Joel Fitzgibbon (Hunter, Australian Labor Party, Shadow Assistant Treasurer and Revenue) Share this | Link to this | Hansard source

The House has agreed to deal with the Excise Laws Amendment (Fuel Tax Reform and Other Measures) Bill 2006, the Excise Tariff Amendment (Fuel Tax Reform and Other Measures) Bill 2006, the Customs Amendment (Fuel Tax Reform and Other Measures) Bill 2006 and the Customs Tariff Amendment (Fuel Tax Reform and Other Measures) Bill 2006 cognately. They are not unimportant bills, not in any sense of the word, but they are not the bills we should be debating today. The bills we should be debating today are the Fuel Tax Bill 2006 and the Fuel Tax (Consequential and Transitional Provisions) Bill 2006. We are not debating them today, apparently because the government has a backbench revolt.

It would have made a lot more sense for us to be debating the fuel tax bills prior to dealing with these four bills in cognate debate. That would have been the course of action if the government’s original proposal had been followed. Indeed, we would have been debating the fuel tax bills yesterday. But we were surprised late last night, or this morning, to learn that we would not be debating those bills this week at all and, indeed, would be having this cognate debate today instead. That is disappointing from the opposition’s perspective. It gives us little notice, but it also causes additional confusion in the parliamentary processes and, of course, new and uncertain times for the industries which are affected.

These bills that we are debating today are effectively machinery bills. Although they do many things that are not related to the fuel tax bills, overwhelmingly they are about putting the technical machinery in place to allow the fuel tax bills to have effect. It is unusual that we are doing them in reverse order. Why is there government backbench revolt? It is for the same reason that Labor has been expressing concern over the last few weeks—that is, the proposed fuel tax changes will have enormous cash flow implications for many businesses in this country.

My office has had representations from many sectors that are very concerned about this aspect. On 22 May Minister Dutton reaffirmed the government’s commitment to putting these changes into effect without any further change. He claimed that he had consulted widely in the industry and that, if he did not go forward with the proposals, we would end up ‘in the same old mess we currently find ourselves in’. Surprise, again: we are not debating the relevant bill today. That is a source of both disappointment and curiosity for those of us on this side of the House.

Labor’s course of action—and it has already been put into motion—was to send the bill to a Senate committee to tease out these cash flow issues and to allow representatives from each of those sectors to put their submission to the Senate committee to determine whether this bill can be redeveloped in a better way, with changes either to come back here or to the Senate by way of amendment. That would have been the sensible course of action. But the government did not want to do it that way because it was concerned about the embarrassment it might face as that Senate committee process unfolded.

I am now joined by my colleague the member for Bruce, and I formally move the amendment that has been circulated in my name:

That all words after “That” be omitted with a view to substituting the following words: “whilst not declining to give the bill a second reading, the House:

(1)

condemns the Government for inappropriately bringing forward debate on these excise and customs bills in advance of consideration of the primary legislation contained in the Fuel Tax and Consequential Bills;

(2)

calls on the Government to bring forward debate on these bills forthwith; and

(3)

criticises the Government over its insensitivity to the impact of record high petrol prices on Australian families”.

I will return to those points later. I will now turn to the technical aspects of the bills being considered by the House this morning. The customs amendment bill and the customs tariff amendment bill change the Customs Act 1901 and the Customs Tariff Act 1995. These bills are designed to extend changes to imported equivalents that the accompanying excise laws amendment bill and excise tariff amendment bill make to excisable goods. While these bills give effect to the fuel tax bills, which constitute what the government claims is major reform of fuel tax—which is something I question but will return to later—the bills also involve some streamlining of excise customs classifications for alcohol and tobacco and changes to the rate of duty for aviation gasoline, which is in effect a cost recovery measure.

I turn now to the Excise Tariff Amendment (Fuel Tax Reform and Other Measures) Bill. This bill changes the list of products subject to excise so that only two rates of duty apply: for aviation fuel and other fuels. Excise duty of 38.143c per litre and customs duty at the excise equivalent rate of 38.143c per litre will be applicable to all fuels other than aviation fuels. Relief from the incidence of fuel tax is delivered in the fuel tax bills through a provision for fuel tax credits. The bill proposes a nine per cent reduction in the duty rates for aviation gasoline and kerosene. New arrangements for cost recovery of aviation fuel have been introduced. The reduction in the duty for aviation gasoline was announced in November 2005 as part of these changes; however, it is not clear why such a reduction is needed. I pose this question to the Assistant Treasurer and I invite him to answer it in his summation of debate on the bill.

Labor had been offered a briefing from the minister’s office on these bills. I thank the minister, because this is somewhat of a departure from the practice of the former minister, Minister Brough, who constantly and regularly denied the opposition briefings on some of these very complex issues. So I again thank the minister for that offer. Unfortunately on this occasion we were not able to take up the offer because of other demands, but I trust that the minister will continue to make his people available to us when we have detailed questions to ask in advance of the debate on these complex issues.

I want to ask a series of questions on this bill. In the absence of an opportunity to submit answers earlier, I hope the minister will answer them in his summation on the bill and, if he is not able to, he will take the opportunity to provide answers through the usual channels as soon as he can. It is very important to the opposition to have these answers before the bill is considered by a Senate committee and, of course, before it is debated in the Senate.

The fuel tax bills combine into one piece of legislation the means of providing fuel tax relief to businesses and households. It is intended that from 1 July 2011 these bills will also provide the legislative basis for taxing certain liquefied and compressed gaseous fuels, when fuel tax is levied on LPG, LNG and CNG for the first time. This takes me back partly to some of the concerns I addressed earlier about a backbench revolt.

It also takes us back to a very important debate we had a few years ago about whether the time had come to start applying taxation to some of these alternative fuels. It was an important debate. My view is that we got a pretty appropriate outcome from that debate. It is very important that these alternative fuels have government assistance in their infancy while they develop the technology and their markets and then build the sort of market share they need to remain competitive, but the time does come when these alternative fuels do need to show that they are capable of standing on their own two feet. The regime that the fuel tax bills will put into place is a balanced one whereby tax-free status is kept in place for some time yet but with a slow phasing in of fuel tax based on the energy content of the fuel—which I think is the appropriate way to levy the tax—and, just as importantly, with an ongoing 50 per cent reduction in that energy content to keep them competitive.

I want to remind the House about the very difficult time that LPG has had as a result of the government’s approach to this issue. Not all that long ago, LPG was tax free. When the GST was introduced, the full weight of the GST was felt by the LPG industry because, unlike petrol and certain other fuels which had their excise reduced to compensate for the impact of the GST, LPG was not carrying any excise; therefore there was no excise to be reduced, and therefore there was no opportunity to give the same sort of compensatory effect to LPG. So in that case LPG took the full weight of the government’s GST, and I know it is an industry that has been suffering ever since as a result of that change.

I want to talk briefly again about the proposals to change the way in which business makes a claim on its GST exemption. Until now, business has been effectively able to do that up front. In some cases—and some would argue that this is a bad thing—that has been cash flow positive for businesses. In other words, they have been able to claim the tax back before making the payment. That would certainly often be the case in circumstances where the business has a 30-day credit line with the supplier of fuel. But what has been proposed in the fuel tax bills is that businesses now claim the rebate on their BAS at the end of the month or the end of the quarter, depending on their circumstances. The government claims this is a streamlining process—it involves less compliance. That is a very strong case. But the government obviously has not properly taken into account the extent to which this will impact upon the cash flow of many businesses in this country, and that is why the Labor Party moved quickly in the Senate to have a Senate committee inquiry. That is the course the government should have followed, rather than putting this House into shambles by pulling the bill while it deals with its backbench revolt.

We have had representations from all sorts of people on this issue, not just the people you would expect to make representation—like farmers, people in the transport industry and the fishing industry, very importantly—but people in areas like chemicals, plastics and paints. ACCI has been making strong representation on their behalf in recent weeks. This could be tens of thousands of dollars, and, in the case of some big paint manufacturers, millions of dollars, in cash flow difficulty for some businesses. We intend to vigorously pursue these issues in the Senate committee process, if indeed we do not see some reversal from the government between now and then.

It is simply the case that the excise tariff will have some transitional compliance costs for taxpayers, as they will have to modify their accounting systems to reflect the changes made. However, it will decrease compliance costs—hopefully—in the longer term, due to the decrease in legislative complexity. Labor understands that and supports that. The difficulty is that the consultation obviously has not been extensive enough. It would appear to me that the government was not made aware early enough of the strength of the lobby and the extent of the problem this poses to industry, and that reflects the fact that the government did not properly consult on the bill.

What surprises me is that the government backbench are in revolt over the cash flow difficulty posed by the new system of reclaiming the tax rebate on the BAS, but we have heard not a word from them on the difficulty posed by the decision in the fuel tax bills to repeal the fuel sales grants scheme. When you have a look at the various reports in the newspapers, you see that the people revolting on the backbench, not surprisingly, are typically members and senators representing rural and regional seats. The fuel grants scheme, of course, is designed to assist people in rural, regional and indeed remote Australia. So why is it that we have a revolt on the cash flow difficulties emanating from the new BAS system but not a word from National Party senators and members and not a word from Liberals representing rural and regional seats? It defies any logic.

The government is going to put the Labor Party in a difficult position, because the government has cleverly decided to link the fuel grants scheme repeal to road funding in rural and regional areas. So everyone is going to have to pay so that some people can get more road funding in their particular area. No doubt, if past form rings true, those areas will be marginal seats held by National Party members in particular but also by other coalition party members and, of course, Labor marginal seats in rural and regional Australia. That is fine. The government can make it difficult for us, but it is going to be up to it to explain to people living in rural, regional and remote Australia the logic behind the repeal of the fuel sales grants scheme.

Here is a little bit of history. This scheme came into effect because of the government’s reluctant acknowledgment that they were unable to meet their promise that the GST would not cause fuel prices to rise. They imposed a 7c per litre reduction on unleaded fuel, working out in their minds that, if you took 7c a litre off and put 10 per cent on fuel, taxes should remain about the same—the GST should not force petrol prices up. But they did not anticipate fuel prices going beyond 70c per litre. If you do the simple arithmetic you will find that, for anything below 70c, if you take 7c off and put 10 per cent on, you come out with about the same result. But, beyond that, take 7c off and put 10 per cent on and you will find the GST starting to dramatically impact on petrol prices. So the government had to run up the white flag and say, ‘We’ll fix this. The real impact, because of the knock-on effects of transport et cetera, will be in rural and regional Australia, so we’ll give people living in regional Australia a 1c rebate at the bowser. For people living in rural Australia, we’ll give you a 2c rebate at the bowser, and people in remote areas of Australia will get a 3c rebate at the bowser.’

That is the scheme the government is repealing. The GST is still there. The GST will continue to have an enormous impact on fuel prices, with oil prices so high, at around $US70-odd per barrel. So the GST is not disappearing; oil prices are not about to fall. The government still refuse to have the ACCC formally monitor petrol prices. And the impact is always worse in the bush. Yet they are repealing this important scheme. So why wouldn’t members of the coalition backbench also be in revolt over that issue? It is a mystery to me. I invite them, when contributing to this bill and the fuel tax bills, both in this place and in the other place, to justify their silence on this enormous whack on country motorists at a time when fuel prices are so high.

One would have thought that there was never a more important time to be extending relief to country motorists than now, when petrol prices are at record highs. The logical thing, if anything, would be to be strengthening the subsidy to the bush, not taking it away from the bush. What we will certainly be pursuing in the Senate committee is some assurance that the government’s claim of I think $1.1 billion saved over four years as a result of the abolition of this scheme will go to roads. We will not be taking that in good faith and on face value; we will be checking and looking for the facts in the Senate committee to ensure that that is the case.

I want to return to the Excise Laws Amendment (Fuel Tax Reform and Other Measures) Bill 2006. Schedule 1 of the bill amends the Excise Act 1901 and makes consequential amendments to a number of other acts to implement measures to streamline existing excise arrangements. It also amends the Energy Grants (Cleaner Fuels) Scheme Act 2004, adding a new fuel tax to the cleaner fuels grants scheme. Renewable diesel, which is liquid fuel manufactured from vegetable oils or animal fats through a process of hydrogenation, is added to the definition of what is a cleaner fuel.

Schedule 2 of the Excise Laws Amendment (Fuel Tax Reform and Other Measures) Bill 2006 repeals a number of acts. Through changes to the Fuel Tax Bill 2006 fuel tax credits will replace existing rebates and subsidies on fuel. I want to clarify a point to the House. The government is presenting this as big fuel tax reform. In its normal, Orwellian way it has included ‘reform’ in the title of the bill. Once upon a time we had a diesel fuel rebate. I think most people in this place, and constituents who have been beneficiaries of that rebate, will understand the meaning of that rebate. The excise on diesel used off-road and in certain road uses for the purpose of business was able to be claimed back. Then we lost that scheme and the government created the energy grants scheme. The energy grants scheme was basically the same scheme. There were some amendments and some improvements to the system, and some minor extensions of the system, but effectively it just replaced the diesel fuel rebate. Now we are going to have the new fuel tax scheme, which again is just a rejig of the way the tax is claimed back. Instead of making an application to the ATO after you have bought the fuel to get your money back, you wait till the end of the quarter and claim it on your BAS. You will take off the money owed to the ATO that money that you believe is payable to you as a result of the tax on fuel that you paid but which you did not need to pay under law because of your exemption.

I want to make one point here. I note in the bill and in some of the announcements by the minister that this scheme is now going to be extended to petrol, not just diesel and some other fuels. That is all well and good. Anyone listening to that announcement would be forgiven for taking a great leap in the air now that not only diesel but petrol for business use will also be effectively tax free. I would understand them thinking that. But this rebate only applies to vehicles that are 4.5 tonnes or heavier. I am not aware of any vehicle of 4.5 tonnes or heavier that runs on petrol. I invite members following me in this debate to nominate a vehicle of 4.5 tonnes or heavier that runs on petrol. The member for Fisher is following me on this bill. I know that he has a great interest in motor vehicles. I invite him to nominate for me a vehicle that is in that classification. I do not know whether the member for Page is speaking on this bill.

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

I’ve got a Dodge truck.

Joel Fitzgibbon (Hunter, Australian Labor Party, Shadow Assistant Treasurer and Revenue) Share this | Link to this | Hansard source

A Dodge truck? We will check that.

Alan Griffin (Bruce, Australian Labor Party, Shadow Minister for Veterans' Affairs) Share this | Link to this | Hansard source

If it’s yours it would be a dodgy truck!

Joel Fitzgibbon (Hunter, Australian Labor Party, Shadow Assistant Treasurer and Revenue) Share this | Link to this | Hansard source

It could be a dodgy truck, as the member for Bruce suggests. Is the member for Page speaking on this bill?

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

Yes.

Joel Fitzgibbon (Hunter, Australian Labor Party, Shadow Assistant Treasurer and Revenue) Share this | Link to this | Hansard source

He is. I invite the member for Page, a rural man himself, to do so. He should be very familiar with the sorts of transport vehicles used in agricultural pursuits in particular. I think he may have had some involvement in the trucking industry at some stage—or the son?

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

Mr Causley interjecting

Joel Fitzgibbon (Hunter, Australian Labor Party, Shadow Assistant Treasurer and Revenue) Share this | Link to this | Hansard source

No, not the son. But he is a man with great experience in these matters, and I look forward to him nominating a vehicle of 4.5 tonnes or heavier that runs on petrol. If both members fail to do so then we will be giving the minister an opportunity, when he provides a summary to the bill, to do so himself.

But I will return to the detail of the bill. Coal is listed in the excise tariff and has attracted a free rate of duty since 1992. The inclusion of coal in the excise tariff means that it is an excisable product, and coal producers are therefore required to be licensed as excise manufacturers. Coal is omitted from the excise tariff rather than included at the free rate of excise duty, as in the existing law, the Coal Excise Act—which contains licensing and other requirements. It is repealed, as it is no longer considered necessary to impose these requirements on activities involving coal.

The Spirits Act, which provides for controls over the manufacture of spirits, including brandy, whisky and rum, and methylated spirits, is repealed on the basis that most of the provisions it contains are adequately covered in the Excise Act or are no longer relevant to the effective management of the alcohol taxation regime. The Distillation Act, which provides controls on the distillation of spirits, including stills, distilleries, licences and fortification of Australian wine, is also repealed. I understand Senator Murray has sought to refer some matters relating to alcohol to the Senate Economics Legislation Committee. I make the point, having learned he has done so, that the government made a commitment that there would not be any changes to alcohol taxes in this country on a piecemeal basis, that any change or review of alcohol taxes in this country would be done in a holistic way by looking at every sector in the industry—that is, wine, beer and spirits.

I was surprised at the changes in the budget. Although I welcome the improvements to the exemptions on the wine equalisation tax, those are changes in isolation to alcohol tax in this country. I am not surprised that there are some who are now interested in further inquiring into the potential to make further changes to alcohol taxes in this country. I am sure there is not a member of this place who would disagree that it is a bit of a mess and that any Senate process could prove fruitful in teasing out whether the relativities are right and whether the policy is set correctly in social terms. Is it producing the best health and social outcomes? I hope that representatives from all subsectors of the industry—again, wine, beer and spirits—and others who might have an interest take the opportunity to appear before that inquiry and to make their various points.

I now turn to the Customs Amendment (Fuel Tax Reform and Other Measures) Bill 2006. This bill amends the Customs Act 1901 to (1) strengthen customs control over certain imported goods that are used in the manufacture of excisable goods; (2) repeal the customs related provisions of the fuel penalty surcharge legislation; and (3) replicate certain provisions of the Spirits Act 1906, which again are to be repealed. I also turn to the Customs Tariff Amendment (Fuel Tax Reform and Other Measures) Bill 2006. The purpose of the bill is to amend the Customs Tariff Act 1995 to implement changes that are complementary to amendments contained in the Customs Amendment (Fuel Tax Reform and Other Measures) Bill 2006. These measures are designed to, as the government argues, strengthen customs control over certain goods that are used in excise manufacture and to ensure that excise equivalent goods are subject to the same duty when imported as they would be under the Excise Tariff Act 1921—that is, the same products when manufactured or produced in Australia.

This cognate debate is about putting in place the machinery, if you like, to lay down the pathway for the Fuel Tax Bill. As I said, there are a number of other changes of well. Some go to avgas and some potentially go to alcohol taxes. The excise rates are not being dealt with in this cognate debate. What we are dealing with is the tidying up of the framework. We need four bills, on a constitutional basis, because we are dealing with excises on domestically produced products, we are dealing with the way in which we apply taxes to imported goods and we are amending two excise acts—one, if you like, that lays down the framework of our excise system and another, a later act of 1921, which deals with the excise rates. It is the same with customs. We are dealing with the earlier act, which lays down the framework, and the second bill, which deals with the detail of the rates et cetera. These bills are very important, but the most important bill is the Fuel Tax Bill. That is the one we should have been debating first. It is the one we were going to debate first, according to the government’s own program of earlier in the week, but we are not debating it today.

I have three quick questions for the Minister for Revenue and Assistant Treasurer. I hope he can respond to them. These bills reduce the customs duty and excise for avgas and avtur by nine per cent. The minister has indicated in his EM to these bills that the reduction is part of a change to the cost recovery regime for aviation services. However, it is not clear exactly how this reduction in the excise and customs duty operates as part of these new arrangements. I now ask the minister: what is the cost to revenue of reducing excise and customs duty rates for aviation gas and aviation turbine fuel? Also, Labor has been informed that the change to the definition of biodiesel in schedule 1, item 2, of the Excise Tariff Amendment (Fuel Tax Reform and Other Measures) Bill 2006 is significant. The definition of biodiesel is now to be amended so that biodiesel includes liquid fuels manufactured by chemically altering vegetable oils or animal fats. I ask the minister those two questions. I will take the opportunity to raise my third question in the consideration in detail stage. (Time expired)

Kim Wilkie (Swan, Australian Labor Party) Share this | Link to this | Hansard source

Is the amendment seconded?

Alan Griffin (Bruce, Australian Labor Party, Shadow Minister for Veterans' Affairs) Share this | Link to this | Hansard source

I second the amendment and reserve my right to speak.

Peter Slipper (Fisher, Liberal Party) Share this | Link to this | Hansard source

The cognate bills being debated here today will bring a raft of changes in the areas of excises and tariffs. The Excise Laws Amendment (Fuel Tax Reform and Other Measures) Bill 2006 and the Excise Tariff Amendment (Fuel Tax Reform and Other Measures) Bill 2006 together will introduce measures that will bring excise relief to a wide range of Australian businesses and to householders in general. This area has been somewhat hindered by a lack of consistency in the excise provisions affecting certain fuels.

The changes include that from 2012 all fuels used off-road for business purposes will become excise neutral. Excise paid on fuel used in currently ineligible off-road business activities will be subject to a 50 per cent excise credit from 2008 to 2012, to be increased to a 100 per cent credit from 2012 onwards. Also, excise relief will be extended to all off-road business activities including previously ineligible activities in the manufacturing, construction and quarrying industries. These provisions will, for the first time, extend to utilities and motorcycles used off-road for business purposes.

The provisions of the Excise Laws Amendment (Fuel Tax Reform and Other Measures) Bill will also extend to those fuels purchased by both business and private users, meaning fuels used for the generation of electricity and those used for the generation of heat, such as kerosene, will also be excise free. This improved and more consistent arrangement will come about through the introduction of a fuel tax credit system. The tax credit will be able to be introduced through the business owner’s regular business activity statement. 

I have been approached by a number of constituents who are concerned about this new arrangement, and in particular I refer to trawler operators who operate from Mooloolaba on the Sunshine Coast in my electorate of Fisher. The fishing industry is particularly important. In Mooloolaba we actually have a lot of product being landed and, given the fact that there have been concerns over the sustainability of the fishing industry, increasingly it is necessary for fishermen to go further afield to obtain an appropriate catch. They are big users of fuel and clearly are at the coalface when any changes are mooted. Previously, their fuel supplier was able to sell them the fuel minus excise and then the supplier would claim the fuel credit. The fishermen will now have to pay full price and claim the credit through their regular tax statements. This new arrangement is similar to those in other industries. I have made representations to the minister’s office in relation to this and the minister has advised:

Currently, under the Energy Grants (Credit) Scheme (EGCS) fishers can authorise a third party to make and/or receive grant claims on their behalf. These arrangements are known as the ‘sales to the fishing industry’ arrangements. These allow fishers to enter into an arrangement with fuel suppliers whereby the fuel supplier claims a grant under the EGCS on behalf of the fisher and sells the fuel to the fisher at the price excusive of tax.

Under the fuel tax credit system, fishers will pay the excise on their diesel but will then be able to claim a credit for the amount of the excise on their monthly or quarterly business activity statement.

When one initially looks at this, one might be disposed to say that the new situation does not seem unreasonable. However, the point that has been compellingly made to me by these constituents is that this is going to place an incredible disadvantage on these industries insofar as they will not have the cash arrangements to make the payments as required. In fact, it is going to present major problems for the fishing industry, and numbers of these fishermen have told me that if this change proceeds then they could well be put out of business.

It is going to have a very adverse impact on their business’s cash flow. This industry is particularly important to the Sunshine Coast and I would hope that the government is able to look at this matter. I am sure that it is an unintended consequence—I am sure that the government did not intend to force the fishermen at Mooloolaba out of business. Representations have been made to the government. We will have to wait and see, but I hope that the government is able to address the concerns, quite reasonably expressed, by my constituents at Mooloolaba. I suspect that other honourable members might well have had representations from their constituents, and I can see the honourable member for Page nodding—obviously his fishermen are similarly affected.

The Excise Tariff Amendment (Fuel Tax Reform and Other Measures) Bill 2006 helps to simplify the various taxation implements that are applicable to various types of fuel. The bill removes the various fuel tax provisions and replaces them with just two rates. One of those new rates is applicable only to aviation fuels and the other rate applies to other fuels.

The Customs Amendment (Fuel Tax Reform and Other Measures) Bill 2006 and the Customs Tariff Amendment (Fuel Tax Reform and Other Measures) Bill 2006 accompany the previous two bills. These bills have the purpose of amending the Customs Act 1901 to improve the measures available to Customs to control specific goods that are imported and used in the manufacture of goods that are subject to excise. This means that the excise that is currently payable on goods that are used in Australia to manufacture goods that are excisable will be removed. This excise liability is removed as a result of the good itself being used to create other excise liabilities. These two bills will also remove the penalty provisions applicable to Customs’ operations of the fuel surcharge legislation. This means that imported fuels will be treated in the same way as locally produced fuels in relation to excise. The bills will also reintroduce certain provisions of the Spirits Act 1906, which will be repealed.

The changes outlined come about largely as a result of a review of excise provisions for a range of items including specific alcohol products, petroleum products and tobacco products. The review identified a number of redundant and unnecessarily complex provisions in our excise schedules and these bills enable the new excise schedules to be introduced.

These are important bills, but I would strongly urge the government to take on board the concerns of my constituents in Mooloolaba with a view to enabling them to continue their industry and to continue in business. I would hope that the concerns I have expressed will indeed be addressed by the government.

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

I am pleased to speak on the Excise Laws Amendment (Fuel Tax Reform and Other Measures) Bill 2006 and cognate bills today. This is a very interesting bill. It covers a number of areas of taxation and focuses on streamlining current excise arrangements across a range of sectors. These matters are of great interest to the National Party—in particular my colleague the member for Hinkler, who is on sick leave today in Brisbane and cannot participate in this debate. It will reduce compliance costs for excise manufacturers, importers and their administering authorities, and in this regard I would like to discuss one aspect of the accompanying bill—the Excise Tariff Amendment (Fuel Tax Reform and Other Measures) Bill 2006before I move into the body of my speech.

I note that the explanatory memorandum for the accompanying bill discusses the compliance costs for businesses using the fuel grants scheme. Changes to that scheme mean that the users will have to claim back fuel excise via their quarterly business activity statement. The explanatory memorandum suggests that the bill will have some compliance costs for end users of the scheme and says that end users will face rebalancing of their compliance costs, that they will have some transitional compliance costs and that they will have to modify their accounting system.

It all sounds rather benign, but I will put forward the case of commercial fishermen, who will remain eligible for the rebate but stand to be thousands of dollars out of pocket for months until they can claim their pay-back through the BAS. I and my east coast National colleagues believe that the fishing industry should be exempt and be allowed to retain its current arrangements, where the excise is rebated immediately on purchase through the fishing cooperative or the fuel supplier.

We need to recognise that fuel represents more than 30 per cent of the cost of fishing. This is bad enough, but now consider the state and federal closures along the east coast which are forcing fishermen well outside their traditional grounds to get a catch—it is a triple whammy. Even at this late stage I would urge the Minister for Revenue and Assistant Treasurer to remove the cash flow problem that this measure will create and not subject a struggling industry to even more pain.

Turning to the liquor aspects of the bill at hand, I would like to discuss the administration and taxation arrangements for alcohol, particularly in relation to the tax treatment of alcoholic beverages that have a volume of alcohol below 10 per cent. There is no doubt this government has taken some important steps in recent years in improving tax treatment of alcohol products, and in this bill the government proposes to make significant changes to spirits legislation.

We need to recognise that many sectors of the liquor industry depend on sugar, particularly so in the case of rum. Rum is one of the primary tertiary by-products of the sugar industry, and it is of great concern to me and my National colleagues—especially the member for Hinkler, in whose electorate Bundaberg Rum is located. We have proposed these changes after extensive and detailed consultation with industry, which applauds our commitment to getting rid of unnecessary red tape.

The bill repeals the Distillation Act 1901 and the Spirits Act 1906, both of which contain provisions relating to the manufacture of spirits. These provisions are already adequately covered in the Excise Act but, hand-in-hand with repealing these acts, the government is inserting new provisions to the Excise Act 1901 to protect ongoing revenue interests and to ensure high standards of distilled alcoholic products, including provisions for the maturation of brandy, whisky and rum.

Maturation is a key step in the production process because storage in wood improves the quality of spirits and provides their unique characteristics. If the government had not inserted these new provisions, we would in effect have removed the requirement that brandy, whisky or rum be matured for at least two years. The maturation process is in keeping with standards applied around the world, and the matter of repealing the maturation provisions has been rejected by this parliament on a number of occasions. In 1979 the Fraser government rejected any move to repeal the maturation requirement and in 1986 a Hawke government proposal to remove the rules was defeated in the Senate. This is because the coalition understands that without the maturation requirement there would be nothing to stop cane spirit—which, in effect, is raw ethanol—flooding into Australia.

Once it was allowed in, it could be mixed with artificial colouring and flavouring and sold to Australian consumers as rum. We do not want to see people being conned into buying ‘dressed-up’ ethanol and thinking it is rum when it could be anything from distilled potatoes to distilled grain, and certainly not when we have such a renowned and robust distilled spirit industry of our own.

My colleague Senator Ron Boswell and the former National Party member for Hinkler Bryan Conquest made another point when they spoke in defence of our maturation rules in 1986. They noted that such inferior products have much lower production costs, and manufacturers would therefore be able to incorporate the cost of aggressive advertising blitzes into the final retail price and still be able to get a competitively-priced product onto Australian shelves.

So this bill maintains the requirement that distilled alcohol products cannot be delivered from the Commissioner of Taxation’s control unless they continue to abide by the current maturation requirements. These requirements are also a nod to the fact that Australia has a very fine distilling sector, including the Bundaberg Distilling Company, and it ensures that the ongoing production of quality Australian products such as Bundaberg Rum is not jeopardised.

As members would be well aware, the member for Hinkler comes from the city of Bundaberg, and Bundaberg Rum is a very important part of the local economy. Bundaberg Rum is Australia’s highest selling rum, with around 330 million Bundaberg Rums drunk in Australia each year, and up until recently it was the highest selling spirit brand in Australia. But aside from its national popularity as a drink, Bundaberg Rum has a far more profound presence in Bundaberg itself. The Bundaberg Rum Distillery employs 56 locals and is actually the No. 1 tourist attraction in Bundaberg, with 69,000 visitors to the distillery in 2004-05.

A couple of years ago, Bundaberg Rum announced a $24 million expansion plan to help meet the demand for its products, including the installation of new maturation tanks, new timber storage vats and the upgrade of visitor facilities at the distillery. Work is already under way on a new $2.7 million visitors centre which will offer tourists an interactive experience where they can touch, taste and smell the ingredients used in the rum-making process. I and my colleagues commend the company on its commitment to the Bundaberg region and want to underline just how significant it is. On the face of it, any company investing $24 million in a regional economy deserves plaudits, but the extrapolation of these funds holds even greater significance for the local economy and the national economy.

Earlier this year, the member for Hinkler commissioned Bundaberg Rum’s new bond store, which cost $4.6 million to build. The bond store will ultimately hold 90 extra vats of rum, worth approximately $450 million—almost half a billion dollars worth of product, or nearly 10 times the value of the initial investment and all of it attracting excise revenue for the government.

This leads me to another point on the matter of our excise regime for spirits. If we want to foster further investment such as this, while encouraging increased production of lower alcohol products—and, by association, promote safe drinking practices by consumers—I think we should consider an alteration to the taxation arrangements for low- and mid-strength ready to drink spirits. There is an existing discrepancy between the taxation arrangement for low- and mid-strength ready to drink products and beer products of a similar strength.

With respect to beer, excise is levied on the basis of alcohol content, with a 1.15 per cent alcohol by volume duty-free exemption. This means that for all packaged and draught beer there is no excise for the first 1.15 per cent of alcohol by volume—a concession not given to alcohol beverages that have the same alcohol by volume, that is the ready to drink products. This arrangement was introduced by the Labor government in the 1988 budget and has been in place since 1989. An examination of the debates indicates that the rationale for its introduction was to encourage the consumption of low-alcohol beer. Significantly, the net revenue effect of the regime was a $400 million loss to revenue.

Remember that figure, because I believe that this is an ideal opportunity to consider applying the same taxation arrangement to low- and mid-alcohol packaged ‘ready to drinks’. As it stands, packaged ready to drinks are subject to a flat excise rate equal to that of full-strength packaged beer. At the current excise rates, this means 49c in excise for a can of mid-strength ready to drink, compared with 33c for a can of mid-strength packaged beer. Similarly, there is 37c in excise for a can of low-strength ready to drink and 18c for a can of low-strength packaged beer.

There is no sound policy reason for this anomaly. I believe that the Commonwealth should consider giving ready to drinks access to the 1.15 per cent excise-free threshold which applies to all beer products, as well as the reduced excise rates that apply to packaged and draught low- and mid-strength beer. Such a proposal is consistent with encouraging the consumption of lower alcohol content beverages and could well improve drinking behaviours within the community. Producers of ready to drinks would also be encouraged to produce lower alcohol products due to the associated reduction in tax costs. As I have outlined, this could bring substantial benefits to both the national and local economies.

Interestingly, the National Alcohol Strategy 2006-09, which was recently endorsed by the Ministerial Council on Drug Strategy, highlights the need to focus on price related mechanisms to reduce consumption of alcohol at harmful levels. It sees that as a key strategy in generating a more responsible drinking culture in Australia. Tax equivalence between low- and mid-strength ready to drinks and packaged beer would undoubtedly help achieve this goal.

In concluding, let me answer a couple of questions posed by the member for Hunter. He berated members who represent rural electorates about the fact that we were saying very little about the fuel sales exemption scheme which operated in isolated areas and, I think, had a subsidy of between 1c and 3c, depending on the area and the price of petrol. I think the member for Hunter was forgetting that in the budget we doubled the amount of money that we are putting into roads in the country. We are very happy about that. If you have a close look at the money for roads, especially through AusLink, you will see that many millions of dollars have been put into the national road system, something which I think motorists right across Australia will benefit from.

As far as the trivial comment about four-tonne to five-tonne trucks is concerned, I just say to the member for Hunter that he should visit some of our wheat farms at the time of harvest. Farmers are not all that flush with cash. There are a lot of old trucks out there that still haul grain to the silos. Many of those trucks, including the Internationals and Dodges of the 1960s and 1970s, ran on petrol. I dare say one of the reasons that much of our equipment and many of our trucks converted to diesel was that, in earlier days, diesel fuel was much cheaper than petrol. The reason given by the fuel companies at the time was that it was a product that was not used as extensively as petrol and therefore it was sold at a lower rate. Unfortunately, everyone has converted to diesel, and diesel is now dearer than petrol. I do not rule out the fact that some of these vehicle operators might be starting to look at other fuels, including petrol, in the future. I would not treat that matter as being quite so trivial.

It has been a pleasure to speak on this bill. I commend the bill to the House.

Peter Dutton (Dickson, Liberal Party, Minister for Revenue and Assistant Treasurer) Share this | Link to this | Hansard source

I thank members in this place who have contributed to the debate on the Excise Laws Amendment (Fuel Tax Reform and Other Measures) Bill 2006, the Excise Tariff Amendment (Fuel Tax Reform and Other Measures) Bill 2006, the Customs Amendment (Fuel Tax Reform and Other Measures) Bill 2006 and the Customs Tariff Amendment (Fuel Tax Reform and Other Measures) Bill 2006. It is a very important debate.

I specifically thank the member for Page for his contribution and want to respond to a couple of issues that he raised. I note the member’s comments about the retention of maturation requirements for rum, brandy and whisky—and in particular rum and Bundaberg Rum, a great Queensland product. The satisfaction of the spirits industry with the outcome demonstrates the utility of the government’s commitment to consult with that industry—and with all industries, where feasible, on legislation that affects them. I thank the member for Page for his contribution to that end and for the way he has contributed to this debate otherwise.

This has been an important debate. Before I provide my summing up speech proper, I want to address some of the concerns raised by the member for Hunter. Only a couple of issues raised are relevant to the bills before the House, and they are the ones I intend to address. The member for Hunter spoke on the validation of the tariff proposal for reduction of excise and customs rates on aviation fuels. As the member for Hunter would be aware, it is a longstanding practice in excise and customs legislation that changes to rates are introduced by tariff proposals. This is covered in House of Representatives Practice. Excise and customs tariff proposals in themselves are not law; they work with other provisions of the legislation to allow duty to be collected by Customs or the tax office for a period of 12 months without legal challenge until the parliament considers the matter. These bills now legislate for the reduction of rates in the proposals. I suspect that that will answer the query the member for Hunter had on that issue.

The member for Hunter raised issues in relation to the change of treatment of aviation fuel. What I can say to the member for Hunter is that the cost is minor and was announced in the 2004-05 budget. The reduction reflects the cessation of cost recovery for the location pricing subsidy, as explained in paragraphs 1.127 to 1.131 of the EM. The renewable diesel definition implements the Prime Minister’s announcement of 31 March 2006 and is attached. This directly affects product to be made by BP at its Bulwer Island refinery utilising tallow, a renewable product, as an input.

These bills, along with the Fuel Tax Bill 2006 and the Fuel Tax (Consequential and Transitional Provisions) Bill 2006, give effect to the government’s announcement in its energy white paper Securing Australia’s energy future of 15 June 2004 that the current complex system of fuel tax concessions will be replaced by a single fuel tax credit system from 1 July 2006.

The Excise Laws Amendment (Fuel Tax Reform and Other Measures) Bill 2006 amends the Excise Act 1901 and makes consequential amendments to a number of other acts to implement a number of measures to streamline existing excise arrangements, protect the revenue and promote best practice regulation. It also amends the Energy Grants (Cleaner Fuels) Scheme Act 2004 so that fuel manufactured through a process of hydrogenating vegetable oil or animal fats receives the same tax treatment as biodiesel. This measure applies from 1 July 2006. The Excise Laws Amendment (Fuel Tax Reform and Other Measures) Bill 2006 also repeals the Coal Excise Act 1949, the Distillation Act 1901, the Fuel Blending (Penalty Surcharge) Act 1997, the Fuel Misuse (Penalty Surcharge) Act 1997, the Fuel (Penalty Surcharges) Administration Act 1997, the Fuel Sale (Penalty Surcharge) Act 1997 and the Spirits Act 1906, which are no longer required under the new system for providing fuel tax relief.

The Excise Tariff Amendment (Fuel Tax Reform and Other Measures) Bill 2006 amends the Excise Tariff Act 1921 so that the mechanism of fuel tax relief for eligible users is through the fuel tax credit system legislated through the Fuel Tax Bill 2006 and not through concessions within the excise system. In particular, the fuel items in the schedule to the Excise Tariff Act 1921 are amended so that there are only two rates of duty—one for aviation fuel and one for other fuels. In conjunction with the fuel tax credit system, this will remove the effective excise on burner fuels and provide effective excise relief for a wide range of business users of fuel, including where fuel is used rather than as a fuel. This measure applies from 1 July 2006, but three items in schedule 1 relating to the validation of an excise tariff proposal apply from 1 November 2005.

The Customs Amendment (Fuel Tax Reform and Other Measures) Bill 2006 and the Customs Tariff Amendment (Fuel Tax Reform and Other Measures) Bill 2006 make amendments to strengthen customs control over certain imported goods that are used in the manufacture of excisable goods to ensure that excise equivalent goods, certain alcohol, tobacco and petroleum products, are subject to the same duty when imported as is applied under the Excise Tariff Act 1921 for the same products when manufactured or produced in Australia. The amendments repeal customs related provisions of the fuel penalty surcharge legislation and replicate certain provisions of the Spirits Act 1906, the act which is to be repealed.

Presently, fuel tax relief is provided in the form of remissions, refunds and rebates under the Excise Act 1901 and the Customs Act 1901 and energy grants under the Energy Grants Credit Scheme. These schemes have restrictive and complex eligibility criteria and apply to different fuels and fuels used in different ways. The Energy Grants Credit Scheme currently provides a grant for the use of diesel fuel and alternative fuels in the case of the on-road credit in activities that are eligible for an off-road credit and an on-road credit. No credits are provided for the use of petrol under the scheme.

Remissions, rebates and refunds of excise and customs duties are also presently provided in prescribed circumstances and subject to prescribed conditions and restrictions. Remissions allow holders of a remission certificate to obtain prescribed fuel products fuel tax free for use in prescribed circumstances. Remissions and refunds commonly relate to solvent and burner fuel applications, kerosene for some specific fuel uses and diesel and petrol substitutes for non-fuel uses.

These bills contain positive improvements to the system of providing fuel tax relief, giving effect to the government announcement of major reform in its energy white paper Securing Australia’s energy future to modernise and simplify the fuel tax system. Further, the changes will lower compliance costs, reduce tax on businesses and remove fuel tax for the thousands of businesses and households across the country. When the fuel tax credit system is fully implemented, fuel tax will only be effectively applied to fuel used in private vehicles and for certain other private purposes and to fuel used on road in light vehicles for business purposes and aviation fuels where tax is imposed for cost recovery reasons. For the reasons I have outlined above, I commend these bills to the House.

Kim Wilkie (Swan, Australian Labor Party) Share this | Link to this | Hansard source

The original question was that this bill be now read a second time. To this the honourable member for Hunter has moved as an amendment that all words after ‘That’ be omitted with a view to substituting other words. The question now is that the words proposed to be omitted stand part of the question.

Question agreed to.

Original question agreed to.

Bill read a second time.