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

The Fuel Tax Bill 2006 and its cognate bill are very important bills. The Fuel Tax Bill 2006 is complex, but it is broadly about three things: moving business from the Energy Grants (Credits) Scheme onto the new Fuel Tax Credits Scheme, promoting changes to the way businesses that are exempt from excise claim back the tax paid on fuel and putting in place the legislative structures required to give effect to the phasing in of tax or excise on LPG, CNG—that is, compressed natural gas—and biofuels, including ethanol.

The opposition has expressed support for the broad structure of the new fuel tax regime, which provides for a single system of fuel tax and associated credits; a reduction in the incidence of fuel tax levied on taxable fuels; a staged introduction of a framework for the taxation of liquefied petroleum gas, liquefied natural gas and compressed natural gas from 1 July 2011; a staged introduction of excise on and a phasing out of domestic assistance for biodiesel and domestic ethanol; and the linking of fuel credits to environmental standards.

Under the fuel tax credit system, all taxable fuel acquired, manufactured or imported into Australia for use in off-road applications for business purposes will become tax free over time. There will be an effective tax-free status for fuel introduced over time for business off-road use. Petrol for off-road business use will also be eligible for a fuel tax credit from 1 July 2008. This is a major tax benefit to business fuel users in regional Australia.

For off-road usage the current Energy Grants (Credits) Scheme will be phased out from 1 July 2008 when a 50 per cent fuel tax credit will apply and 100 per cent for petrol for uses that the current grants scheme recognises. However, the new tax regime will gradually impose fuel tax for biodiesel, domestically produced ethanol, liquefied petroleum gas, compressed natural gas and liquefied natural gas. This will be phased in from 1 July 2011 to 1 July 2015, and this delay is essential for development of these sectors. Labor claims credit for advocating this staged introduction.

For on-road users, the current 20-tonne threshold is removed and vehicles over 4.5 tonnes will now only pay fuel tax at the level of a road-user charge and receive a fuel tax credit for other tax. The Energy Grants (Credits) Scheme will continue to provide grants for alternative fuels from 1 July 2006 until 30 June 2010 for vehicles over 4.5 tonnes. This is then phased out in five equal steps. Concessions, refunds and remissions currently delivered through the excise and customs system for the use of fuel other than fuel in an internal combustion engine will be replaced by fuel tax credits. Claiming of fuel tax credits for large claimants—over $3 million—and operators of on-road diesel vehicles will be conditional upon businesses meeting certain environmental criteria.

As the new fuel tax model was being developed, Labor called for a delay in the period before the excise would apply to gaseous fuels and ethanol and bodies. The government accepted this proposal by Labor, with an extension of the introduction of the excise from 2008 to 2011, and this was significant in Labor’s decision to support the broad framework. The question before the chamber today is not whether the broad fuel tax model is acceptable—this is a debate that has already occurred. The question is really whether the bill adequately gives effect to the intention behind this model, and I have to say that it manifestly does not in its current form.

As a member of the Senate Economics Legislation Committee that considered the bills I must say that the committee heard many concerns in its inquiry that many businesses will be introduced to paying fuel tax for the first time. The excise or customs duty is to be paid up front, and the associated credit is to be claimed by businesses via the business activity statement, BAS, in the same way as input tax credits are claimed for the GST. Labor has received strong representations from manufacturers in the areas of chemicals, plastics and paints, sponsored by ACCI. In addition, farmers would be adversely affected. Again, we heard evidence about this in the committee inquiry into the bills. In fact, on the public record Senator Fiona Nash has said:

The changes, if successful, would have severely impacted on the cash flow of broad-acre farmers who make up roughly 70 per cent of Australia’s 130,000 farming businesses, at a time when they could least afford it.

During the inquiry the manufacturers claimed that the new arrangements will potentially cause major cash flow problems for medium-sized producers. Currently these producers are effectively fuel tax free due to the remission certificates from excise and customs on fuel inputs. Now they must pay the fuel tax and get the credit when they lodge their BAS. Producers with turnover of $20 million must report monthly for GST purposes. Providing that the GST refunds are made quickly these producers will not face major delays. However, businesses with turnover from $2 million to $20 million report quarterly and thus face major delays between payment of the tax and the associated credit. Clearly, this measure would cause cash flow problems. In addition, the ATO has been slow in processing refunds when there has been an audit or review of the BAS, as identified by the ANAO.

So strong were the arguments against the model of receiving the fuel tax credit when BAS was lodged that Minister Dutton has had to announce the introduction of the two-year transitional arrangement which would permit the commercial users of the fuel to apply to the commissioner to have an early payment. It is not clear exactly when the commissioner needs to make the early payment. It would be helpful for the minister to clarify this. I presume that this means that the fuel tax credit will be paid as soon as an application is received for payment and the excise or customs duty has been paid. The proposed changes do appear to provide a measure of relief to those adversely affected by the new arrangements. However, the question can still be asked: if the government sees fit to provide for fuel tax credit to be brought forward now, why shouldn’t this be a permanent feature of the new regime? In two years time the same cash flows problems could persist. In fact, it was the recommendation of Labor senators who are members of the Economics Legislation Committee that it should occur and should remain a permanent arrangement. Labor is certainly predisposed to review the operation of this transitional model to determine whether or not the proposed transitional model should expire at all or become a permanent element of the fuel tax system.

The Fuel Sales Grants Scheme is being abolished in this bill. The scheme provides a grant for sales of gasoline or diesel up to three per cent per litre in non-metropolitan areas, including my own electorate of Hume and across regional New South Wales where I do most of my travelling. Higher petrol prices in regional and rural Australia will be the result if the Howard government goes ahead with its plan to abolish the Fuel Sales Grants Scheme—and, as I reported to the chamber, over the long weekend some places in New South Wales had petrol prices over $1.50 a litre. Led by the National Party, the abolition of the scheme from 1 July 2006 will increase the tax burden on petrol in rural and regional Australia. At this time of record fuel prices the government is withdrawing a scheme worth $257 million a year that was central to ensuring that, after the GST, prices of petrol in non-metropolitan areas would not rise more than in metropolitan areas. It may be the case that this scheme has not operated properly, but more evidence needs to be presented on this point and direct options for reform considered.

The government has said that the funding will be put into AusLink. Although it is true that the majority of AusLink funding goes to non-metropolitan areas, a large slice of it is also spent on major roads like the Pacific Highway. So a significant element of the funding has been removed from rural, regional and remote communities. This in itself is a concern, but what is worse is that the government is doing this by stealth, hoping that regional Australia will not notice. Certainly the Australian Labor Party has noticed.

On behalf of Labor, I move the second reading amendment standing in my name:

At the end of the motion add “and the Senate calls on the government to review in 2009 the proposal to introduce excise on biofuels in 2011, and consider whether or not there is a case for delaying the introduction of excise, depending on the progress made:

             (a)    by the industry in securing new investment in biofuel production in Australia;

             (b)    by the biofuels industry and the petrol retail industry in increasing market penetration of biofuels; and

             (c)    towards achieving the 350 million litre target in 2010”.

Labor is very concerned that government delays in legislating the regime may have adversely affected the industry’s ability to move forward more quickly with new investments, and that means a slower market penetration for E10 fuels. Industry says it needs a full five years to mature, and Labor suggests that a review of the proposed tax regime should be undertaken in 2009 to determine whether the industry needs more time. It should take into account the three points that are contained in the amendment.

We believe that ethanol is good for regional jobs and the environment and it can certainly help Australia become less reliant on imported fuels. Our increasing dependence on imported fuel and refined petrol is an issue that must be addressed in the future. With Labor’s plan to encourage the establishment of a gas to liquids industry, the promotion of ethanol will make Australia less vulnerable to the vagaries of the international market.