Bruce Billson (Dunkley, Liberal Party, Minister for Small Business) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

This bill amends the Excise Tariff Act 1921.It is part of a package of bills that will give effect to the government's commitment to ensure that the rate of fuel excise duty applying to all fuels, with the exception of aviation fuel, crude oil and condensate, will be biannually indexed by reference to the consumer price index.

Excise has applied to domestically produced petrol since 1929. From its introduction up until 1983, changes to the excise rate were largely made in an ad hoc manner. Indexation of excise was introduced by the Hawke Labor government in August 1983 in order to maintain the real value of excise collections and to provide more stability for business and consumers.

Since March 2001, the excise rate applying to petroleum products has been frozen, leaving the excise rate on petrol at its current level of 38.143c per litre.

The reintroduction of fuel excise indexation will provide a predictable and growing source of revenue which will be used to assist the government to deliver road infrastructure projects.

The bills will establish the Fuel Indexation (Road Funding) Special Account. This account will ensure that the net revenue raised through the reintroduction of fuel duty indexation is spent on road infrastructure. Its balance will be reported in Budget Paper No. 4.

Consequential amendments will also be made to the Excise Tariff Act 1921 in order to simplify the burden on businesses by rounding the applicable duty rate of indexed fuels from three decimal places in the cent to one decimal place. On the current rate for petrol, this would have the effect of reducing the excise and excise-equivalent customs duty rate from 38.143c per litre to 38.1c per litre. However, indexation will apply in each indexation period to the three decimal places.

In the 2014-15 budget, the government has committed around $26 billion over the forward estimates period to fund new road projects. The indexation of fuel excise and excise-equivalent customs duty will contribute to their funding by raising approximately $2.2 billion over the same time frame.

By indexing fuel excise with the consumer price index, the cost of petrol and diesel will increase by approximately 0.9c per litre for consumers in 2014-15. This would mean that 50 litres of fuel per week would cost around 45c extra or around $24 extra per annum.

This measure will not increase input costs for businesses using fuel in off-road operations or operating a vehicle with a gross vehicle mass in excess of 4.5 tonnes. This is because these businesses are able to receive fuel tax credits to offset the fuel excise paid. For off-road activities, this is the full reimbursement of fuel excise while for on-road vehicles with a gross vehicle mass in excess of 4.5 tonnes this is equivalent to the excise rate minus the road user charge.

This government is committed to budget repair and putting the nation's finances back onto a sustainable path. Indexation of fuel excise will assist the government to build the road infrastructure for a 21st century economy.

Full details of the measure are contained in the explanatory memorandum.

Debate adjourned.