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

I will continue in the debate on the Fuel Tax Bill 2006. Under the Greenhouse Challenge Plus program, member businesses must measure their greenhouse gas emissions, develop action plans for greenhouse gas abatement and report to the government on their actions. The government recognises that making greenhouse management a core element of business is important to finding cost-effective solutions to the long-term greenhouse response. Membership of the Greenhouse Challenge Plus program signals an expectation that very large users will participate in an active partnership with government to address climate change. The program complements the government’s other energy and greenhouse gas abatement measures addressing very large energy users.

Where a taxpayer becomes a member of the Greenhouse Challenge Plus program, they will be entitled to claim fuel tax credits for taxable fuel they acquired or manufactured in or imported into Australia before they joined the program by making a decreasing fuel tax adjustment for the amount of fuel tax credit that they were previously not entitled to take into account. The decreasing fuel tax adjustment will take into account the credits the taxpayer was previously not entitled to, up to five years prior to the end of the financial year in which they became a member of the program.

A further environmental measure is compliance with emissions performance criteria by vehicles using diesel fuel in on-road applications. Operators of diesel vehicles with a gross vehicle mass of more than 4.5 tonnes are required to meet one of four emissions performance criteria to be entitled to the fuel tax credit. These criteria are designed to ensure that the operators of diesel vehicles have an increased incentive to make sure their vehicle meets the emissions standard set under the National Environment Protection (Diesel Vehicle Emissions) Measure.

Accounting and reporting arrangements for business users under the diesel fuel tax credit scheme will align, as far as possible, with the existing arrangements under the GST law. Generally, this means that a taxpayer will have to be registered for the GST to claim a fuel tax credit; will claim fuel tax credits on the BAS in the same way that they claim GST input tax credits; will apply the same tax periods for fuel tax credits as they would apply for the GST; will attribute fuel tax credits to the same tax period as the GST input credits for the acquisition or importation of fuel; and will be subject to special GST rules applying to the way that their business is organised for the purpose of fuel tax credits. Compliance costs for businesses currently claiming the energy credits through third parties or receiving fuel effectively excise free under the excise remission arrangements will be rebalanced, as the end user of the fuel, rather than the third-party fuel supplier, will claim fuel tax credits directly via the BAS.

The Fuel Tax Bill 2006 provides for the payment of fuel tax credits to taxpayers to remove or reduce the incidence of fuel tax levied on taxable fuels. Under the fuel tax credit scheme, all fuel acquired or manufactured in or imported into Australia for use in off-road applications for business purposes will become tax free over time. In this context, tax-free treatment occurs through a credit of tax paid—that is, the fuel is effectively tax free. This system of taxing and crediting is necessary to deal with the fact that currently fuel tax is paid by the manufacturer or importer of the fuel, generally well before its eventual use. Therefore, under current arrangements, the fuel tax is levied on the assumption that the fuel could be used in a taxable way, and credits are allowed to reverse the effect of the tax when it becomes clear that the fuel will be put to a non-taxable use covered by the legislation.

There are also additional amendments proposed that will allow certain eligible taxpayers to make claims for the early payment of their fuel tax credit entitlements for a two-year transitional period for fuel bought between 1 July 2006 and 30 June 2008. Taxpayers who make claims for early payment will still be required to report their fuel tax entitlements for the relevant tax period on their BAS and to take into account any claims for early payment.

The two-year transitional period will allow taxpayers to align their business practice to the new claiming arrangements and will ameliorate negative cash flow effects that may be associated with claiming fuel tax credits via the BAS. Under fuel tax reform, all the current mechanisms for delivering fuel tax-free treatment for petroleum products will be removed by 30 June 2006, and from 1 July 2006 fuel tax will apply to all petroleum products, including blends of petroleum products suitable for use for internal combustion engines. Effective fuel tax-free treatment for these products, where used other than as a fuel in an internal combustion engine, will be delivered by fuel tax credit to either the user of the fuel or at another point in the supply chain, depending on whether the use is business or private. For the business use of petroleum products as burner fuels or in non-fuel uses, the effective fuel tax-free treatment will be delivered through the fuel tax credit to the business as the end user of the product.

From 1 July 2006, a fuel tax credit will apply to the acquisition or manufacture in, or importation into, Australia of diesel and diesel-like fuels in applications that currently qualify for an off-road credit under the Energy Grants (Credits) Scheme. From 1 July 2008, the acquisition or manufacture in, or importation into, Australia of taxable fuels for use in other off-road applications will become eligible for a 50 per cent fuel tax credit of the fuel tax paid on the fuel. At the same time, the acquisition or manufacture in, or importation into, Australia of petrol will become eligible for a 100 per cent fuel tax credit of the fuel tax paid for all users that were previously eligible for an off-road credit under the Energy Grants (Credits) Scheme. It is intended that alternative fuels such as biodiesel, domestically produced ethanol, liquefied petroleum gas, compressed natural gas and liquefied natural gas begin to incur effective fuel tax from 1 July 2011. From that date, the acquisition, manufacture or importation into Australia of these fuels for use in off-road business applications will become eligible for the fuel tax credit equivalent to the amount of fuel tax paid on the fuel.

Fuel grants will continue to apply from 1 July 2006 to 30 June 2010 under the Energy Grants (Credits) Scheme for the purchase for use of alternative fuels—biodiesel, ethanol, liquefied petroleum gas, liquefied natural gas and compressed natural gas—in registered vehicles with a gross vehicle mass of over 4.5 tonnes. The grant rates applicable in respect of these fuels will be reduced to zero in five equal annual steps commencing on 1 July 2006 and concluding on 1 July 2010.

The proposed amendments in this bill are intended to assist taxpayers to make the transition to the new fuel tax system that will commence on 1 July 2006 to replace the existing complex system of fuel tax concessions. Taxpayers will claim a fuel tax credit through the business activity statement in the same way as they claim goods and services tax input tax credits. The claiming mechanisms proposed are intended to simplify administration and compliance arrangements. I commend the bill to the House.

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