Richard Colbeck (Tasmania, Liberal Party, Parliamentary Secretary to the Minister for Finance and Administration) Share this | Hansard source

I am sure—and the Petroleum Products Freight Subsidy Scheme. These bills combine the means of providing fuel tax relief to businesses and households in one piece of legislation. Changes to implement the new system will be phased in from 1 July 2006, with final changes taking effect from 1 July 2012.

It is intended that from 1 July 2011, these bills will also provide the legislative basis for taxing certain liquefied and compressed gaseous fuels when fuel tax is levied on liquefied petroleum gas, liquefied natural gas and compressed natural gas. Under the fuel tax credit system, all fuel, including petrol consumed off-road for business purposes, will become effectively tax-free over time. This will provide fuel tax relief to a number of businesses for the first time, and will benefit businesses involved in manufacturing, quarrying, construction, primary production, mining or commercial power generation.

The fuel tax credit system reform also expands fuel tax relief for fuel consumed in road transport by allowing partial fuel tax credits for all taxable fuels, including petrol, consumed on-road for all business purposes in registered vehicles with a gross vehicle mass of 4.5 tonnes or more. Presently, fuel tax relief is provided in the form of remissions, refunds and rebates under the Excise Act 1901, the Customs Act 1901 and the Energy Grants Credits Scheme. These schemes have restrictive and complex eligibility criteria and apply to different fuels and fuel uses in different ways. The changes will lower compliance costs, reduce tax on business and remove fuel tax for thousands of businesses and households. When the fuel tax credit system is fully implemented, fuel tax will only be effectively applied to fuel used in private vehicles and for certain other private purposes, to fuel used on-road in light vehicles for business purposes, and to aviation fuels where tax is imposed for cost recovery reasons.

The changes to the system of providing fuel tax relief will allow businesses to claim their fuel credits through their business activity statements in the same way they claim goods and services tax input credits. A separate claiming mechanism will be available to allow householders to claim a fuel tax credit for fuel used in the generation of electricity.

In response to the Senate Economics Legislation Committee report into these bills, it is worth recalling that, as announced in the energy white paper of 2004, the government’s policy is to bring all fuels into the fuel tax system so that, to the greatest extent possible, all fuels and fuel users are treated in a consistent and transparent way and the fuel tax system is competitively neutral, avoiding instances where taxed fuels compete with untaxed fuels. Consistent with that policy, these bills deliver the fuel tax credit system, which is intended to remove or reduce the incidence of effective fuel tax on business. The government recognises the matters reflected in the committee’s report, including with respect to those industries highlighted in the committee’s recommendations. The government will continue to monitor the effect of fuel tax reform upon business during the transition period, to ensure that there are no unintended consequences or impacts of the policy on industry. In response to Senator Macdonald’s concerns, expressed in the chamber earlier, the government will assess the new claiming arrangements on the fishing industry before the transitional arrangements cease.

I would like to make a couple of comments on the second reading amendment proposed by Senator Stephens on behalf of the opposition. This bill removes the incidence of fuel tax on business inputs in accordance with government policy. The reforms will effectively reduce fuel tax collections from businesses and households by $1.5 billion over the period of 2012 to 2013. The government’s decision not to increase the road user charge will effectively reduce fuel tax on heavy vehicles by a further $1.2 billion over the forward estimates. Business and household use of fuel to generate electricity will be effectively fuel tax free from 1 July 2006. Business and household use of burner fuel such as heating oil and kerosene will be effectively fuel tax free from 1 July 2006. Partial fuel tax credits will apply to all fuels, including petrol, used on-road in heavy vehicles from 1 July 2006, and the existing metropolitan boundaries will be removed. All off-road business use of fuel will become effectively fuel tax free over time. Currently ineligible activities will receive a half credit from 1 July 2008 and a full credit from 1 July 2012.

Although the opposition amendment may be well intentioned, it is misdirected. The excise arrangements for biofuels are not determined by this bill. Excise and customs duty on fuel ethanol and biodiesel is imposed by excise and customs legislation; the effective fuel tax status is then delivered by offsets through either the Energy Grants (Cleaner Fuels) Scheme Act 2004 or contracts administered by the department of industry. I repeat and emphasise that this bill does not change the effective tax status of the import or manufacture of fuel ethanol or biodiesel. The whole purpose of fuel tax reform is to lead to a system where all fuels are brought into the fuel tax system so that, to the greatest extent possible, all fuels and fuel users are treated in a consistent and transparent way and the fuel tax system is competitively neutral, avoiding instances where taxed fuels compete with untaxed fuels.

The government has clearly set out a long-term framework to allow biofuels to establish their credentials in the marketplace. The Prime Minister announced the industry biofuels action plan on 22 December 2005. He also noted that industry projections show that industry expects not only to meet but to exceed the government’s biofuels target of 350 megalitres by 2010. The Australian government will monitor and review progress towards these targets on a six-monthly basis, and the industry players have committed to annually update their company action plans. In these circumstances the government considers the opposition amendment is unnecessary, and as such the government does not support it. In conclusion, I suggest that the measures proposed in these bills contain positive improvements to the system of providing fuel tax relief. They will modernise and simplify the fuel tax system. For these reasons and the reasons outlined above, I commend the bills to the chamber.