Ursula Stephens (NSW, Australian Labor Party, Shadow Parliamentary Secretary for Science and Water) Share this | Hansard source

The discussion this evening has certainly been very interesting. We have managed to extract a little bit more information that makes a bit more sense of the Fuel Tax Bill 2006. As I said in my speech in the second reading debate, the issues that most concerned all members of the committee were the lack of information and the lack of time in which to consider the complexity of these bills.

I have a lot of sympathy with the issues raised by Senator Allison and in the evidence that we received from the biofuels industry, particularly in the evidence that we had about a lack of policy coordination and consistency. We have heard about it tonight in the concerns that people have about the biofuels industry. I will briefly quote from the report:

The Biofuels Taskforce, for example, represents the development of positive policies for new ethanol and biodiesel industry growth, while Fuel Tax Bill 2006 represents a clear example of impediments being put in place that will undermine the achievement of those policy objectives.

So there is no doubt that there is a lot of policy confusion in this chamber and certainly a lot of confusion out there.

I want to put on the record Labor’s position on the Democrat amendments. The evidence that we have heard both tonight and during the inquiry into the bills clarifies the issues for us very clearly. The current definition of on-road diesel under the Energy Grants (Credits) Scheme has led to what we have heard tonight called an ‘unintended consequence’, an ‘unintended advantage’ or a ‘loophole’, whereby tax-free biodiesel has been able to attract a credit when blended with diesel. Although biodiesel is specifically excluded from the definition of off-road diesel, the definition does allow blends of diesel and biodiesel consisting primarily of diesel to be treated as off-road diesel. We understand and accept that that definition is intended to allow biodiesel blends sold as diesel to qualify for an off-road credit. But biodiesels and diesel blends of up to 49 per cent biodiesel have emerged in the market as a result of this definition in the current legislation, and that is being exploited by some biodiesel producers. We accept the argument from the minister that that is the case. So this loophole effectively allows tax-free biodiesel to be entitled to an off-road credit at the same rate as diesel. Labor accepts that the fuel tax bills will rectify that anomaly.

Under the proposed Democrat amendments, the unintended advantage of the current legislation would in fact be extended because unblended biodiesel would be entitled to a full fuel tax credit—an effective subsidy equal to 19c per litre. After July 2006, biodiesel will remain effectively excise free for off-road use as well as enjoying a lower effective tax rate for on-road use. So, importantly, biodiesel or diesel blends that meet the diesel standard will continue to receive the same fuel tax credit treatment as diesel.

I will go through the Democrat amendments one by one. Labor believes that amendment (1), relating to clause 43-5, will have the effect of the subsidy under the energy grants scheme for on-road use being taken into account for calculating the fuel tax credit. We believe that if you do not pay fuel tax then you should not receive a fuel tax credit. Amendment (2), relating to paragraphs (3)(c) and (3)(d), actually amends the act to allow biodiesel and other taxable fuels to be taken into account in the calculation of the fuel tax credit. We understand that this actually increases the biodiesel subsidy. We accept the figures from Treasury. Labor sought clarification of the cost from Treasury and was advised that, over the forward estimates, that represents over $1 billion. We accept that that is the case. In amendment (3), the clause is purely definitional and, of course, it was dealt with in the excise bills that we dealt with last week. So, on the basis of that and the consideration of the debate, Labor is not in a position to support the Democrat amendments, while being very sympathetic to the issues raised by the biofuels industry.