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2013-2014
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
EXCISE TARIFF AMENDMENT (FUEL INDEXATION) BILL 2014
CUSTOMS TARIFF AMENDMENT (FUEL INDEXATION) BILL 2014
FUEL INDEXATION (ROAD FUNDING) SPECIAL ACCOUNT BILL 2014
FUEL INDEXATION (ROAD FUNDING) BILL 2014
EXPLANATORY MEMORANDUM
(Circulated by the authority of the Treasurer, the Hon J. B. Hockey MP and the
Minister for Immigration and Border Protection, the Hon Scott Morrison MP)
Table of contents
Glossary .................................................................................................. 1
General outline and financial impact ....................................................... 3
Chapter 1 CPI indexation of fuel excise and
excise-equivalent customs duty .................................... 5
Chapter 2 Regulation impact statement: CPI indexation of
fuel excise and excise-equivalent customs duty ......... 21
Index ..................................................................................................... 31
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
Abbreviation Definition
ACCC Australian Competition and Consumer
Commission
ATO Australian Taxation Office
AWOTE Average Weekly Ordinary Time Earnings
BAS Business Activity Statement
COAG Council of Australian Governments
CPI Consumer Price Index
CTA 1995 Customs Tariff Act 1995
CTAFI 2014 Customs Tariff Amendment (Fuel
Indexation) Bill 2014
CTLAA 2011 Customs Tariff Amendment (Taxation of
Alternative Fuels) Act 2011
ETA 1921 Excise Tariff Act 1921
ETAFI 2014 Excise Tariff Amendment (Fuel Indexation)
Bill 2014
ETLAA 2011 Excise Tariff Amendment (Taxation of
Alternative Fuels) Act 2011
FIRF 2014 Fuel Indexation (Road Funding) Bill 2014
FISA 2014 Fuel Indexation (Road Funding) Special
Account Bill 2014
FMAA 1997 Financial Management and Accountability
Act 1997
FOFA Future of Financial Advice
PGPA 2013 Public Governance, Performance and
Accountability Act 2013
RBCO Regulatory Burden and Cost Offset
SES Senior Executive Service
1
General outline and financial impact
CPI indexation of fuel excise and excise-equivalent customs
duty
The Excise Tariff Amendment (Fuel Indexation) Bill 2014 and the
Customs Tariff Amendment (Fuel Indexation) Bill 2014 amend the
Excise Tariff Act 1921 and the Customs Tariff Act 1995 to index the rate
of excise and excise-equivalent customs duty applying to fuels to assist in
funding road infrastructure.
The Fuel Indexation (Road Funding) Special Account Bill 2014
establishes a special account to ensure that the net additional revenue from
the reintroduction of fuel indexation is used for road infrastructure
funding.
The Fuel Indexation (Road Funding) Bill 2014 amends the Fuel Tax
Act 2006 to ensure that taxpayers generally use the same indexed rate of
duty that was payable on the fuel for determining the amount of their fuel
tax credits.
Date of effect: The amendments apply indexation to duty on domestically
manufactured and imported fuel with effect from 1 August 2014.
The provisions which establish a special account for the net additional
revenue from the reintroduction of fuel indexation apply from
1 July 2015.
Proposal announced: This measure was announced by the Treasurer in
the Budget on 13 May 2014. Rounding duty rates and the road user
charge to one decimal place of a cent has not previously been announced.
Financial impact: The measure is estimated to result in a gain to revenue
over the forward estimates period of $2,197.5 million comprising:
2014-15 2015-16 2016-17 2017-18
$157.5m $375m $675m $990m
Note: financial impacts are in fiscal balance terms.
Human rights implications: These Bills do not raise any human rights
issues. See Statement of Compatibility with Human Rights -- Chapter 1,
paragraphs 1.69 to 1.74.
3
Excise Tariff Amendment (Fuel Indexation) Bill 2014, Customs Tariff Amendment
(Fuel Indexation) Bill 2014, Fuel Indexation (Road Funding) Special Account Bill 2014,
Fuel Indexation (Road Funding) Bill 2014
Compliance cost impact: The measure imposes a moderate increase in
compliance costs for fuel manufacturers and importers, as well as fuel tax
credit claimants.
Summary of regulation impact statement
Regulation impact on business
Impact: Moderate.
Main points:
· Some of the fuel manufacturers and importers in the
Australian market are likely to require an update to their
systems in order to accommodate the biannual indexation of
fuel duty rates.
· There will also be ongoing costs associated with the
twice-yearly change in the fuel duty rate for all remitters of
fuel excise and excise-equivalent customs duty.
· The majority of the change in the compliance costs for
businesses with entitlements to fuel tax credits is borne by
entities who submit their Business Activity Statements on a
quarterly or annual basis. These entities will be required to
organise purchases of fuels between purchases before and
after the indexation date, in order to properly account for
their fuel tax credit entitlement.
4
CPI indexation of fuel excise and
excise-equivalent customs duty
Outline of chapter
1.0 The Excise Tariff Amendment (Fuel Indexation) Bill 2014
(ETAFI 2014) and the Customs Tariff Amendment (Fuel Indexation)
Bill 2014 (CTAFI 2014) amend the Excise Tariff Act 1921 (ETA 1921)
and the Customs Tariff Act 1995 (CTA 1995) to index the rate of excise
and excise-equivalent customs duty applying to fuels to assist in funding
investment in road infrastructure.
1.1 The Fuel Indexation (Road Funding) Special Account Bill 2014
(FISA 2014) establishes a special account to ensure that the net additional
revenue from the reintroduction of fuel indexation is used for road
infrastructure funding.
1.2 The Fuel Indexation (Road Funding) Bill 2014 (FIRF 2014)
amends the Fuel Tax Act 2006 to ensure that taxpayers generally use the
same indexed rate of duty that was payable on the fuel for determining the
amount of their fuel tax credits.
Context of amendments
1.3 Excise and excise-equivalent customs duty are levied on fuel at
the rates set out in the ETA 1921 and the CTA 1995. The rates of excise
and excise-equivalent customs duty applying to fuel have not been
indexed since 2001. As a result, the real value of excise and
excise-equivalent customs duty collections has decreased each year.
1.4 Grants are available for entities that manufacture, and in some
cases import, biodiesel, renewable diesel and ethanol. The rate of the
grants for biodiesel and renewable diesel is set to equal the rate of duty for
biodiesel. The grants for ethanol are determined contractually by the
Commonwealth Government.
1.5 Registered entities that use fuel in their business activities for
certain activities are entitled to claim fuel tax credits. The rates of the fuel
tax credits are calculated by subtracting any rebate or grant that applies
from the applicable excise and excise-equivalent customs duty.
5
Excise Tariff Amendment (Fuel Indexation) Bill 2014, Customs Tariff Amendment
(Fuel Indexation) Bill 2014, Fuel Indexation (Road Funding) Special Account Bill 2014,
Fuel Indexation (Road Funding) Bill 2014
Summary of new law
1.6 The amendments index the rate of excise and excise-equivalent
customs duty applying to fuels, including gaseous fuels, in line with
changes in the Consumer Price Index (CPI). The rates of excise and
excise-equivalent customs duty are indexed to the CPI on 1 August 2014,
and then on 1 February and 1 August of each subsequent year.
1.7 The additional net revenue from the reintroduction of fuel
indexation is placed into a special account established by the FISA 2014.
The balance of the special account can only be used for road infrastructure
funding.
1.8 The FIRF 2014 amends the Fuel Tax Act 2006 to ensure that
taxpayers generally use the same indexed rate of duty payable on the fuel
for determining the amount of their fuel tax credits.
Comparison of key features of new law and current law
New law Current law
Indexation of duty on fuel
The rate of excise and The rate of excise and
excise-equivalent duty on fuels, excise-equivalent customs duty on
including gaseous fuels, is indexed to fuels is not indexed.
the CPI twice a year. No indexation
occurs for aviation fuels, production
of stabilised crude oil and condensate,
or petroleum-based oils and greases.
Rounding of duty rate and road user charge
The indexed rates of excise and No equivalent. Duty rates for fuels
excise-equivalent customs duty for are generally expressed to three
fuels (excluding aviation fuel and the decimal places of a cent.
other petroleum products listed
above) are rounded to one decimal
place of a cent.
The road user charge is also rounded No equivalent.
to one decimal place of a cent.
Special account for additional net revenue from fuel indexation
The net additional revenue from No equivalent.
reintroducing fuel indexation is
credited to a special account and
amounts are debited from the account
only for the purpose of road
infrastructure funding.
6
CPI indexation of fuel excise and excise-equivalent customs duty
New law Current law
Calculation of fuel tax credits
Claimants who acquire or import fuel Registered claimants who acquire or
calculate their fuel tax credits using import fuel after 30 November 2011
the duty rate on the day they acquired and before 1 July 2015 calculate their
or imported the fuel. The same rule fuel tax credits using the duty rate on
applies to registered and unregistered the day they acquired or imported the
claimants. fuel.
Claimants who manufacture the fuel Registered claimants who
and enter it for home consumption manufacture the fuel and enter it for
calculate their fuel tax credits using home consumption after
the duty rate on the day they enter the 30 November 2011 and before
fuel for home consumption. 1 July 2015 calculate their fuel tax
credits using the duty rate on the day
they enter the fuel for home
consumption.
Registered claimants who acquire,
manufacture or import the fuel after
30 June 2015 calculate their fuel tax
credits using the rate on the first day
of the tax period to which the credit is
attributed.
Unregistered claimants calculate their
fuel tax credits using the rate on the
day the Commissioner receives their
return.
Detailed explanation of new law
Indexation of the rates of excise and excise-equivalent customs duty
for fuel
1.9 This measure indexes the rates of excise and excise-equivalent
customs duty applying to fuels. The measure maintains the real value of
excise and excise-equivalent customs duty collections. The additional
revenue is used to fund investment in road infrastructure.
1.10 Fuel indexation operates in a similar way to the indexation of the
rates of excise and excise-equivalent customs duty applying to alcohol.
Indexation occurs on 1 February and 1 August each year and is based on
changes in the CPI as published by the Australian Statistician. [Schedule 1
of ETAFI 2014, items 1 to 6, subsections 6A(1), (2), (5), (6), (8) and (9) of ETA 1921,
Schedule 1 of CTAFI 2014, items 1 to 7, subsections 19(1), (2), (5), (6), (8), (9) and (10)
of CTA 1995]
7
Excise Tariff Amendment (Fuel Indexation) Bill 2014, Customs Tariff Amendment
(Fuel Indexation) Bill 2014, Fuel Indexation (Road Funding) Special Account Bill 2014,
Fuel Indexation (Road Funding) Bill 2014
1.11 Indexation applies to the following fuels:
· petroleum condensate and stabilised crude petroleum oil used
as a fuel;
· topped crude petroleum oil;
· refined or semi-refined liquid products derived from
petroleum;
· liquid hydrocarbon products;
· liquefied petroleum gas;
· liquefied and compressed natural gas;
· denatured ethanol for use in an internal combustion engine;
· biodiesel; and
· blends of the above products.
[Schedule 1 of ETAFI 2014, item 7, subsection 6A(10) of ETA 1921, Schedule 1 of
CTAFI 2014, item 8, section 19AAB of CTA 1995]
1.12 Indexation does not apply to the rates of excise and
excise-equivalent customs duty applying to aviation fuels as the net excise
and excise-equivalent customs duty collected from aviation fuels is
hypothecated to fund the Civil Aviation Safety Authority. Also
indexation does not apply for certain imported goods to the component of
the duty rate that is calculated as a percentage of the value of the goods.
[Schedule 1 of CTAFI 2014, item 8, section 19AAB of CTA 1995]
1.13 The duty payable on petroleum products is generally worked out
by applying duty at a set rate of cents per litre or kilogram of the product.
However, duty on production of stabilised crude oil and condensate under
items 20 and 21 of the Schedule to the ETA 1921 is calculated as a
percentage of the weighted-average selling price of product from the
production field. Accordingly, indexation does not apply to the
production of stabilised crude oil and condensate under items 20 and 21.
1.14 Indexation applies to blends of fuels. The rate of excise duty for
fuel blends is determined by using a five-step process. First, the entity
calculates the duty that would be payable on each fuel constituent in the
blend. The appropriate duty rate is the rate at the time that duty on the
blend is payable and takes into account indexation. [Schedule 1 of
ETAFI 2014, item 9, subsection 6G(1) of ETA 1921]
8
CPI indexation of fuel excise and excise-equivalent customs duty
1.15 The second and third steps require the entity to determine the
volume of fuel that is not attributable to one of the fuel constituents or to
water, and to calculate the duty payable on these non-fuel constituents.
The rate of duty is the same as the indexed rate of duty that applies to
petrol and diesel in item 10 of the Schedule to the ETA 1921. [Schedule 1
of ETAFI 2014, items 7 and 10, subsections 6A(10) and 6G(1) of ETA 1921]
1.16 The fourth step in subsection 6G(1) of the ETA 1921 requires
the entity to add the duty calculated in steps 1 and 3. Finally, the entity
subtracts any duty that has already been paid.
Example 1.1: Duty on fuel blends where duty has been paid on a
constituent at the same rate
A manufacturer makes a solvent blend to a customers specification
from 10,000 litres of toluene and 100 litres of a synthetic performance
enhancer on 21 January 2015. Duty was paid on the toluene on
21 December 2014. Assume that the CPI indexed rate for toluene on
1 August 2014 is 39.5 cents per litre.
Toluene is classified to subitem 10.25 of the Schedule to the
ETA 1921. The synthetic performance enhancer is not classified in its
own right in the Schedule to the ETA 1921.
The blend is classified to subitem 10.30 of the Schedule to the
ETA 1921 (assume that the blend is not excluded from subitem 10.30
by the operation of section 77J of the Excise Act 1901). The duty on
the blend is calculated under subsection 6G(1) of the ETA 1921 as
follows:
Step 1 10,000 litres of toluene × 39.5 cents $3950.00
per litre
Step 2 100 litres of synthetic performance
enhancer
Step 3 100 litres × 39.5 cents per litre $39.50
Step 4 Add the amounts in steps 1 and 3 $3989.50
Step 5 Less duty paid (10,000 litres × 39.5 cents) $3950.00
Duty payable on the blend $39.50
9
Excise Tariff Amendment (Fuel Indexation) Bill 2014, Customs Tariff Amendment
(Fuel Indexation) Bill 2014, Fuel Indexation (Road Funding) Special Account Bill 2014,
Fuel Indexation (Road Funding) Bill 2014
Example 1.2: Duty on fuel blends where duty has been paid on a
constituent at a lower rate
Assume the same facts as in Example 1.1 but that the duty was paid on
the toluene on 21 June 2014 at a rate of 38.143 cents per litre. The
duty on the blend is calculated as follows:
Step 1 10,000 litres of toluene × 39.5 cents per litre $3950.00
Step 2 100 litres of synthetic performance enhancer
Step 3 100 litres × 39.5 cents per litre $39.50
Step 4 Add the amounts in steps 1 and 3 $3989.50
$3814.30
Step 5 Less duty paid (10,000 litres × 38.143 cents)
Duty payable on the blend $175.20
Rounding of duty payable
1.17 The indexed rates of excise and excise-equivalent customs duty
for fuels (excluding aviation fuels) are rounded to one decimal place of a
cent. This simplifies the fuel tax credit claim calculation for claimants of
fuels such as petrol and diesel that currently have a rate of duty calculated
to three decimal places of a cent (otherwise expressed as five decimal
places of a dollar). [Schedule 1, item 8 of ETAFI 2014, subsection 6AAA(1), (3) and
(4) of ETA 1921, Schedule 1, item 8 of CTAFI 2014, subsections 19AAA(1) and (3) of
CTA 1995]
1.18 The rounding rules in subsection 6A(2) of the ETA 1921 and
subsection 19(2) of the CTA 1995 still apply for the purposes of
calculating the CPI indexed rate of duty for each indexation period.
Accordingly, the calculation of CPI indexed rates uses rates expressed to
three decimal places of a cent for fuels such as petrol and diesel but with
the result of the calculation rounded to one decimal place of a cent.
[Schedule 1, item 8 of ETAFI 2014, subsections 6AAA(2), (3) and (4) of ETA 1921,
Schedule 1, item 8 of CTAFI 2014, subsections 19AAA(2) and (3) of CTA 1995]
10
CPI indexation of fuel excise and excise-equivalent customs duty
Example 1.3: Calculating rounding of indexed duty payable on diesel
On 1 August 2014 CPI indexation applies. Assume that the indexation
factor for 1 August 2014 is 1.035. Accordingly the CPI indexed duty
rate for diesel on 1 August 2014 is 39.5 cents per litre (or $0.395 per
litre). This is calculated by multiplying the indexation factor by the pre
1 August 2014 duty rate (38.143 cents per litre x 1.035 = 39.478 cents
per litre rounded up to one decimal place of a cent being 39.5 cents
per litre).
On 1 February 2015 CPI indexation applies. Assume that the
indexation factor for 1 February 2015 is 1.022. Accordingly the CPI
indexed duty rate for diesel on 1 February 2015 is 40.3 cents per litre
(or $0.403 per litre). This is calculated by multiplying the indexation
factor by the 1 August 2014 rate before rounding (39.478 cents per
litre x 1.022 = 40.347 cents per litre). The result of this calculation is
then rounded down to one decimal place of a cent being 40.3 cents
per litre.
Special account for additional net revenue from fuel indexation
1.19 The FISA 2014 establishes a special account called the
Fuel Indexation (Road Funding) Special Account. [Schedule 1, section 7
of FISA 2014]
1.20 A special account is a mechanism that sets aside an amount
within the Commonwealths Consolidated Revenue Fund. The amount in
the special account must be expended for a particular purpose.
1.21 The purpose of the special account established by the FISA 2014
is to ensure that the additional net revenue collected from the
reintroduction of fuel indexation is used to fund road infrastructure
investment. The additional net revenue is calculated by determining the
excise and excise-equivalent customs duty collected as a result of the
reintroduction of fuel indexation and subtracting the estimated amount of
fuel tax credits, grants and other similar amounts that are payable to the
extent they relate to the additional duty collected from reintroducing fuel
indexation. [Schedule 1, section 9 of FISA 2014]
1.22 The FISA 2014 extends to external Territories and binds the
Crown in each of its capacities. However, it does not make the Crown
liable to be prosecuted for an offence. [Schedule 1, sections 5 and 6 of
FISA 2014]
11
Excise Tariff Amendment (Fuel Indexation) Bill 2014, Customs Tariff Amendment
(Fuel Indexation) Bill 2014, Fuel Indexation (Road Funding) Special Account Bill 2014,
Fuel Indexation (Road Funding) Bill 2014
Simplified outline
1.23 The simplified outline in the FISA 2014 is designed to assist
readers by describing the main provisions in the legislation in general
terms. [Schedule 1, section 3 of FISA 2014]
1.24 As the outline is not intended to be comprehensive it is
important to rely on the substantive provisions.
Credits to the special account
1.25 The Treasurer determines, in writing, the amount to credit to the
special account. This results in a credit from the Consolidated Revenue
Fund to the special account equal to the amount of the determination.
[Schedule 1, subsection 8(1) of FISA 2014]
1.26 The determination must state that a specified amount is credited
to the special account on a specified day. [Schedule 1, subsection 8(1) of
FISA 2014]
1.27 The Treasurer must have regard to the purpose of the special
account when making the determination. This ensures that the amount of
the determination is an estimate of the net additional revenue from the
reintroduction of fuel indexation. [Schedule 1, subsection 8(2) of FISA 2014]
1.28 The determination must be made as soon as practicable after
1 July each year once the net additional revenue from fuel indexation for
the immediately preceding financial year can be determined. In practice,
the Treasurer can only estimate the net additional revenue from fuel
indexation several months after the end of the financial year once
Business Activity Statements, which include fuel tax credit claims, have
been lodged and grant and rebate claims have been made. [Schedule 1,
paragraph 8(4)(b) of FISA 2014]
1.29 The Treasurer must make only one determination a year. The
FISA 2014 does not exclude the general power to amend a determination
in subsection 33(3) of the Acts Interpretation Act 1901. Nevertheless, it is
not anticipated that the Treasurer would vary the amount of a
determination. Any adjustments that occur to duty collections or grant,
credit or rebate claims after a determination is made are reflected in the
amount worked out for the next years determination. [Schedule 1,
paragraph 8(4)(a) of FISA 2014]
1.30 The determination is administrative in character and would not
ordinarily be considered to be a legislative instrument. However, for the
purposes of transparency, it has been decided that the determination
should be treated as a legislative instrument under the Legislative
Instruments Act 2003 despite its administrative character. This ensures
that the determination is published on the Federal Register of Legislative
Instruments. [Schedule 1, subsection 8(3) of FISA 2014]
12
CPI indexation of fuel excise and excise-equivalent customs duty
1.31 The Treasurer does not have a broad discretion to determine the
amount to credit to the special account as the Treasurer must have regard
to the purpose of the account and the amount of net additional revenue
from fuel indexation. Decisions which are administrative in character and
non-discretionary are not generally treated as disallowable legislative
instruments. Accordingly, given the administrative nature of the
determination, the provisions ensure that the determination is not
disallowable under section 42 of the Legislative Instruments Act 2003.
[Schedule 1, subsection 8(3) of FISA 2014]
1.32 Treating the determination as not disallowable minimises
uncertainty. The risk of disallowance would delay decisions to apply the
amounts in the special account for road infrastructure funding until after
the disallowance period had expired. Delays would also occur if the
instrument was disallowed and arrangements needed to be put in place for
remaking a revised instrument or legislation needed to be passed to give
effect to the intended operation of the determination.
Debits from the special account
1.33 The balance of the special account must be used to make grants
of financial assistance to the States and Territories for the purpose of
investing in road infrastructure. [Schedule 1, section 9 of FISA 2014]
1.34 The Commonwealth has the power to make conditional grants of
financial assistance to the States and Territories under sections 96 and 122
of the Australian Constitution. The terms and conditions of the grant must
be set out in a written agreement between the Commonwealth and the
relevant States and Territories. A Commonwealth Minister has the power
to enter into the agreement on behalf of the Commonwealth. [Schedule 1,
section 11 of FISA 2014]
1.35 The Commonwealth makes grants of financial assistance to the
States and Territories through the COAG Reform Fund special account
established under the COAG Reform Fund Act 2008. Funds are payable
from the Fuel Indexation (Road Funding) Special Account in accordance
with the existing payment processes.
1.36 When a payment is to be made to a State or Territory for road
infrastructure in accordance with the relevant written agreement, the
Infrastructure Minister directs, in writing, that a specified amount is to be
debited from the special account and credited to the COAG Reform Fund
special account. [Schedule 1, subsection 10(1) of FISA 2014]
13
Excise Tariff Amendment (Fuel Indexation) Bill 2014, Customs Tariff Amendment
(Fuel Indexation) Bill 2014, Fuel Indexation (Road Funding) Special Account Bill 2014,
Fuel Indexation (Road Funding) Bill 2014
1.37 The declaration enables the amounts to be debited from the
COAG Reform Fund for the purpose of making a specified grant of
financial assistance to the States and Territories. This debiting should
occur as soon as practicable. [Schedule 1, subsection 10(2) and (3) of FISA 2014]
1.38 The Infrastructure Minister may make multiple directions in the
same year and in the same document. This differs from determinations
made by the Treasurer which may only be made once a year. The
Infrastructure Minister makes periodic transfers as road infrastructure
payments become due throughout the year in accordance with the relevant
written agreement. [Schedule 1, subsection 10(4) of FISA 2014]
1.39 The Infrastructure Ministers directions are not a legislative
instrument within the meaning of section 5 of the Legislative Instruments
Act 2003 as they are administrative in character. [Schedule 1, subsection 10(5)
of FISA 2014]
1.40 The Infrastructure Minister is defined as the Minister that is
responsible for the administration of the Infrastructure Australia
Act 2008. [Schedule 1, section 4 of FISA 2014]
1.41 After the funds have been transferred from the special account to
the COAG Reform Fund special account following the Infrastructure
Ministers direction, the funds will then be paid to the States and
Territories as part of the normal regular payments from the COAG
Reform Fund special account. The Treasurer must ensure that these funds
are paid to the States and Territories as soon as practicable after the
amount is credited to the COAG Reform Fund special account.
[Schedule 1, section 11 of FISA 2014]
Delegation
1.42 The Infrastructure Minister may, by writing, delegate the
Ministers functions to the Secretary of the Infrastructure Department, or a
Senior Executive Service (SES) employee or an acting SES employee in
the Department. A delegation power is necessary and appropriate as the
Minister is required to make periodic declarations throughout each year as
grants are made. [Schedule 1, section 13 of FISA 2014]
1.43 The Treasurer may delegate, in writing, the debiting of the
COAG Reform Fund special account to the Secretary to the Treasury or
an SES employee, or acting SES employee in the Department. [Schedule 1,
section 14 of FISA 2014]
1.44 The Treasurer does not need a power to delegate the
determination of the amounts to be credited to the special account because
these determinations are made only once a year.
14
CPI indexation of fuel excise and excise-equivalent customs duty
1.45 The Infrastructure Department is defined as the Department
administered by the Infrastructure Minister while the Treasury is defined
as the Department administered by the Treasurer. The terms
SES employee and acting SES employee have the meaning set out in
section 2B of the Acts Interpretation Act 1901. [Schedule 1, section 4 of
FISA 2014]
Reporting requirements and regulation-making power
1.46 There are no specific reporting requirements in the FISA 2014
as Budget Paper No. 4 sets out the estimated cash flows and balances of
all special accounts.
1.47 The Governor-General may make regulations which are
necessary or convenient for giving effect to the FISA 2014. [Schedule 1,
section 15 of FISA 2014]
Calculation of fuel tax credits
1.48 The amount of the fuel tax credit for an amount of fuel depends
on the rate of excise or excise-equivalent customs duty applying to the
fuel (section 43-5 of the Fuel Tax Act 2006).
1.49 Claimants who acquire or import the fuel use the rate of duty
applying on the day that they acquired or imported the fuel. Claimants
who manufacture the fuel and enter it for home consumption use the rate
of duty applying on the day they enter the fuel for home consumption.
1.50 This amendment seeks to ensure that the same indexed rate is
used for determining the amount of excise or excise-equivalent customs
duty payable on the fuel and the amount of the fuel tax credit. These rules
also apply in determining the rate of duty used in working out a claimants
fuel tax credit entitlement after deducting the road user charge and any
applicable grant for biodiesel or renewable diesel. [Schedule 4, items 1, 2 and
3 of FIRF 2014, subsections 43-5(2A) and 43-10(6) of the Fuel Tax Act 2006]
15
Excise Tariff Amendment (Fuel Indexation) Bill 2014, Customs Tariff Amendment
(Fuel Indexation) Bill 2014, Fuel Indexation (Road Funding) Special Account Bill 2014,
Fuel Indexation (Road Funding) Bill 2014
1.51 The provisions that applied before the amendment used the duty
rate on the first day of the tax period to calculate the amount of the fuel
tax credits after 30 June 2015 for most registered claimants. This may
have understated the fuel tax credits for claimants who report quarterly or
annually. These claimants may have paid the higher indexed rate of duty,
or acquire fuel that has borne the higher rate on or after 1 February or
1 August, but could only claim fuel tax credits based on the lower duty
rate applying on the first day of a tax period starting on 1 January or
1 July.
1.52 The special rule for determining the appropriate duty rate for
unregistered claimants is also removed. Formerly, unregistered claimants
used the excise rate applying on the day the Commissioner of Taxation
received the return relating to the fuel. If this rule was retained after
indexation, unregistered claimants would be able to gain an advantage by
postponing the lodgment of their fuel tax returns. [Schedule 4, item 1 of
FIRF 2014, subsection 43-5(2A) of the Fuel Tax Act 2006]
1.53 The rate of the road user charge set out in the Road User Charge
Determination (No. 1) 2013 of 26.14 cents is reduced to one decimal place
of a cent, that is, 26.1 cents effective from 1 August 2014. This ensures
that the rate is consistent with the rounding of duty rates to one decimal
place of a cent from 1 August 2014 and simplifies the fuel tax credit claim
calculation for heavy vehicles using fuel for travelling on public roads.
[Schedule 4, item 6 of FIRF 2014]
1.54 In addition, future rates of the road user charge must also be
rounded to one decimal place of a cent. [Schedule 4, items 4 and 5 of
FIRF 2014, subsection 43-10(11A) of the Fuel Tax Act 2006]
Consequential amendments
1.55 The Excise Tariff Amendment (Taxation of Alternative Fuels)
Act 2011 (ETLAA 2011) and the Customs Tariff Amendment (Taxation of
Alternative Fuels) Act 2011 (CTLAA 2011) increase excise and
excise-equivalent customs duty on liquefied petroleum gas, and
compressed and liquefied natural gas from 1 July 2015 as part of the final
stage of the phase-in of taxation on gaseous fuels.
1.56 The increase in the rates of duty that applies on 1 July 2015 to
gaseous fuels is indexed to ensure that the rates increase in line with the
CPI. The indexed duty rates are rounded to one decimal place of a cent.
[Schedule 1, item 12 of ETAFI 2014, section 6FAA of ETLAA 2011, Schedule 1, item 10
of CTAFI 2014, section 19AD of CTLAA 2011]
16
CPI indexation of fuel excise and excise-equivalent customs duty
1.57 Consequential amendments are made to the Energy Grants
(Cleaner Fuels) Scheme Regulations 2004 to make it clear that the amount
of the cleaner fuel rebates for biodiesel and renewable diesel are
calculated by using the biodiesel duty rate that applied at the time when
the cleaner fuel was entered for home consumption. [Schedule 5, items 1 to 4
of FIRF 2014, Regulations 6 and 7C of the Energy Grants (Cleaner Fuels) Scheme
Regulations 2004]
1.58 Consequential amendments are also made to the Excise Act 1901
to ensure that a fuel is not classified as a blend and subject to duty if parts
of the fuel attracted a different rate of duty only because of indexation.
[Schedule 3, item 1 of FIRF 2014, subsection 77H(2AA) of the Excise Act 1901]
1.59 A note is added to section 5 of the COAG Reform Fund
Act 2008. The note sets out that amounts may be credited to the
COAG Reform Fund special account under the FISA 2014. [Schedule 2,
item 1 of FIRF 2014, subsection 5(2) of the COAG Reform Fund Act 2008]
1.60 The FIRF 2014 makes consequential amendments that are
contingent on the commencement of the relevant parts of the Public
Governance Performance and Accountability Act 2013 (PGPA 2013).
The changes reflect that the PGPA 2013 refers to ,,special accounts in
lower case whereas the Financial Management and Accountability
Act 1997 (FMAA 1997) uses upper case when referring to ,,Special
Accounts. A contingent amendment is also made to the provision which
states that the Fuel Indexation (Road Funding) Special Account is a
special account under the FMMA 1997. This amendment substitutes a
reference to the PGPA 2013 for the reference to the FMAA 1997.
[Schedule 1 of FIRF 2014, items 1 to 15, sections 3, 4, 7, 8, 9 and 10 of FISA 2014]
Application and transitional provisions
Application provisions
1.61 Indexation applies to goods manufactured or produced in
Australia, or imported into Australia, on or after 31 July 2014. It also
applies to goods imported into Australia, or manufactured or produced in
Australia, before 31 July 2014 but which have not yet been entered into
home consumption. The amendments commence on 31 July 2014. This
removes any doubt that the amendments apply for the purposes of
indexation on 1 August 2014. [Schedule 1, item 11 of ETAFI 2014, Schedule 1,
item 9 of CTAFI 2014, clause 2 of ETAFI 2014, clause 2 of CTAFI 2014]
17
Excise Tariff Amendment (Fuel Indexation) Bill 2014, Customs Tariff Amendment
(Fuel Indexation) Bill 2014, Fuel Indexation (Road Funding) Special Account Bill 2014,
Fuel Indexation (Road Funding) Bill 2014
1.62 The consequential amendments that impose the final increase in
duty for alternative fuels have effect from 1 July 2015 under clause 12 of
the ETLAA 2011 and clause 134 of the CTLAA 2011. [Schedule 1, item 12
of ETAFI 2014, section 6FAA of ETLAA 2011, Schedule 1, item 10 of CTAFI 2014,
section 19AD of CTLAA 2011]
1.63 The amendments to the Fuel Tax Act 2006 commence on
31 July 2014. They apply to tax periods, starting on or after 1 July 2014
and to returns that relate to a fuel tax return period and are lodged with the
Commissioner on or after 1 July 2014. Although this has an element of
retrospectivity, taxpayers will not be adversely affected as the fuel tax
credit rate for acquisitions, importations and the entry of manufactured
fuels in the period 1 July 2014 to 31 July 2014 will not change.
[Schedule 4, item 3 of FIRF 2014, clause 2 of FIRF 2014]
1.64 The consequential amendments to the Excise Act 1901
concerning blending and to the Energy Grants (Cleaner Fuels) Scheme
Regulations 2004 concerning the rate of rebate commence on
31 July 2014. [Clause 2 of FIRF 2014]
1.65 The FISA 2014 and the provision in the FIRF 2014 which
inserts a note into the COAG Reform Fund Act 2008 commence on
1 July 2015. This ensures that the special account which holds net
revenue from fuel indexation can be first credited with an amount after the
end of the 2014-15 financial year once the net revenue collected for the
2014-15 financial year can be calculated. [Clause 2 of FISA 2014, clause 2
of FIRF 2014]
1.66 The consequential amendments to the capitalisation of the
words "special accounts" in the FISA 2014 commence on the later of
1 July 2015 and the commencement of section 6 of the PGPA 2013.
[Clause 2 of FIRF 2014]
Transitional provisions
1.67 The legislative instrument that gives effect to the road user
charge that is in force when the ETAFI 2014 commences is treated as
being rounded to one decimal place of a cent from 1 August 2014.
[Schedule 4, item 6 of FIRF 2014]
18
CPI indexation of fuel excise and excise-equivalent customs duty
STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS
Prepared in accordance with Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011
Excise Tariff Amendment (Fuel Indexation) Bill 2014, Customs Tariff
Amendment (Fuel Indexation) Bill 2014, Fuel Indexation (Road Funding)
Special Account Bill 2014 and the Fuel Indexation (Road Funding)
Bill 2014
1.68 The Excise Tariff Amendment (Fuel Indexation) Bill 2014, the
Customs Tariff Amendment (Fuel Indexation) Bill 2014, Fuel Indexation
(Road Funding) Special Account Bill 2014 and the Fuel Indexation (Road
Funding) Bill 2014 are compatible with the human rights and freedoms
recognised or declared in the international instruments listed in section 3
of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview
1.69 The Excise Tariff Amendment (Fuel Indexation) Bill 2014 and
the Customs Tariff Amendment (Fuel Indexation) Bill 2014 amend the
Excise Tariff Act 1921 and the Customs Tariff Act 1995 to index the rate
of excise and excise-equivalent customs duty applying to fuels to fund
investment in road infrastructure.
1.70 The Fuel Indexation (Road Funding) Bill 2014 amends the
Fuel Tax Act 2006 to ensure that taxpayers generally use the same indexed
rate for determining the amount of duty payable on the fuel and the
amount of their fuel tax credits.
1.71 The Fuel Indexation (Road Funding) Special Account Bill 2014
establishes a special account to ensure that the net additional revenue from
fuel indexation must be used for road infrastructure investment.
Human rights implications
These Bills do not engage any of the applicable rights or freedoms.
Conclusion
These Bills are compatible with human rights as they do not raise any
human rights issues.
19
Regulation impact statement: CPI
indexation of fuel excise and
excise-equivalent customs duty
What is fuel excise?
2.0 Fuel tax (excise or customs duty) is applied to all excisable fuel
and petroleum products whether domestically produced or imported.
2.1 The rate applicable to each fuel varies, but the benchmark rate
that applies to petroleum and diesel is currently set at 38.143 cents
per litre. The tax is applied at the point at which the fuel enters the
Australian market. For domestically produced fuels, this is generally at
the point of wholesale, while for imported fuels, it is at the point of
delivery for home consumption.
2.2 Indexation of fuel tax was introduced in August 1983 in order to
maintain the real value of tax collections and to provide more stability for
businesses and consumers by removing the need for discretionary changes
to tax rates (larger amounts made less frequently). In March 2001, the
then Government abolished the six monthly indexation of fuel tax rates,
but continued to apply indexation to other excisable goods, such as
alcohol and tobacco. This decision was taken following the introduction
of the GST on 1 July 2000, as increasing world oil prices at the time gave
rise to concerns that fuel prices would be pushed higher. Consequently,
the fuel tax on petrol and diesel has remained at 38.143 cents per litre
since then.
2.3 The Australia's Future Tax System report released in May 2010
recommended that revenue from fuel tax imposed for general government
purposes should be replaced over time with revenue from more efficient
broad-based taxes.
2.4 The report also recommended that fuel tax should apply to all
fuels used in road transport on the basis of energy content, and be indexed
to the consumer price index (CPI).
21
Excise Tariff Amendment (Fuel Indexation) Bill 2014, Customs Tariff Amendment
(Fuel Indexation) Bill 2014, Fuel Indexation (Road Funding) Special Account Bill 2014,
Fuel Indexation (Road Funding) Bill 2014
Why is government action needed?
2.5 Since the cessation of fuel tax indexation in March 2001 the real
value of fuel tax has declined with inflation, creating significant
difficulties for the Government to fund spending commitments, such as
new road infrastructure projects. At the time of the indexation freeze, fuel
tax represented 43.4 per cent of the average national petrol price. By
March 2014 this proportion had fallen to 25 per cent.
2.6 In the 2014-15 Budget the Government committed to increasing
road expenditure, with over $26 billion of Commonwealth spending
planned for road infrastructure projects. An increase in the rate of fuel tax
would be used to help fund these infrastructure projects. This would
create a link between the users of the road infrastructure and the payers of
fuel tax whilst ensuring a predictable and growing source of revenue.
2.7 Unlike fuel, rates on alcohol and tobacco are currently indexed.
Alcohol (excluding wine) is indexed to the CPI, which changes biannually
in February and August every year. As of March 2014, tobacco has
changed from CPI indexation to Average Weekly Ordinary Time Earnings
(AWOTE) indexation and is now indexed in March and September every
year.
What policy options are you considering?
Option 1: Biannual CPI indexation
2.8 Beginning 1 August 2014 the excise and excise-equivalent
customs duty on all non-aviation fuels are indexed to the CPI, occurring
on 1 February and 1 August each year thereafter based on the sum of the
CPI movements in the two quarters prior to the indexation date.
2.9 The duty on gaseous fuels will increase on 1 July 2014 in
accordance with their transition into the fuel tax system, and will then
have biannual CPI indexation applied to them from 1 August 2014. On
1 July 2015 the duty rate will then rise by an interval such that it
maintains a 50 per cent discount on the energy content equivalent rate
with the application of indexation.
2.10 For consumers of petrol and diesel, the reintroduction of
indexation is expected to result in an initial price increase of around
0.5 cents per litre on 1 August 2014.
22
Regulation impact statement: CPI indexation of fuel excise and excise-equivalent customs duty
2.11 By the end of the forward estimates period in July 2018 the
biannual indexation of fuel excise and excise-equivalent customs duty is
estimated to result in a total increase in petrol and diesel prices of
4.1 cents per litre, which includes a 0.4 cent per litre increase in
GST which is levied on the duty-inclusive price.
Option 2: Quarterly CPI indexation
2.12 Beginning 1 August 2014 the excise and excise-equivalent
customs duty on all non-aviation fuels are indexed to the CPI, occurring
on 1 February, 1 May, 1 August and 1 November each year thereafter
based on the CPI movement in the quarter prior to the indexation date.
2.13 The duty on gaseous fuels will increase on 1 July 2014 in
accordance with their transition into the fuel tax system, and will then
have quarterly CPI indexation applied to them from 1 August 2014. On
1 July 2015 the duty rate will then rise by an interval such that it
maintains a 50 per cent discount on the energy-content equivalent rate
with the application of indexation.
2.14 For consumers of petrol and diesel, the reintroduction of
indexation is expected to result in a price increase of around 0.5 cents
per litre after two indexation periods.
2.15 By the end of the forward estimates period in July 2018, the
quarterly indexation of fuel excise and excise-equivalents customs duty
will result in a larger increase in petrol and diesel prices than the biannual
indexation due to compounding effects.
Option 3: A one-off increase of four cents
2.16 On 1 August 2014 the excise and excise-equivalent
customs duty rates on petrol and diesel are increased by 4 cents per litre,
with all other non-aviation fuels having pro-rated increases. This would
increase the duty rate on petrol and diesel from 38.143 cents per litre to
42.143 cents per litre.
2.17 Gaseous fuels would continue to increase at the same intervals
as previously until they reach their full rate on 1 July 2015 and then have
an additional 10.5 per cent increase on 1 July 2016, bringing the duty rate
on gaseous fuels back in line with 50 per cent of the energy equivalent
rate.
23
Excise Tariff Amendment (Fuel Indexation) Bill 2014, Customs Tariff Amendment
(Fuel Indexation) Bill 2014, Fuel Indexation (Road Funding) Special Account Bill 2014,
Fuel Indexation (Road Funding) Bill 2014
What is the likely impact of each option?
Fuel wholesalers and importers
2.18 The Australian Competition and Consumer Commission
(ACCC) currently publishes an annual price monitoring report on the
Australian petroleum industry. The most recent was published in
December 2013. 1
2.19 In that report, the ACCC stated that the wholesale market for
petroleum is dominated by four major players (BP, Shell, Caltex and
Mobil). These four entities accounted for 92 per cent of wholesale petrol
sale volumes in 2012-13.
2.20 According to further data provided by the Australian Taxation
Office (ATO), there are fewer than 100 remitters of fuel excise (excluding
aviation fuel remitters).
2.21 For the options which change the current treatment of fuel tax
(all options), the initial compliance cost imposed on wholesale remitters is
likely to be felt through the need for an update to their systems to enable
changes to the rate they apply when on-selling the fuel.
2.22 As a result, the compliance cost assessment uses the average
wage in the IT industry of $47 per hour and assumes an average of five
hours to update each of the 97 fuel companies. This creates a total
compliance cost for the industry of approximately $22,795 for all of the
considered options (a Regulatory Burden and Cost Offset (RBCO)
Estimate Table for option 1 is provided at Appendix A).
2.23 However, some of the oil companies may not need the initial
update to their systems as they will already have the ability to account for
changing duty rates.
2.24 There will also be ongoing compliance costs for the options, as a
legislative change to the fuel excise and excise-equivalent customs duty
will result in either biannual (Option 1), quarterly (Option 2) or once-off
(Option 3) changes to the duty rate that the wholesalers charge purchasers
of fuel. Each change with indexation will require the manual inputting of
a new duty rate into the companys systems, with reference to the new
duty rate announced by the ATO.
1
Australian Competition and Consumer Commission (2013) Monitoring of the Australian
petroleum industry 2013 - Report of the ACCC into the prices, costs and profits of unleaded
petrol in Australia; http://www.accc.gov.au/publications/monitoring-of-the-australian-
petroleum-industry.
24
Regulation impact statement: CPI indexation of fuel excise and excise-equivalent customs duty
2.25 The compliance costs for this action are assumed to be
completed by administrative staff paid an average of $27 per hour, taking
half an hour to find and change the excise and customs duty rates in the
companys system and done either biannually, quarterly or once only,
depending upon which option is chosen. This creates a total compliance
cost for the industry of $2,619 for biannual indexation, $5,238 for
quarterly indexation or $1,309 for the one-off increase (which would be
the same as for an annual indexation option).
2.26 The indexed rates of fuel tax will be calculated by the ATO
every indexation period, which will save businesses the need to calculate
the new rate themselves by applying CPI to the present duty rate.
2.27 The size of these compliance costs is likely to vary from
wholesaler to wholesaler, with smaller remitters of duty likely to face
greater compliance cost relative to the four large oil companies.
Households and businesses
2.28 By re-introducing biannual indexation by the consumer price
index of excise and excise-equivalent customs duty (Option 1) for all fuels
except aviation fuels, the Government would generate $2.2 billion over
the forward estimates period.
2.29 The price impact of any increase in fuel excise and
excise-equivalent customs duty will fall most heavily on households and
owners of light commercial vehicles used on-road. However, there will
be no increase in the compliance costs borne by these groups.
2.30 Similarly, the effect on demand of an increase in the fuel tax is
expected to be minimal, due to the inelasticity of demand for most fuel
products. The Australia's Future Tax System consultation paper noted
that ,,due to limitations in current technology and distribution systems, the
demand for transport fuels is relatively unresponsive to price.2
2.31 Fuel used in heavy (that is, more than 4.5 tonnes gross vehicle
mass) on-road vehicles and business off-road use will not bear the burden
of any fuel excise increases because of their entitlements to fuel tax
credits. For off-road activities, this is the full reimbursement of fuel tax
while for heavy on-road vehicles this is equivalent to the fuel tax rate
minus the road user charge.
2
Australias Future Tax System (2008) Consultation Paper;
http://taxreview.treasury.gov.au/content/downloads/consultation_paper/consultation_paper.p
df.
25
Excise Tariff Amendment (Fuel Indexation) Bill 2014, Customs Tariff Amendment
(Fuel Indexation) Bill 2014, Fuel Indexation (Road Funding) Special Account Bill 2014,
Fuel Indexation (Road Funding) Bill 2014
2.32 However, businesses with access to fuel tax credits may still
face increased compliance costs. Fuel purchase records will need to be
categorised before and after the indexation date and variable fuel tax
credit entitlements will need to be calculated for standard reporting
businesses with either quarterly or annual Business Activity Statements
(BAS). This will occur under any of the considered options to change the
duty rates (all options), but will be an ongoing cost every six- or
three-month period under the indexation options (Options 1 and 2).
2.33 The indexation of fuel excise will also further affect those
businesses which rely on their own software to calculate their fuel tax
credit claims, as they will have to manually enter the new excise rate
every indexation period.
2.34 The ongoing compliance costs for these actions depend on
which option is chosen and may occur once-off, biannually or quarterly.
Assuming that all (approximately 186,000) fuel tax credit claimants are
similarly affected by either filing a BAS quarterly or annually or through
having to update their own software every month, the compliance costs
are estimated at $27 per hour for a single administrative staff member to
either sort through the fuel purchase records or change the excise rate in
the software within half an hour. This creates a total compliance cost for
the industry of $5,037,903 for biannual indexation, $10,075,806 for
quarterly indexation or $2,518,952 for the once-off increase.
2.35 Businesses with an entitlement to offsetting fuel tax credits may
also face the possibility of increased cash flow issues due to a larger
immediate outgoing of fuel tax, as they only receive the credit for fuel tax
paid at the end of their tax period when they lodge their BAS.
2.36 As a result of the more frequent indexation periods and the fixed
time costs of any rate changes, quarterly indexation (Option 2) would
likely involve higher compliance costs than biannual indexation
(Option 1).
Alternative fuels
2.37 The gaseous fuels are not yet through their transition into the
fuel tax system, which is set to be completed on 1 July 2015.
Reintroducing fuel tax indexation will further raise the scheduled
increases in their fuel tax.
2.38 The Government announced in the 2014-15 Budget that it will
make changes to the tax treatment of ethanol and biodiesel to end their
respective industry support grants, the Ethanol Production Grants and the
Cleaner Fuels Grants Scheme. This is planned to begin on 1 July 2015
26
Regulation impact statement: CPI indexation of fuel excise and excise-equivalent customs duty
with the immediate cessation of the grants and a simultaneous reduction
of the excise rate on domestically produced ethanol and biodiesel from its
current rate of 38.143 cents per litre to zero. The customs duty rate on
imported ethanol and biodiesel will remain at 38.143 cents per litre. Over
the following five years to 2020-21, both products will be phased into the
excise system until they reach 50 per cent of the energy content
equivalent excise rate, similar to the expected treatment of gaseous fuels
after 1 July 2015.
2.39 At current excise rates, 50 per cent of energy content
equivalence would be 12.5 cents per litre for ethanol (increasing in
2.5 cent intervals over the five years) and 19.07 for biodiesel (in 3.814
cent intervals). However, during the transition period, ethanol and
biodiesel will be subject to indexation along with other non-aviation fuels,
which will further raise the scheduled increases in their excise.
Consultation
2.40 A targeted consultation process on the compliance costs
associated with a change to biannual fuel duty indexation was undertaken.
The four major fuel manufacturers in the Australian market (BP, Shell,
Caltex and Mobil) have been consulted on the estimated costs associated
with the reintroduction of fuel duty indexation.
2.41 While the fuel manufacturers are not overly concerned about the
costs of updating their systems, they do have concerns about the time
between the announcement of the new duty rate each indexation period
and its application on 1 August or 1 February as they consider this could
lead to disputes over payments from customers.
2.42 These timing concerns are largely driven by the relevant CPI
figures only being released in late July and late January for the August
and February indexation periods, respectively. This gives the fuel
manufacturers approximately one week to be forewarned of the new duty
rate by the ATO and Customs. One weeks notice for the new rate was
standard practice in the years between 1983 and 2001, prior to the
freezing of indexation for fuel products, and has continued to be standard
practise for alcohol and tobacco duty (prior to tobacco moving to
AWOTE indexation in March 2014).
2.43 Concerns were also raised about the impact of indexation on
tying up working capital, as there is normally a delay between when the
manufacturers remit excise and customs duty and when they receive
payment from their customers.
27
Excise Tariff Amendment (Fuel Indexation) Bill 2014, Customs Tariff Amendment
(Fuel Indexation) Bill 2014, Fuel Indexation (Road Funding) Special Account Bill 2014,
Fuel Indexation (Road Funding) Bill 2014
2.44 Further, the fuel manufacturers also raised concerns about the
costs involved with informing customers of changed prices. However,
given the constant price volatility in fuel markets, the additional costs
from fuel indexation involved with this are considered to be negligible in
the context of the overall compliance costs of $5.1 million.
Conclusion and recommended option
2.45 In view of the Governments commitment to deliver new road
infrastructure projects through a predictable, growing source of revenue, it
is considered that the reintroduction of some form of indexation of fuel
tax (Options 1 or 2) is the preferred option.
2.46 Given that biannual indexation was a standard feature of the fuel
tax system prior to 2001 and due to the additional compliance costs
expected from quarterly indexation (Option 2), the biannual indexation of
fuel excise to the CPI from 1 August 2014 (Option 1), is the preferred
option. In addition, in comparison to annual indexation, biannual
indexation would also result in a larger source of revenue which would
allow the Government to more easily fund spending on new road
infrastructure projects.
2.47 To further simplify the compliance burden on businesses,
rounding the duty rate of indexed fuels from three decimal places in a
cent to one decimal place would also be recommended. On the current
rate for petrol, this would have the effect of reducing the excise and
excise-equivalent customs duty rate from 38.143 cents per litre to
38.1 cents per litre.
Implementation and review
2.48 The proposed approach is to biannually index non-aviation fuel
excise and excise-equivalent customs duty to the CPI from 1 August 2014
by the introduction of legislation into the Parliament.
2.49 The legislation would modify the Excise Tariff Act 1921 and the
Customs Tariff Act 1995. These modifications will result in the
reintroduction of the indexation to the CPI of excise and excise-equivalent
customs duty on fuel products. In addition, the applicable duties will now
be applied by rounding to one decimal place for the purpose of remitting
excise and the claiming of fuel tax credits.
2.50 To ensure that the fuel tax credit system works effectively,
modifications will also be made to the Fuel Tax Act 2006. These
28
Regulation impact statement: CPI indexation of fuel excise and excise-equivalent customs duty
modifications seek to ensure that the same indexed rate is used for
determining the amount of excise or excise-equivalent customs duty
payable on the fuel and the amount of the fuel tax credit for the same fuel.
2.51 Further changes to the Fuel Tax Act 2006 will also ensure that
the road user charge is designated to three decimal places after the next
determination by the Transport Minister as well as during the transition
period prior to this determination, in order to prevent additional
compliance burdens through an early determination.
2.52 A separate Fuel Indexation (Road Funding) Special Account
Bill 2014 will establish a special account in order to ensure that all net
additional revenue gained from the indexation of fuel duty is used to fund
the provision of new road infrastructure projects.
2.53 Consequential amendments will also be made to the
Energy Grants (Cleaner Fuels) Scheme Regulations 2004 to ensure that
the Cleaner Fuels Grants Scheme continues to fully offset the increased
fuel duty applying to biofuels. Further amendments will be made to the
Excise Act 1901 and the Financial Management and Accountability Act
1997 to ensure the proper functioning of the fuel duty indexation measure.
29
Appendix A: Regulatory Burden and Cost Offset Estimate Table
Average Annual Compliance Costs (from Business as usual)
Costs Business Community Individuals Total Cost
Organisations
Total by Sector $5,063,317.00 $0 $0 $5,063,317.00
Cost offset Business Community Individuals Total by
Organisations Source
Agency $5,063,317.00 $0 $0 $5,063,317.00
Within portfolio $0 $0 $0 $0
Outside portfolio $0 $0 $0 $0
Total by Sector $5,063,317.00 $0 $0 $5,063,317.00
Proposal is cost neutral? yes no
Proposal is deregulatory yes no
Balance of cost offsets ($132,988,606.10)
30
Index
Schedule 1: Amendments (Excise Tariff Amendment
(Fuel Indexation) Bill 2014)
Bill reference Paragraph number
Items 1 to 6, subsections 6A(1), (2), (5), (6), (8) and (9) of 1.11
ETA 1921
Items 7 and 10, subsections 6A(10) and 6G(1) of ETA 1921 1.16
Item 7, subsection 6A(10) of ETA 1921, 1.12
Item 8, subsection 6AAA(1), (3) and (4) of ETA 1921 1.18
Item 8, subsections 6AAA(2), (3) and (4) of ETA 1921 1.19
Item 8, section 19AAB of CTA 1995 1.13
Item 9, subsection 6G(1) of ETA 1921 1.15
Item 11 1.62
Item 12 of section 6FAA of ETLAA 2011 1.57, 1.63
Clause 2 1.62
Schedule 1: Amendments (Customs Tariff Amendment
(Fuel Indexation) Bill 2014)
Bill reference Paragraph number
Items 1 to 7, subsections 19(1), (2), (5), (6), (8), (9) and (10) of 1.11
CTA 1995
Item 8, section 19AAB of CTA 1995 1.12
Item 8, subsections 19AAA(1) and (3) of CTA 1995 1.18
Item 8, subsections 19AAA(2) and (3) of CTA 1995 1.19
Item 9 1.62
item 10, section 19AD of CTLAA 2011 1.57, 1.63
Clause 2 1.62
31
Excise Tariff Amendment (Fuel Indexation) Bill 2014, Customs Tariff Amendment
(Fuel Indexation) Bill 2014, Fuel Indexation (Road Funding) Special Account Bill 2014,
Fuel Indexation (Road Funding) Bill 2014
Schedule 1: Amendments consequential on the enactment of
the Public Governance, Performance and Accountability
Act 2013 (Fuel Indexation (Road Funding) Bill 2014)
Bill reference Paragraph number
Items 1 to 15, sections 3, 4, 7, 8, 9 and 10 of FISA 2014 1.61
Schedule 1: Fuel Indexation (Road Funding) Special Account
Bill 2014
Bill reference Paragraph number
Section 3 1.24
Section 4 1.41, 1.46
Sections 5 and 6 1.23
Section 7 1.20
Subsection 8(1) 1.26
Subsection 8(1) 1.27
Subsection 8(2) 1.28
Subsection 8(3) 1.31, 1.32
Paragraph 8(4)(a) 1.30
Paragraph 8(4)(b) 1.29
Section 9 1.22, 1.34
Subsection 10(1) 1.37
Subsection 10(2) and (3) 1.38
Subsection 10(4) 1.39
Subsection 10(5) 1.40
Section 11 1.35, 1.42
Section 13 1.43
Section 14 1.44
Section 15 1.48
32
Index
Schedule 2: Consequential amendment for establishment of
(Fuel Indexation (Road Funding) Special Account Bill 2014)
Bill reference Paragraph number
Item 1 of FIRF 2014, subsection 5(2) of the COAG Reform Fund 1.60
Act 2008
Schedule 3: Consequential amendment for indexation
(Fuel Indexation (Road Funding) Bill 2014)
Bill reference Paragraph number
Item 1 of FIRF 2014, subsection 77H(2AA) of the Excise Act 1901 1.59
Schedule 4: Fuel Tax (Fuel Indexation (Road Funding)
Bill 2014)
Bill reference Paragraph number
Item 1 of FIRF 2014, subsection 43-5(2A) of the Fuel Tax Act 2006 1.53
Items 1, 2 and 3 of FIRF 2014, subsections 43-5(2A) and 43-10(6) of 1.51
the Fuel Tax Act 2006
Item 3 of FIRF 2014, clause 2 of FIRF 2014 1.64
Items 4 and 5 of FIRF 2014, subsection 43-10(11A) of the Fuel Tax 1.55
Act 2006
Item 6 of FIRF 2014 1.54, 1.68
Schedule 5: Energy Grants (Cleaner Fuel) Scheme
(Fuel indexation (Road Funding) Bill 2014
Bill reference Paragraph number
Items 1 to 4 of FIRF 2014, Regulations 6 and 7C of the Energy 1.58
Grants (Cleaner Fuels) Scheme Regulations 2004
33