Ron Boswell (Queensland, National Party) Share this | Hansard source

We are debating the Fuel Tax Bill 2006 today, which will bring into effect legislation that will remove excise from many fuels. It is designed to simplify the way tax credits for fuels are administered. It replaces and adds to the Energy Grants (Credits) Scheme. And what it effectively does is provide a mechanism to allow a greater number of businesses to claim back the fuel tax that has already been paid. There are a number of aspects of this bill which I am happy to commend. These include the provision to allow rebates on tax paid to all off-road fuel users. In effect, this allows fuel excise exemption for every farmer that has a petrol pump auger or for any petrol that is used off-road. That is going to be a great benefit to many regional and rural users of petrol on farms.

I see Senator Scullion in the chamber today. He will be rejoicing on behalf of the fishing community, because it will also exempt all petrol used in outboard motors. As a former fisherman, and a very successful one at that, he knows it will make a huge difference to the fishing industry. This bill removes about $800 million in extra fuel tax credits to business right across Australia, whether it be fishing, forestry, mining or primary producers. This means any petrol or fuel that is used in those industries will have an excise exemption, and that is a big plus. It means a business will be able to operate more effectively as the level of tax for these businesses is being reduced.

One aspect of the bill is to centralise a system of fuel tax credits through the Australian Taxation Office, rather than through a number of different departments and schemes as is currently the case. In practical terms, this means that rebates are to be processed through the Business Activity Statement rather than through the automatic claiming system that currently exists. That had certain problems for rural farmers and fishermen. There was a claiming system that farmers used that gave almost immediate tax excise relief. You put your statement through to the appropriate department and your tax excise rebate would be credited to your bank. In the case of fishermen, they had some particular arrangement that meant they did not pay excise at all. The people they bought the fuel from made the exemption claim on their behalf. When this position was reversed, many of my colleagues, including Senator Fiona Nash, Senator Nigel Scullion and Liberals such as Senator Campbell and Senator Macdonald, took it to the appropriate ministers and the Prime Minister, and we were able to get a two-year transitional period for claiming rebates through the BAS.

Many farmers and fishermen would have had to find the excise. In the case of fishermen, it could have been $3,000 or $10,000 a month. That would have been extra cash that they would have had to find and pay, before they got it back through their BAS three months later. I want to make it very clear that a number of us went to the Prime Minister and to the Treasurer, and we were able to get a two-year transitional payment. When these two years are up there is no doubt we will review it. If needed, we will go again and ask for some sort of protection and comfort for these particular industries. In that meeting with the Prime Minister we pointed out to him that there was an imbalance in the fishing industry. Some of the payments that were being made on the Barrier Reef were subject to tax. He took that on board, particularly concerning the fishing industry, and came up with an ex gratia payment on top of another payment that put another $20 million into the fishing industry to pay for what had happened on the Great Barrier Reef through GBRMPA’s incapacity to get it right. In both those areas, we can honestly say that we have done our best for our constituents, and that we really stood up for them.

This change was going to have major cash flow implications for thousands of small businesses, and we made sure the voice was heard in the right areas. Existing claimants of the fuel tax credits or rebates will now have two years to adjust to the different claiming methods. From July 2008 the new fuel will then enter into the rebate system. As I have said, if it then creates problems we will be there monitoring the situation. If it cannot be accommodated or if it is going to cause too much hardship to these particular businesses in primary industry then we will be in there again fighting for them.

In the four years from 2008 to 2012, 50 per cent of the tax paid on these fuels will be able to be claimed. From 2012 the tax paid on off-road use of all fuels is fully rebatable. Therefore, under this act, the effective application of fuel tax will be limited to: business use of fuel in on-road applications of motor vehicles with a gross vehicle mass of 4.5 tonnes or less; business use of on-road motor vehicles with a gross vehicle mass of more than 4.5 tonnes, but only to the extent of the road user charge; and private use of on-road motor vehicles, certain off-road applications and aviation fuel. Fuel excise on fuels used for burners, heating or electricity generation will also be fully rebatable from 2006, making them effectively tax free.

The use of petroleum for manufactured products other than fuel, such as solvents and paint, will be effectively excise free. Manufacturers of these products will then be required to make these excise claims under their BAS. There have been some submissions to the Senate inquiry saying that this will put an extra administrative burden on the cash flow for some of these paint and solvent manufacturers. We will have to take that on board. I note the recommendation by Senator Brandis that the government re-examine the effects of the legislation on manufacturers who use hydrocarbonates for non-fuel manufacture process during the two-year transitional period, with a view to minimise and offset any adverse effects. I used to work in the paint business, and I still keep in contact with those people.

The bill also requires those claiming more than $3 million in tax credits to commit to the Greenhouse Challenge Plus programs, which ensure they are using clean fuel and driving vehicles that produce low emissions. Programs such as this benefit the alternative fuels like biodiesel and ethanol. The large trucking companies and diesel fleet operators will be part of a program, and I ask that those administering those fleets consider a requirement for an increase in biodiesel use as one of the elements to keep their fleets driving and producing low emissions.

There is a contentious issue here. The bill also repeals the Fuel Sales Grants Scheme and the Petroleum Products Freight Subsidy Scheme. This will allow the government to redirect funding from those schemes directly into road funding programs. That money, which used to give a 1c, 2c or 3c a litre freight subsidy, has now gone into the very popular Roads to Recovery program. That was the will of the particular councils that did not believe that the freight subsidy scheme was being all that effective. Nevertheless, there are some people who are not happy with this. But the money did not go into consolidated revenue; it went into the Roads to Recovery funding that is made directly available to all local governments.

The bill provides the framework for the fuel tax credits system, which will be used by the producers of alternative fuels to claim excise rebates on the production of alternative fuels from 2011. Clarification has been received this week that this bill does not specify the excise rates that will apply to domestic and imported ethanol. That legislation is yet to come. But that does not change the fact that from July 2011 excise will apply to domestically produced ethanol and biodiesels for the first time. From that date, the effective excise rate for domestically produced and imported ethanol will be the same. That concerns a number of people in the biofuels industry.

The bill also limits the level of excise able to be rebated to that of actual excise paid. This has the effect of making biodiesel more expensive to the end user. This is a very contentious issue. The argument depends on whether the 38c was an excise rebate or a production subsidy. I have argued long and hard, and with just about everyone who will listen to me in this place, that it was a production subsidy, but my arguments have not met with success. I have been told that it was an excise rebate, and you cannot claim an excise rebate on excise that has not been paid. There lie the two different arguments. Whichever argument is right, the government is saying that it is an excise rebate. Therefore, if you are an off-road user, you cannot claim a rebate on excise that was never there in the first place.

This is going to be a disincentive to current users of biodiesel. I am not going to beat about the bush: it will lead to current biodiesel users reverting back to petrodiesel in order to claim a full tax rebate. However, as I work it out, biodiesel should have some market advantage in that it will be a number of cents cheaper for on-road use.

The Senate committee also addressed this issue, and commented on the disincentive to biodiesel’s use that is in the bill. The Brandis committee made certain recommendations that would have assisted the biodiesel industry. Unfortunately, those recommendations were not taken up. I note that Senator Brandis is now entering the chamber. I have argued strongly that his view is the correct view, but I have not been successful. In a coalition, you have to take the good with the bad. There are going to be serious consequences because of this. We will monitor them. If the worst comes to the worst, we will fight for what Senator Brandis said—and I believe him—about this: that it was a subsidy to increase production.

Everyone in this chamber will be aware that I have been very vocal about the importance of a strong and vibrant biofuels industry for this nation. I am conscious of the types of support that biofuel producers are receiving overseas and the importance of attracting new investment to the industry. Australia is facing a crisis in crude oil, both in price and in supply. In 2001, we produced 31 billion litres, which was pumped out of Bass Strait and other places. Last year, Australia produced 18 billion litres of fuel. In 2004, oil imports accounted for approximately 13 per cent of our balance of trade. This year, oil accounts for 60 per cent of our balance of trade.

Internationally, governments are reacting to the crisis. Governments are enacting legislative mechanisms to boost biofuel uptake and introducing taxation and excise regimes to encourage greater biofuel production. Australia has joined the call for more biofuels. To call is one thing. The reality is that the policy settings in place are pretty short term. We are aiming for a target of 350 million litres, which is 0.75 of one per cent. That is a very small amount when you look at the fuel shortage crisis the world is facing. I might add that someone told me the other day that 12 per cent of the world’s population drive cars. It will be around 15 per cent in a couple of years time, putting more demand on fossil fuel.

There is a lot of buzz about biofuels in our time. Bill Gates is into it. Richard Branson has invested in it. In Australia, Transfield, Colonial and Babcock and Brown have interests in potential biofuel production. But what is the reality of the Australian situation? There are investors with millions of dollars interested in biofuels who are waiting for an indication from government that it is serious about biofuels. Production has been planned, costed and in many cases financed, but nothing is happening.

There have been no new ethanol plants built in Australia since 1990. Ten years ago Australia had three ethanol producers and, for all the government support of the industry, there are still only three ethanol producers. These producers have surplus products in tanks right now, waiting for a buyer. Ethanol that could reduce the cost of petrol by 3c to 4c a litre is being stored because the big four oil companies do not want to buy it. Australian producers at the moment have the capacity to supply over 100 million litres of ethanol. Currently, petrol retailers—and mostly independents—are buying about 30 million litres. The independents are buying probably 80 or 90 per cent of it. In my estimation, the independents are buying around 30 million litres and the four big oil companies are buying about 10 million litres. That is more than this time last year. This is really just a catch-up. We are using less than half the ethanol that was being used in Australia in 2002, when the Labor Party engaged in political scaremongering at the expense of an emerging industry.

A small number of biodiesel production facilities are operating in Australia. These produce and market some of their products directly to large diesel fleets and so have been able to avoid the reticence of oil majors. This bill and the application of the tax credits system has now led these producers to wonder where they are going to sell their product. The response from the oil companies to the Prime Minister’s voluntary industry action plan process has been slow and laboured. In the six months since the action plan was announced, there have been very few new contracts announced. There is certainly no indication that the targets nominated by the oil companies themselves will be met—and that is 89 million litres. I believe they have taken up about 10 million litres. (Time expired)