The Minister for Revenue and Assistant Treasurer, Peter Dutton, today introduced legislation to implement a new fuel tax credit system. The introduction of the fuel tax credit system is part of the Government's programme of reform to modernise and simplify the fuel taxation system, as announced in the energy white paper, Securing Australia's Energy Future, on 15 June 2004.
Under the reforms, the existing multi-layered system of fuel tax concessions will be replaced by a single system providing fuel tax credits claimable via the business activity statement (BAS) in a similar way that goods and services tax input credits are claimed, Mr Dutton said.
The two bills introduced today the Fuel Tax Bill 2006 and Fuel Tax (Consequential and Transitional Provisions) Bill 2006 will establish the new fuel tax credit arrangements from 1 July 2006 and will phase in extensions to eligibility between then and 1 July 2012.
A simpler and more equitable system of fuel tax relief
The introduction of the fuel tax credit system is good news, particularly for Australian business.
It will lower compliance costs, reduce tax on business and remove the burden of fuel tax from thousands of individual businesses and households, Mr Dutton said.
When the fuel tax credit system is fully implemented, fuel tax will only be effectively applied to:
- business use of fuel on-road in vehicles with a gross vehicle mass (GVM) of 4.5 tonnes or less;
- business use of fuel on-road in vehicles with a GVM of more than 4.5 tonnes, but only to the extent of the applicable road user charge; and
- private use of fuel on-road in motor vehicles and in certain off-road applications.
From 1 July 2006, all fuels used in commercial and household electricity generation and fuels used for heating will be effectively free of fuel tax.
From 1 July 2006, all fuels, including petrol, used on-road in vehicles with a GVM of over 4.5 tonnes will be eligible for fuel tax credit equal to the difference between the fuel tax rate and the road user charge.
All fuels used off-road for all business purposes will become free of fuel tax over time.
When the fuel tax system is fully implemented, there will be a substantial reduction in compliance costs. The claiming of fuel tax credits via the BAS will simplify and reduce business interactions with the Australian Taxation Office, as businesses will have a single point of contact and the necessity of separate claim forms will be removed.
There has been extensive consultation with industry and indirect tax specialists in developing the legislation.
Clarification of mining activities under the Energy Grants (Credits) Scheme
The legislation also clarifies the extent of eligibility for off-road credits provided for 'mining operations' under the Energy Grants (Credits) Scheme. 'Mining operations' is intended to only cover the extraction of naturally-occurring minerals.
The legislative changes clarify that the synthetic production of minerals, and extraction of limestone or other materials for use in the manufacture of products to be used for the purposes such as construction, road making or landscaping do not constitute mining operations. These changes take effect from today.