Eric Abetz (Tasmania, Liberal Party, Minister for Fisheries, Forestry and Conservation) Share this | Hansard source

I table a revised explanatory memorandum relating to the bills and move:

That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

Leave granted.

The speeches read as follows—

FUEL TAX BILL 2006

The bill gives 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 introduction of the fuel tax credit system will lower compliance costs, reduce tax on business and remove the burden of fuel tax from thousands of individual businesses and households.

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
• fuel used on-road in light vehicles for business purposes

This bill sets out the principles concerning a taxpayer’s entitlement to a fuel tax credit and the mechanisms for claiming a credit.

Businesses will generally be entitled to a fuel tax credit for fuel they acquire, manufacture or import for use in carrying on their enterprise. For the use of fuel on-road in heavy vehicles the credit will be equal to the effective fuel tax less a road user charge.

Businesses will also be entitled to a fuel tax credit for taxable supplies they make of kerosene or heating oil for domestic heating and taxable supplies they make of packaged fuel such as kerosene, mineral turpentine and white spirit for use other than in an internal combustion engine.

Non-business taxpayers will be able to claim a fuel tax credit for fuel used by them in generating electricity for domestic use.

The use of fuel on road in diesel motor vehicles will generally not be entitled to a fuel tax credit unless the vehicle meets one of four emission performance criteria.

Claimants will be responsible for self-assessing their entitlements and will claim a fuel tax credit through their Business Activity Statement in the same way as they claim their Goods and Services Tax input tax credits. A separate claiming mechanism will apply for non-business taxpayers claiming a credit for fuel used in electricity generation for domestic use.

The bill contains a requirement that large fuel users, those receiving more than $3 million per year in fuel tax credits, join the Greenhouse Challenge Plus Programme in order to receive payment of credit entitlements.

The companion bill, the Fuel Tax (Consequential and Transitional Provisions) Bill 2006, relates to the transition from the existing arrangements to the fuel tax credit system, the phasing in of extended entitlements and the administration of the new system.

Full details of the measures in the bill are contained in the explanatory memorandum.

FUEL TAX (CONSEQUENTIAL AND TRANSITIONAL PROVISIONS) BILL 2006

This bill is a companion bill to the Fuel Tax Bill 2006.

The bill provides the transitional arrangements to phase in the fuel tax credit scheme while phasing-out the Energy Grants (Credits) Scheme, Fuel Sales Grant Scheme and the States-administered Petroleum Products Freight Subsidy Scheme. Changes to implement the fuel tax credit system will be phased in from 1 July 2006, with final changes taking effect from 1 July 2012.

Entitlements under the Fuel Sales Grant Scheme and the States-administered Petroleum Products Freight Subsidy Scheme will cease to exist for fuel sales or deliveries made after 30 June 2006.

The purpose of the transitional provisions is to ensure that claimants receiving a grant continue to benefit from fuel tax concessions, and to phase in the extension of eligibility for off-road business use of 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 credit from 1 July 2012.

The bill also makes consequential amendments to other legislation. The consequential provisions primarily amend the Taxation Administration Act 1953 to bring the administration of the fuel tax credit system within the administrative framework of other indirect taxes under that Act. Amendments to the Taxation Administration Act 1953 are also part of a rewrite of the provisions affecting indirect taxes in a drafting style adopted by the Tax Laws Improvement Project aimed at making tax legislation more comprehensible.

The legislation also clarifies the extent of eligibility for off-road credits provided for ‘mining operations’ under the Energy Grants (Credits) Scheme. ‘Mining operations’ is intended to only cover the extraction of naturally-occurring minerals. The legislative changes clarify that the:

• synthetic production of minerals, and
• extraction of limestone or other materials for use in the manufacture of products to be used for the purposes such as construction, road making or landscaping

do not constitute mining operations. These changes take effect from today.

The bill will fully implement the fuel tax credit system by 1 July 2012 and the existing Energy Grants (Credits) Scheme will be abolished by that date.

Full details of the measures in the bill are contained in the explanatory memorandum already presented.

Debate (on motion by Senator Abetz) adjourned.

Ordered that the resumption of the debate be an order of the day for a later hour of the day.