capital cities.
Full details of the reforms are provided in the Government’s Energy White Paper, released by the Prime Minister today.