Issued by authority of the Minister for Revenue
and Assistant Treasurer

Fuel Tax Act 2006

Fuel Tax Amendment Regulations 2006 (No. 1)

Section 95-100 of the Fuel Tax Act 2006 (the Act) provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.

Paragrah 41-10(2)(a) of the Act provides that an entity is entitled to a fuel tax credit for taxable fuel that it acquires or manufactures in, or imports into Australia to the extent that it does so to package the fuel, in accordance with the regulations, for the purpose of making a taxable supply of the fuel for use other than in an internal combustion engine (non‑fuel applications). Paragraph 41-10(2)(b) specifies further that the fuel must be kerosene, mineral turpentine, white spirit or any other fuel prescribed by the regulations.

As it is intended that fuels used in non‑fuel applications be free of fuel tax for all users (both business and private), packagers of certain products are allowed, under the Act, to claim fuel tax credits such that private or ‘household’ users can access these products effectively fuel tax free without having to interact with the tax system. Use as a solvent is an example of a non‑fuel application. Generally, business end users of fuel products for non‑fuel applications, in contrast, pay the effective fuel tax when they purchase the product and then claim the fuel tax credits via their Business Activity Statement.

Former regulation 41-10 of the Fuel Tax Regulations 2006 (the principal Regulations) prescribed fuel to which item 10.28 of the Schedule to the Excise Tariff Act 1921 (the excise tariff) applies for the purposes of paragraph 41‑10(2)(b) of the Act. It also provided that the volume of a package for the purpose of making a taxable supply of the fuel for non-fuel applications for paragraph 41-10(2)(a) of the Act must be 20 litres or less. This volume was chosen because industry indicated that 20 litres was the maximum volume that could be reasonably considered to be purchased for private use.

Further industry consultation indicated that there were additional kinds of fuels and fuel blends being sold in small containers for private use in non-fuel applications that were not covered by the principal Regulations or paragraph 41‑10(2)(b). This was inconsistent with the policy intent that fuels used in non-fuel applications be effectively fuel tax free. Further, the policy intent applies to imported fuels as well as those produced domestically.

The purpose of the amending Regulations was to substitute former regulation 41-10 with a regulation that prescribes those fuels classified to items 10.25, 10.28 and 10.30 of the excise tariff and their imported equivalents for paragraph 41-10(2)(b) of the Act.

Fuels classified to item 10.25 are packaged for private use including as thinners for epoxy paints, diluents for the first coat of outdoor paving paints and other painting applications.

Item 10.28 of the tariff covers, as an example, lighter fluid used to fill cigarette and other such lighters.

Item 10.30 of the tariff covers blends of one or more of the other fuels covered by the tariff with or without other substances. There is a range of products marketed for use in a number of non‑fuel applications that contain one or more of the fuels classified to the tariff. Blends containing transport fuels (such as diesel, biodiesel, petrol, ethanol and kerosene for use as fuel in an aircraft) were excluded, however, as these are not within the scope of the policy and presented a high compliance risk.

Further, the unrestricted inclusion of the additional fuels could have given rise to a situation where some of these effectively tax free packaged fuels are added to fuel for use in motor vehicles. In order to minimise this risk, the inclusion of these fuels were qualified by a stipulation that their packaging (including any images or text forming part of the packaging) must not suggest or imply that the fuel can or should be used in an internal combustion engine.

The amending Regulations also specified that, for paragraph 41-10(2)(a) of the Act, the volume of a package used for the purposes of making a taxable supply of kerosene, mineral turpentine, white spirit or the fuels prescribed must be 20 litres or less.

The amending Regulations are a legislative instrument for the purposes of the Legislative Instruments Act 2003.

Treasury received representations direct from industry and advice from the Australian Taxation Office following discussions with relevant industry regarding certain fuels that were being packaged for private consumers. Further consultation with industry was undertaken to determine if there were more fuels that were within scope of the intended policy outcome.

The amending Regulations commenced on the day after registration.

Delete RIS if not required.