Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2013-2014
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
OZONE PROTECTION AND SYNTHETIC GREENHOUSE GAS (IMPORT LEVY)
(TRANSITIONAL PROVISIONS) BILL 2014
EXPLANATORY MEMORANDUM
(Circulated by the authority of the Minister for the Environment,
the Hon Greg Hunt MP)
2
Table of contents
Glossary .................................................................................................. 1
General outline and financial impact ....................................................... 3
Chapter 1 Transitional provisions for importers of synthetic
greenhouse gas .......................................................... 12
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
Abbreviation Definition
Bill Ozone Protection and Synthetic Greenhouse Gas
(Import Levy) (Transitional Provisions) Bill 2014
Clean Energy Legislation Clean Energy Act 2011;
Clean Energy Regulator Act 2011;
Climate Change Authority Act 2011;
Clean Energy (Consequential Amendments)
Act 2011;
Clean Energy (Unit Shortfall Charge - General)
Act 2011;
Clean Energy (Unit Issue Charges - Fixed Charge)
Act 2011;
Clean Energy (Unit Issue Charges - Auctions) Act
2011;
Clean Energy (Charges--Excise) Act 2011;
Clean Energy (Charges--Customs) Act 2011;
Ozone Protection and Synthetic Greenhouse Gas
(Manufacture Levy) Amendment Act 2011;
Ozone Protection and Synthetic Greenhouse Gas
(Import Levy) Amendment Act 2011;
Clean Energy (Excise Tariff Legislation Amendment)
Act 2011;
Clean Energy (Customs Tariff Amendment) Act 2011;
Clean Energy (Fuel Tax Legislation Amendment);
Clean Energy (Household Assistance Amendments)
Act 2011;
Clean Energy (Tax Laws Amendments) Act 2011;
Clean Energy (Income Tax Rates Amendments) Act
2011;
Clean Energy Legislation Amendment Act 2012;
Clean Energy Amendment (International Emissions
Trading and Other Measures) Act 2012.
GWP Global warming potential
Main Repeal Bill Clean Energy Legislation (Carbon Tax Repeal) Bill
2014
1
Ozone Protection and Synthetic Greenhouse Gas (Import Levy) (Transitional Provisions) Bill
2014
Abbreviation Definition
SGG Synthetic Greenhouse Gas
Ozone and SGG (Import Ozone Protection and Synthetic Greenhouse Gas
Levy) Act (Import Levy) Act 1995
Ozone Import Amendment Ozone Protection and Synthetic Greenhouse Gas
Bill (Import Levy) Amendment (Carbon Tax Repeal) Bill
2014
Ozone Manufacture Ozone Protection and Synthetic Greenhouse Gas
Amendment Bill (Manufacture Levy) Amendment (Carbon Tax
Repeal) Bill 2014
2
General outline and statements
Background
Repealing the carbon tax
The Australian Government has a clear commitment to repeal the carbon
tax to:
· boost Australia's economic growth, increase jobs and
enhance Australia's international competitiveness;
· remove the cost of living pressures on households resulting
from the carbon tax;
· remove the cost pressures faced by business as a result of the
carbon tax; and
· remove unnecessary, burdensome and costly regulation.
This Bill replaces the Ozone Protection and Synthetic Greenhouse Gas
(Import Levy) (Transitional Provisions) Bill 2013 that has been rejected
twice by the Senate.
Date of effect:
Sections 1 and 2 and anything in the Bill not elsewhere covered in
section 2 commence on the day the Bill receives the Royal Assent.
Sections 3-7 commence at the same time as section 3 of the Ozone
Protection and Synthetic Greenhouse Gas (Import Levy) Amendment
(Carbon Tax Repeal) Bill 2014 (Ozone Import Amendment Bill)
commences.
Proposal announced:
The Prime Minister, the Hon Tony Abbott MP, and the Minister for the
Environment, the Hon Greg Hunt MP, announced the Government's plan
to repeal the carbon tax on Tuesday, 15 October 2013, reflecting the
Coalition parties' longstanding and public commitment to this policy.
3
Ozone Protection and Synthetic Greenhouse Gas (Import Levy) (Transitional Provision) Bill
2014
Financial impact:
The financial impact associated with this Bill is reflected in Fiscal Table 1
below.
Fiscal Table 1: Impact on Underlying Cash Balance ($ million)
2012-13 2013-14 2014-15 2015-16 2016-17 Total
Total Impact on
0.0 -10.0 0.0 0.0 0.0 -10.0
Fiscal Balance:
Total Impact on
0.0 0.0 -10.0 0.0 0.0 -10.0
Underlying Cash:
Regulation Impact Statement
Shortages of some species of synthetic greenhouse gas - Regulation
impact on business
This Regulation Impact Statement is for the Government's response to
potential shortages of some species of synthetic greenhouse gases in the
period prior to the repeal of the carbon tax, including the equivalent
carbon tax on synthetic greenhouse gases, on 1 July 2014.
The agency has prepared a single-stage Regulation Impact Statement. As
no decision has been previously announced, an options-stage Regulation
Impact Statement is not required.
Problem
There is a risk that there may be a shortage of some species of synthetic
greenhouse gases prior to the repeal of the equivalent carbon tax on
1 July 2014. The likelihood of a shortage is considered low. However the
consequences are high as gas is required to maintain essential refrigeration
and air conditioning plant, fire protection systems and electricity
distribution equipment in critical infrastructure such as hospitals,
computer servers and for electricity distribution.
Industry stakeholders have identified that there may be potential shortages
of synthetic greenhouse gases prior to the repeal of the equivalent carbon
tax on 1 July 2014. Shortages may occur as participants in the synthetic
greenhouse gas supply chain seek to minimise their inventories prior to
repeal of the equivalent carbon tax. In particular, synthetic greenhouse gas
importers may reduce or stop imports prior to 1 July 2014. Importers and
wholesalers may also reduce their stocks of synthetic greenhouse gases
until after the repeal of the carbon tax. This behaviour could have been
expected due to any significant drop in the level of the carbon tax.
The equivalent carbon tax is applied when synthetic greenhouse gases
enter the economy, either at the point of import or manufacture. No
synthetic greenhouse gases are manufactured in Australia. The gases are
4
General outline and statements
imported by ship in bulk form in gas tanks (ISOtainers) which generally
contain around 18 tonnes of gas. It takes around 8 weeks from the time an
order is placed with a manufacturer for synthetic greenhouse gases to
arrive in Australia.
The equivalent carbon tax is a significant percentage of the price of
synthetic greenhouse gases at the time they enter the economy due to the
high global warming potential (GWP) of these gases. To calculate the
equivalent carbon tax, the GWP of the species of synthetic greenhouse gas
is multiplied by the carbon tax for the given metric weight of the gas.
There is a significant financial incentive for importers and others
participants in the gas supply chain to minimise their stocks of gas which
have been priced to account for the equivalent carbon tax prior to the
equivalent carbon tax being repealed on 1 July 2014.
For example, the most common synthetic greenhouse gas,
HFC134a, has a global warming potential of 1300 (1300 times
that of carbon dioxide). The equivalent carbon tax on HFC134a
is $30.40 per kilogram in 2013-14. In comparison the cost to
purchase and transport HFC134a from overseas without the
equivalent carbon tax is less than $10 per kilogram.
Imports of synthetic greenhouse gases in bulk form are generally to meet
equipment servicing requirements. Servicing requirements are
unpredictable and are usually not discretionary. The synthetic greenhouse
gas charge in a refrigeration/air conditioning system, fire protection
system or electrical distribution equipment may be discharged to
atmosphere for a number of reasons including for its intended use (e.g.
fire protection system is discharged) or critical equipment failure (e.g.
compressor failure in an air conditioner), or may become contaminated
through its use (e.g. electrical distribution equipment).
Objective
The objective of Government action is to reduce the likelihood of
shortages of synthetic greenhouse gases arising in the period prior to the
repeal of the equivalent carbon tax.
Options
Three options have been considered to address the problem:
1. Legislation that provides for an exemption from the equivalent
carbon tax where synthetic greenhouse gases are imported but not
released onto the Australian market before repeal of the
equivalent carbon tax on 1 July 2014.
2. A grant programme where the equivalent carbon tax can be
reimbursed where synthetic greenhouse gases are imported but not
5
Ozone Protection and Synthetic Greenhouse Gas (Import Levy) (Transitional Provision) Bill
2014
released onto the Australian market before repeal of the
equivalent carbon tax on 1 July 2014.
3. Retain existing arrangements.
Option 1
Provision would be made in legislation for imports of synthetic
greenhouse gases to be exempted from the equivalent carbon tax where
the importer decides to:
import of bulk gas occurs in the period between 1 April 2014 to
30 June 2014;
enter the gas into a Customs warehouse, licensed under the
Customs Act 1901; and
not remove the gas from the Customs warehouse until
1 July 2014.
This option will assist importers manage stocks of synthetic greenhouse
gases. Importers would be able to remove synthetic greenhouse gases
from a Customs warehouse prior to 1 July 2014. If this occurs the
equivalent carbon tax would become payable on the gas.
This option will provide legislative certainty for industry participants and
can be implemented with minimum administrative cost for industry and
government. There are no additional mandatory costs applied through this
option.
Option 2
A grant or rebate programme would be developed that provides for
payments equal to the equivalent carbon tax paid where the importer
decides to:
import of bulk gas occurs in the period between 1 April 2014 to
30 June 2014;
enter the gas into a Customs warehouse, licensed under the
Customs Act 1901; and
not remove the gas from the Customs warehouse until
1 July 2014.
Importers would be able to apply for a grant or rebate equivalent to their
equivalent carbon tax liability on the gas that was stored in the Customs
warehouse until 1 July 2014.
6
General outline and statements
This option does not provide the same level of financial or legal certainty
for industry as Option 1 as a grant or rebate will be subject to approval by
the Minister. While the risk of an application not being approved is low,
industry will prefer a more certain option. The financial risk to an
importer is high as the equivalent carbon tax comprises a significant
majority component of the total cost of synthetic greenhouse gases.
Import licence holders may not use this option to manage gas supplies if
they assess the legal and financial risk as too high.
A grant or rebate programme will have a moderate administrative impost
for industry and the government. There are no additional mandatory costs
applied through this option.
Option 3
Retain the existing arrangements where industry would continue to assess
and provide for gas demand, while managing its financial risk.
Impact
The risk of supplies of synthetic greenhouse gases being exhausted is
considered low. However gas shortages may impact on critical
infrastructure such as hospitals, electricity distribution and computer
server facilities.
Providing a legislative or grant framework will assist importers of
synthetic greenhouse gases manage stocks so that a contingency supply of
gas species that might be in short supply can be kept in secure storage.
The equivalent carbon tax would only become payable on these gas
supplies if there are removed from a Customs warehouse before 1 July
2014.
The proposed options will impact up to forty-seven Controlled Substance
Licence holders. A Controlled Substance Licence allows the import of
bulk synthetic greenhouse gases under the Ozone Protection and Synthetic
Greenhouse Gas Management Act 1989.
Importers who wish to use the facility provided under either Options 1 or
2 would incur higher storage costs through using a Customs warehouse.
The increased costs would be around $10 per day per ISOtainer (around
18 tonnes), plus a one-off fee of $250. However there are no costs being
imposed as a result of this proposal as participation is voluntary. Import
licence holders can continue to operate without using this facility and will
not be subject to any financial impact from the regulatory or rebate
proposal.
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Ozone Protection and Synthetic Greenhouse Gas (Import Levy) (Transitional Provision) Bill
2014
Finance Impact of the Regulatory / Rebate Option
Table 2: Regulatory Burden and Cost Offset Estimate
Average Annual Compliance Costs (from Business as usual)
Sector/Cost Business Not-for- Individuals Total by
Categories profit cost
category
Administrative Costs $0 $0 $0 $0
Substantive $0 $0 $0 $0
Compliance Costs
Delay Costs $0 $0 $0 $0
Total by Sector $0 $0 $0 $0
Annual Cost Offset
Agency Within Outside Total
portfolio portfolio
Business $0 $0 $0 $0
Not-for-profit $0 $0 $0 $0
Individuals $0 $0 $0 $0
Total $0 $0 $0 $0
Proposal is cost neutral? yes
Proposal is deregulatory no
Balance of cost offsets $0
There is a potential loss to revenue of $10.0 million in 2013-14 from the
legislation option. This loss would accrue where importers continue their
existing business practice of maintaining a stock of gas that is above
minimum, or just in time, requirements, and the gas is put on the market
after 1 July 2014. Under a legislative or rebate option the equivalent
carbon tax would not be paid on imports made during the last quarter of
2013-14 that may have occurred as part of ordinary business.
8
General outline and statements
The actual impact on revenue may be less than $10 million as importers
may, in the absence of a legislative or rebate option, delay imports until
non-taxed gas supplies are available after 1 July 2014. Such a delay will
reduce equivalent carbon tax revenue in 2013-14. This behaviour may
substantially offset the revenue impact of a legislative or rebate option.
Gas that is imported prior to 1 July 2014 and kept in a Customs warehouse
until after 1 July 2014 will have a considerable price advantage compared
with gas that has been subject to the equivalent carbon tax. The benefits of
this advantage might be received by any, or all, participants in the supply
chain, from gas importers to consumers. A grant or rebate programme
would carry a similar cost to the legislative option, as well as add to
business costs for importers, as the equivalent carbon tax would need to
be paid to the Government and then, after being held for a period of time,
returned to the importer in the form of a financial benefit.
Consultation
The draft legislation to repeal the carbon tax was released for public
consultation by the Government on 15 October 2013. The consultation
period closed at 5 pm on 4 November 2013. The Department of the
Environment held a meeting with synthetic greenhouse gas importers,
suppliers and end users on 17 October 2013.
During the course of the consultation period the Department of the
Environment received several submissions relating to the equivalent
carbon tax repeal and the impact that this may have on the industry.
Refrigerants Australia proposed an approach where importers could
import and then store synthetic greenhouse gases in a bonded warehouse
in advance of 1 July 2014. Importers would be able to withdraw synthetic
greenhouse gases from the bonded warehouse before 1 July 2014 and pay
the equivalent carbon tax. Any withdrawals after 1 July 2014 would not
attract the equivalent carbon tax.
The other key issue raised by the industry through the consultation period
was that the need for clear, early and industry-specific communications.
Recommended option
The recommend option is to make legislation to allow for a transitional
exemption from the carbon charge component of the levy imposed by the
Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Act 1995
on the import of bulk synthetic greenhouse gas. The exemption would
only be available for imports during the quarter starting 1 April 2014,
where the synthetic greenhouse gas is entered into a warehouse licensed
under the Customs Act 1901 and is not removed from the warehouse
before 1 July 2014.
9
Ozone Protection and Synthetic Greenhouse Gas (Import Levy) (Transitional Provision) Bill
2014
The exemption would be supported by additional reporting requirements
in the legislation. Currently, importers of synthetic greenhouse gases are
required to provide reports on their import activity during each quarter to
the Department of the Environment. Under the Bill importers claiming the
exemption from the equivalent carbon tax will be required to provide
reports on the quantity and kind of synthetic greenhouse gas that is
covered by the exemption.
A refund provision would also be required in the event that importers pay
equivalent carbon tax to the Department of the Environment where they
should instead be exempted from paying it at all.
Implementation and review
The Bill will be introduced in November 2013. The Bill provides a
temporary exemption from equivalent carbon tax liability. The
Department of the Environment will implement the Bill. Implementation
is supported by the current operational requirements imposed by the
Customs Act 1901.
As this is a temporary exemption lasting only three months, a review
provision is not required.
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary
Scrutiny) Act 2011.
Ozone Protection and Synthetic Greenhouse Gas (Import Levy)
(Transitional Provisions) Bill 2014
This Bill is 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 of the Ozone Protection and Synthetic Greenhouse Gas (Import
Levy) (Transitional Provisions) Bill 2014
The Bill allows for a transitional exemption from carbon charge
component of the levy imposed by the Ozone Protection and Synthetic
Greenhouse Gas (Import Levy) Act 1995 (Ozone and SGG (Import Levy)
Act).
Human rights implications
The Bill engages the right to privacy under Article 17 of the International
Covenant on Civil and Political Rights (ICCPR). Article 17 prohibits
10
General outline and statements
unlawful or arbitrary interferences with an individual's privacy. It
provides that individuals have the right to the protection of the law against
such interference. An interference with privacy will not be arbitrary if it is
not inconsistent with the provisions, aims and objectives of the ICCPR
and is reasonable in the circumstances. Reasonableness, in this context,
incorporates notions of proportionality to the objectives sought to be
achieved.
The Bill engages the right to privacy because clause 7 of the Bill would
require import licensees who claim the benefit of the proposed levy
exemption to provide information to the Minister about the quantity and
kind of SGGs which are subject to the exemption, and some of the
licensees may be individuals.
To the extent that an individual's right to privacy is affected by the Bill,
the impact is not arbitrary. It is reasonable, necessary and proportionate to
the object of providing a tax exemption to require the taxpayer to provide
information which verifies the entitlement to the exemption. The Bill
requires provision of no more information that would be necessary to
verify the entitlement.
Conclusion
The Bill is compatible with human rights because its only potential
limitation on human rights relates to the right to privacy and involves a
reasonable, necessary and proportionate requirement for an import
licensee to provide information to the Minister to verify the licensee's
entitlement to the proposed levy exemption.
Greg Hunt
Minister for the Environment
11
Chapter 1
Transitional provisions for importers of
synthetic greenhouse gas
Outline of chapter
1.1 This chapter describes the arrangements necessary to allow for a
transitional exemption from the carbon charge component of the levy
imposed by the Ozone Protection and SGG (Import Levy) Act.
Context of amendments
1.2 The Clean Energy Legislation introduced an equivalent carbon
price, which applies to the import or manufacture of synthetic greenhouse
gases (SGGs) and import of products containing these gases. The
equivalent carbon price is applied and calculated at the point of import or
manufacture.
1.3 The equivalent carbon price will be repealed through the Main
Repeal Bill, the Ozone Import Amendment Bill and the Ozone
Manufacture Amendment Bill. The equivalent carbon price will be
repealed and no longer apply from 1 July 2014.
1.4 There is a small risk of potential shortages of SGGs in the
lead-up to the repeal of the equivalent carbon price on 1 July 2014 due to:
reduced SGG imports in anticipation of the lower SGG levy
from the 1 July 2014 repeal date; and
domestic business reducing the levels of SGG inventories in
order to delay purchases of SGGs until after repeal of the carbon
tax.
1.5 Any shortages in SGGs could impact on critical cooling needs
for end users such as hospitals, computer server facilities and electrical
infrastructure.
1.6 To address this risk, an exemption from the equivalent carbon
price will be made for the import of SGGs between 1 April and
30 June 2014 if certain conditions are met. This transitional approach is
included to reduce the risk of shortages of SGGs in the period prior to
1 July 2014.
12
Chapter 7: Specific repeal issues
Detailed explanation of new law
Transitional provisions for SGG importers
1.7 The provisions of the Bill will not come into effect unless the
Ozone Import Amendment Bill receives Royal Assent. They will
commence on the same date as section 3 of the same Bill. Once enacted it
will be called the Ozone Protection and Synthetic Greenhouse Gas
(Import Levy) (Transitional Provisions) Act 2014 [Sections 1-2]
1.8 The Bill includes provisions to exempt Controlled Substance
Licence holders from the carbon charge component of the levy imposed
by the Ozone and SGG (Import Levy) Act where the SGG is imported
after 1 April 2014; and the SGG is entered for warehousing (within the
meaning of the Customs Act 1901); and the SGG is not removed from the
warehouse for home consumption (within the meaning of the Customs Act
1901) before 1 July 2014. All these conditions must be satisfied to obtain
the exemption and the exemption is transitional in nature and will only
operate for the quarter starting 1 April 2014. [Sections 3-5]
1.9 The Bill includes provisions for the Commonwealth to refund
overpayment of the levy imposed by the Ozone and SGG (Import Levy)
Act during the quarter beginning 1 April 2014 provided the overpayment
is wholly attributable to section 5 of the Ozone Protection and Synthetic
Greenhouse Gas (Import Levy) (Transitional Provisions) Act 2014.
[Section 6]
1.10 Further, the Bill includes provisions on the reporting
requirements for importers of SGGs relating to the quarter beginning
1 April 2014. Currently, importers of SGGs are required to provide
reports on their import activity during each quarter to the Department of
the Environment. Under the Bill, importers claiming the exemption from
the equivalent carbon price will be required to provide reports on the
quantity and kind of SGG that is covered by the exemption. [Section 7]
13