Geoff Prosser (Forrest, Liberal Party) Share this | Hansard source

The Fuel Tax (Consequential and Transitional Provisions) Bill 2006 is a companion bill to the Fuel Tax Bill 2006 and provides the transitional arrangements to phase in the fuel tax credit scheme while phasing out the Energy Grants (Credit) Scheme, Fuel Tax Grant Scheme and the state administered Petroleum Products Freight Subsidy Scheme. The Commonwealth government announced a major program of reform to modernise and simplify the fuel tax scheme in its energy white paper, Securing Australia’s energy future.

The reform program is scheduled to commence on 1 July 2006 with the introduction of a single fuel tax credit scheme to replace the current complex system of fuel tax credit concessions, with final changes taking effect from 1 July 2012. The changes will lower compliance costs, reduce tax on business and remove the burden of fuel tax for thousands of individual businesses and households. When fully implemented, the fuel tax credit scheme will ensure that general fuel tax is only levied on business use of fuel in travelling on a public road in motor vehicles with a gross vehicle mass of 4.5 tonnes or less; on-road business use in motor vehicles with a gross vehicle mass of more than 4.5 tonnes but only to the extent of the road user charge; on-road private use in motor vehicles and in certain off-road applications; and aviation fuels.

The break point of 4.5 tonnes or less gross vehicle mass aligns eligibility for fuel tax credits with the additional licensing conditions that must be met in all Australian jurisdictions to drive a vehicle of this mass or greater and the Australian design rules for heavy vehicles. In addition, the heavy vehicle charges determination that establishes the road user charges for heavy vehicles applies to vehicles over 4.5 tonnes.

Under the fuel tax credit system, all taxable fuel acquired or manufactured in, or imported into, Australia for use in off-road applications for business purposes will become tax free over time. This will for the first time provide fuel tax relief to businesses involved in a range of activities. For example, businesses involved in manufacturing, quarrying and construction will become entitled to fuel tax relief. Other major beneficiaries will include primary production, mining and commercial power generation. Further, the excise currently levied on burner fuels such as heating oil and kerosene and on fuels used in commercial and household electricity generation will be effectively removed from 1 July 2006.

As part of this process, all currently untaxed fuels used in internal combustion engines will be brought into the fuel tax system over time with the intention of imposing fuel tax on fuels where they are used in transport applications. Fuel tax will be applied to the currently untaxed fuels of liquefied petroleum gas, liquefied natural gas and compressed natural gas from 1 July 2011. Effective fuel tax on these fuels will phase in over five equal annual steps commencing on 1 July 2011 and ending on 1 July 2015. The final fuel tax rate applying to these fuels will incorporate a 50 per cent discount on the energy content fuel tax rates that would otherwise apply.

The purpose of the transitional provisions is to ensure that the claimants receiving a grant continue to benefit from the fuel tax concessions and to phase in the extension of eligibility for off-road business use and fuel over time. Currently ineligible off-road activities will become eligible for a 50 per cent fuel tax credit from 1 July 2008 and a full tax credit from 1 July 2012. The bill also makes consequential amendments to 10 other acts which will operate under the general compliance and administrative umbrella of the Australian Taxation Administration Act 1953. The Fuel Tax Bill 2006 administers certain other indirect taxes, such as the GST, luxury car tax and the wine equalisation tax, and will operate under a new part of the schedule to the Taxation Administration Act 1953. This part will be modelled on the current indirect tax provisions in part VI of the Taxation Administration Act 1953. This means that entities will generally have the same rights and obligations in relation to the Fuel Tax Bill 2006 as they now have to other indirect tax laws.

The bill also repeals the Fuel Sales Grants Act 2000, from 1 January 2007, and the States Grants (Petroleum Products) Act 1965 from 1 July 2007 in accordance with the government’s decision to abolish the Fuel Tax Grant Scheme and the Petroleum Products Freight Subsidy Scheme from 1 July 2006. As a supplement to measures already in place for addressing the environmental impact of fuel use, the government will introduce two new measures to ensure that those businesses receiving fuel tax credits meet appropriate environmental standards. These environmental measures are the requirement of large fuel users who claim over $3 million each year in fuel tax credits to become members of the Greenhouse Challenge Plus program.

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