As announced in its policy for the last election, Tax Reform: Not a New Tax, A New Tax System the Government will be reducing excise on petrol and diesel at the time of the commencement of GST on 1 July.
For business (which gets a credit for GST) this means the cost of petrol and diesel will fall by about 10 per cent. For consumers this means that prices need not rise as a result of GST.
To ensure that this applies in non-metropolitan and remote areas the Government will be introducing a new grants system targeted at consumers in these areas. The Fuel Sales Grants Bill 2000, to be introduced into Parliament this week, will allow a tiered grant system to be paid to retailers of petrol and diesel.
A grant will be paid for sales to consumers in non-metropolitan areas with a higher rate of grant provided for sales in remote areas. Petrol and diesel prices are generally higher in non-metropolitan and remote areas compared with metropolitan areas. The grants scheme will help address the divergence in fuel prices between the cities and regional areas.
The Government will continue to monitor fuel prices in the lead up to 1 July 2000 to set the grant rates. Details on entitlement to the grant scheme, including the mechanism for determining non-metropolitan and remote areas, along with the grant rates will be prescribed in the regulations to the legislation.
Retailers of petrol and diesel will be expected to pass on to consumers the benefit of the grant. To assist in this process the grant will be prescribed under the Price Exploitation legislation administered by the Australian Competition and Consumer Commission (ACCC). The ACCC will carefully monitor petrol and diesel prices to ensure that retailers comply with this legislation.
Compliance costs for fuel retailers will be minimal. To receive the grant, fuel retailers will need to register with the Australian Taxation Office and maintain records including sales volumes. Grants will be paid to retailers in advance to avoid cash flow difficulties. The scheme will be considerably simpler in its operation than the fuel rebate systems operating in the States which are delivered to fuel wholesalers.
The scheme is expected to cost around $500 million over the next four years and will provide major benefits to users of petrol and diesel in remote and non-metropolitan areas. This is in addition to the significant fall in fuel costs to businesses in these areas under tax reform, due to the availability of GST input tax credits, the expansion of the diesel fuel rebate scheme and the introduction of the diesel and alternative fuel grant scheme.
- The new on-road Diesel and Alternative Fuel Grants scheme, combined with the other changes in the New Tax System, will cut the cost of fuel used in many transport vehicles by about 24 cents a litre.
- The existing off-road Diesel Fuel Rebate Scheme will be extended and with the New Tax System changes will take about 44 cents a litre off the cost of fuel for rail and marine transport as well as primary production.
- The New Tax System will also cut the cost of both petrol and diesel for all registered businesses by about 10 per cent.