Ron Boswell (Queensland, National Party) Share this | Link to this | Hansard source

We are debating the Fuel Tax Bill 2006 today, which will bring into effect legislation that will remove excise from many fuels. It is designed to simplify the way tax credits for fuels are administered. It replaces and adds to the Energy Grants (Credits) Scheme. And what it effectively does is provide a mechanism to allow a greater number of businesses to claim back the fuel tax that has already been paid. There are a number of aspects of this bill which I am happy to commend. These include the provision to allow rebates on tax paid to all off-road fuel users. In effect, this allows fuel excise exemption for every farmer that has a petrol pump auger or for any petrol that is used off-road. That is going to be a great benefit to many regional and rural users of petrol on farms.

I see Senator Scullion in the chamber today. He will be rejoicing on behalf of the fishing community, because it will also exempt all petrol used in outboard motors. As a former fisherman, and a very successful one at that, he knows it will make a huge difference to the fishing industry. This bill removes about $800 million in extra fuel tax credits to business right across Australia, whether it be fishing, forestry, mining or primary producers. This means any petrol or fuel that is used in those industries will have an excise exemption, and that is a big plus. It means a business will be able to operate more effectively as the level of tax for these businesses is being reduced.

One aspect of the bill is to centralise a system of fuel tax credits through the Australian Taxation Office, rather than through a number of different departments and schemes as is currently the case. In practical terms, this means that rebates are to be processed through the Business Activity Statement rather than through the automatic claiming system that currently exists. That had certain problems for rural farmers and fishermen. There was a claiming system that farmers used that gave almost immediate tax excise relief. You put your statement through to the appropriate department and your tax excise rebate would be credited to your bank. In the case of fishermen, they had some particular arrangement that meant they did not pay excise at all. The people they bought the fuel from made the exemption claim on their behalf. When this position was reversed, many of my colleagues, including Senator Fiona Nash, Senator Nigel Scullion and Liberals such as Senator Campbell and Senator Macdonald, took it to the appropriate ministers and the Prime Minister, and we were able to get a two-year transitional period for claiming rebates through the BAS.

Many farmers and fishermen would have had to find the excise. In the case of fishermen, it could have been $3,000 or $10,000 a month. That would have been extra cash that they would have had to find and pay, before they got it back through their BAS three months later. I want to make it very clear that a number of us went to the Prime Minister and to the Treasurer, and we were able to get a two-year transitional payment. When these two years are up there is no doubt we will review it. If needed, we will go again and ask for some sort of protection and comfort for these particular industries. In that meeting with the Prime Minister we pointed out to him that there was an imbalance in the fishing industry. Some of the payments that were being made on the Barrier Reef were subject to tax. He took that on board, particularly concerning the fishing industry, and came up with an ex gratia payment on top of another payment that put another $20 million into the fishing industry to pay for what had happened on the Great Barrier Reef through GBRMPA’s incapacity to get it right. In both those areas, we can honestly say that we have done our best for our constituents, and that we really stood up for them.

This change was going to have major cash flow implications for thousands of small businesses, and we made sure the voice was heard in the right areas. Existing claimants of the fuel tax credits or rebates will now have two years to adjust to the different claiming methods. From July 2008 the new fuel will then enter into the rebate system. As I have said, if it then creates problems we will be there monitoring the situation. If it cannot be accommodated or if it is going to cause too much hardship to these particular businesses in primary industry then we will be in there again fighting for them.

In the four years from 2008 to 2012, 50 per cent of the tax paid on these fuels will be able to be claimed. From 2012 the tax paid on off-road use of all fuels is fully rebatable. Therefore, under this act, the effective application of fuel tax will be limited to: business use of fuel in on-road applications of motor vehicles with a gross vehicle mass of 4.5 tonnes or less; business use of on-road motor vehicles with a gross vehicle mass of more than 4.5 tonnes, but only to the extent of the road user charge; and private use of on-road motor vehicles, certain off-road applications and aviation fuel. Fuel excise on fuels used for burners, heating or electricity generation will also be fully rebatable from 2006, making them effectively tax free.

The use of petroleum for manufactured products other than fuel, such as solvents and paint, will be effectively excise free. Manufacturers of these products will then be required to make these excise claims under their BAS. There have been some submissions to the Senate inquiry saying that this will put an extra administrative burden on the cash flow for some of these paint and solvent manufacturers. We will have to take that on board. I note the recommendation by Senator Brandis that the government re-examine the effects of the legislation on manufacturers who use hydrocarbonates for non-fuel manufacture process during the two-year transitional period, with a view to minimise and offset any adverse effects. I used to work in the paint business, and I still keep in contact with those people.

The bill also requires those claiming more than $3 million in tax credits to commit to the Greenhouse Challenge Plus programs, which ensure they are using clean fuel and driving vehicles that produce low emissions. Programs such as this benefit the alternative fuels like biodiesel and ethanol. The large trucking companies and diesel fleet operators will be part of a program, and I ask that those administering those fleets consider a requirement for an increase in biodiesel use as one of the elements to keep their fleets driving and producing low emissions.

There is a contentious issue here. The bill also repeals the Fuel Sales Grants Scheme and the Petroleum Products Freight Subsidy Scheme. This will allow the government to redirect funding from those schemes directly into road funding programs. That money, which used to give a 1c, 2c or 3c a litre freight subsidy, has now gone into the very popular Roads to Recovery program. That was the will of the particular councils that did not believe that the freight subsidy scheme was being all that effective. Nevertheless, there are some people who are not happy with this. But the money did not go into consolidated revenue; it went into the Roads to Recovery funding that is made directly available to all local governments.

The bill provides the framework for the fuel tax credits system, which will be used by the producers of alternative fuels to claim excise rebates on the production of alternative fuels from 2011. Clarification has been received this week that this bill does not specify the excise rates that will apply to domestic and imported ethanol. That legislation is yet to come. But that does not change the fact that from July 2011 excise will apply to domestically produced ethanol and biodiesels for the first time. From that date, the effective excise rate for domestically produced and imported ethanol will be the same. That concerns a number of people in the biofuels industry.

The bill also limits the level of excise able to be rebated to that of actual excise paid. This has the effect of making biodiesel more expensive to the end user. This is a very contentious issue. The argument depends on whether the 38c was an excise rebate or a production subsidy. I have argued long and hard, and with just about everyone who will listen to me in this place, that it was a production subsidy, but my arguments have not met with success. I have been told that it was an excise rebate, and you cannot claim an excise rebate on excise that has not been paid. There lie the two different arguments. Whichever argument is right, the government is saying that it is an excise rebate. Therefore, if you are an off-road user, you cannot claim a rebate on excise that was never there in the first place.

This is going to be a disincentive to current users of biodiesel. I am not going to beat about the bush: it will lead to current biodiesel users reverting back to petrodiesel in order to claim a full tax rebate. However, as I work it out, biodiesel should have some market advantage in that it will be a number of cents cheaper for on-road use.

The Senate committee also addressed this issue, and commented on the disincentive to biodiesel’s use that is in the bill. The Brandis committee made certain recommendations that would have assisted the biodiesel industry. Unfortunately, those recommendations were not taken up. I note that Senator Brandis is now entering the chamber. I have argued strongly that his view is the correct view, but I have not been successful. In a coalition, you have to take the good with the bad. There are going to be serious consequences because of this. We will monitor them. If the worst comes to the worst, we will fight for what Senator Brandis said—and I believe him—about this: that it was a subsidy to increase production.

Everyone in this chamber will be aware that I have been very vocal about the importance of a strong and vibrant biofuels industry for this nation. I am conscious of the types of support that biofuel producers are receiving overseas and the importance of attracting new investment to the industry. Australia is facing a crisis in crude oil, both in price and in supply. In 2001, we produced 31 billion litres, which was pumped out of Bass Strait and other places. Last year, Australia produced 18 billion litres of fuel. In 2004, oil imports accounted for approximately 13 per cent of our balance of trade. This year, oil accounts for 60 per cent of our balance of trade.

Internationally, governments are reacting to the crisis. Governments are enacting legislative mechanisms to boost biofuel uptake and introducing taxation and excise regimes to encourage greater biofuel production. Australia has joined the call for more biofuels. To call is one thing. The reality is that the policy settings in place are pretty short term. We are aiming for a target of 350 million litres, which is 0.75 of one per cent. That is a very small amount when you look at the fuel shortage crisis the world is facing. I might add that someone told me the other day that 12 per cent of the world’s population drive cars. It will be around 15 per cent in a couple of years time, putting more demand on fossil fuel.

There is a lot of buzz about biofuels in our time. Bill Gates is into it. Richard Branson has invested in it. In Australia, Transfield, Colonial and Babcock and Brown have interests in potential biofuel production. But what is the reality of the Australian situation? There are investors with millions of dollars interested in biofuels who are waiting for an indication from government that it is serious about biofuels. Production has been planned, costed and in many cases financed, but nothing is happening.

There have been no new ethanol plants built in Australia since 1990. Ten years ago Australia had three ethanol producers and, for all the government support of the industry, there are still only three ethanol producers. These producers have surplus products in tanks right now, waiting for a buyer. Ethanol that could reduce the cost of petrol by 3c to 4c a litre is being stored because the big four oil companies do not want to buy it. Australian producers at the moment have the capacity to supply over 100 million litres of ethanol. Currently, petrol retailers—and mostly independents—are buying about 30 million litres. The independents are buying probably 80 or 90 per cent of it. In my estimation, the independents are buying around 30 million litres and the four big oil companies are buying about 10 million litres. That is more than this time last year. This is really just a catch-up. We are using less than half the ethanol that was being used in Australia in 2002, when the Labor Party engaged in political scaremongering at the expense of an emerging industry.

A small number of biodiesel production facilities are operating in Australia. These produce and market some of their products directly to large diesel fleets and so have been able to avoid the reticence of oil majors. This bill and the application of the tax credits system has now led these producers to wonder where they are going to sell their product. The response from the oil companies to the Prime Minister’s voluntary industry action plan process has been slow and laboured. In the six months since the action plan was announced, there have been very few new contracts announced. There is certainly no indication that the targets nominated by the oil companies themselves will be met—and that is 89 million litres. I believe they have taken up about 10 million litres. (Time expired)

Ruth Webber (WA, Australian Labor Party) Share this | Link to this | Hansard source

As a member of the Senate Economics Committee, it gives me a great deal of pleasure to rise and speak on the Fuel Tax Bill 2006 and the Fuel Tax (Consequential and Transitional Provisions) Bill 2006. The economics committee inquiry into this package of legislation is an example of one of the ways that the committee process in this place can work very well. So I want to place on record my thanks to other members of the committee and the committee secretariat for what was a fairly rushed process but, nonetheless, I think a very productive process.

In fact, it would seem just the thought of having a Senate Economics Committee inquiry into this legislation produced action on the part of the government. It is interesting to note that as soon as our inquiry was announced, once it was agreed to by government senators, the government made an announcement about the transitional arrangements for this bill and decided to allow a further two years for some of the transition. Whilst as a member of the opposition I welcome that announcement, I think we all need to be aware—and I noted this at the time—that if this is the path that the government insists on taking us down then it is incumbent on the Assistant Treasurer and on Treasury to ensure that this is real transition, that we really do spend the next two years working on transition and addressing a lot of the cash flow and other issues the businesses have raised. I for one do not want to be having the same argument and the same rush in two years time. I think that, for the future of the industry and for the future of small and medium businesses, we need to get this right and to work on effective change.

As has been mentioned by others in this debate, whilst these bills deal with a number of aspects, some of the aspects of these bills have caused a great deal of concern within the biofuels industry in particular. Renewable Fuels Australia summed up the views of a number of submissions, claiming that there has been a lack of policy coordination and consistency which has hindered the growth of the biofuels area. They said, as quoted in our 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.

Again, if we are going to have transitional arrangements and have this debate, it is incumbent on all of us to get a consistent approach to the development of this industry and to get it right.

As a member of the Senate Economics Legislation Committee and also as a West Australian, I was approached by a number of people in the lead-up to the Senate inquiry. I was approached by people from the WA Fishing Industry Council, who talked about some of the cash flow problems that the changes—as announced at the time, before the two-year transition was announced—would cause to their members who, if they were to submit for the subsidy when they did their BAS, would be paying for the fuel up front. They go away to sea for between three and six months at a time, so that is a very hefty cost for them to carry before they come back to the mainland and submit their BAS. So it is good to see that we have taken that into account. I was also approached by a number of people from the biofuels industry.

In considering this, the Labor members of the committee supported the recommendations that were made by the chair of the committee—and the committee obviously recommended that the bills be passed. However, the committee considered that there are a number of issues that require resolution before the bills proceed. Accordingly, the committee recommended that:

• during the transition period announced by the Minister, the Government re-examine the effects of the legislation on manufacturers who use hydrocarbons for non-fuel manufacturing processes, with a view to minimising and offsetting any adverse effects;
• the Bills be amended to exempt oil recycling companies from the operation of the legislation;
• the Government implement an urgent review of the effectiveness of the Product Stewardship for Oil program, with a particular focus on whether the program will continue to be effective in meeting its objectives following the abolition of the energy grants credits scheme and the implementation of the fuel tax credits system;
• the Minister for Environment and Heritage initiate a review of disposal requirements applying to used oil, and in particular whether more stringent standards on the use of this material as a burner fuel are appropriate; and
• the Government reconsider whether Subclause 43-5(2) of the Bill is fully consistent with the Government’s other policies in relation to encouraging the development of a biodiesel industry and if appropriate, exempt the industry from its operation in the meantime.

What is important to note with those recommendations is that they are an example of how committees in this place can work. Whilst the recommendations were put forward in the name of the chair, they were actually with the unanimous agreement of all committee members. Those of us from the opposition went on to make some additional comments after our examination of the legislation. We said that we believe the bill should be amended along additional lines. Firstly, the two-year transitional arrangements for early payment of the fuel tax credit should be provided for on an ongoing basis. Secondly, the 31 December 2006 date for receipt of applications for early payment should be dispensed with. Those are recommendations that, obviously, as a member of the opposition I wholeheartedly endorse.

As a Western Australian and having been involved in this inquiry, not only was I approached by people involved in the development of the biofuels industry in my home state and those involved in other industries that may use biofuels but also I have had cause to have discussions with my own state government. They have an across-government approach to encouraging the development of the biofuels industry and the use of biofuels. Kim Chance, one of the main ministers responsible in this area, has a number of concerns about the government’s approach to this. It is his view that the federal government needs to fix the unfair burden of the cash flow issues, which are particularly placed on small and medium businesses. It is his view that the initial bill would require fuel users to pay the fuel tax up front. I accept the two-year transition, but not getting credit until they lodge their BAS would actually target small and medium businesses, many of whom do not lodge their BAS with the regularity that perhaps others assume they do. In the view of Mr Chance:

The Australian Government should be looking to expand the E-Grant system as an option for farmers and fishers to claim their credits.

That is something that the committee discussed at length. He went on to say:

The Australian government should also provide a more detailed industry by industry assessment of the measures which it claims will result in savings to industry, with a view to ensuring that industries such as the agricultural and fishing sectors receive fair treatment within the scope of the bill.

That is a remark that I wholeheartedly concur with. Whilst Mr Chance supports the move to have large claimants join the Greenhouse Challenge Plus program, another issue that we discussed in some detail in the committee hearings, he believes that the federal government should acknowledge the businesses operating in regional and remote areas—something that Western Australia specialises in—may need additional administrative support and time to enact those changes. He said that this support would then ensure that the program is seen as a positive partnership with the government rather than an attempt by the government to shift responsibility and costs.

It is the view of my home state—and it is a view that I share—that some form of assistance should also be given to compensate fuel users, particularly those in remote communities, for the impact of the removal of the Fuel Sales Grants Scheme. It is certainly my view that the case for the scheme remains just as valid now as it was in 2000. Mr Chance also suggested that there be a review of the legislation to ensure that it retains the current incentives for commercial operators to use blends with higher volumes of biofuel and that there is no disincentive for producers to set up plants in regional areas. I know of at least one company in Western Australia which has a long-term plan to establish facilities in regional towns in Western Australia, particularly those in the wheat belt, that are really struggling for any form of ongoing economic development and employment. Any adverse impact that this legislation has on that company will have a direct impact on the viability of those townships. That is something we all need to be aware of. Whilst I know it is the case in Western Australia, I am sure that we are not unique in having concerns in that area. Probably, when you look at that, consideration should also be given to simplifying the scheme so it is easier for people.

As part of its fuel tax regulatory changes, the federal government should delete section 43, a particular section of the bill that Labor senators have highlighted as a disincentive for farmers and fishers to purchase biodiesel as they cannot claim back the excise for biodiesel. The net effect is that biodiesel will become even more expensive and uncompetitive compared with diesel. I am sure that is not an outcome that we all want to see. Finally, when I was talking to Mr Chance, he said that in his view the federal government should, as part of its 350 million litre biofuels target, allocate a portion of the excise extracted from biofuels to supporting national and state based research and development of biofuels by allocating significant resources to appropriate research organisations. Improving the technology is critical to the future success of the biofuels industry. That is something that I am sure we all support.

Ian Macdonald (Queensland, Liberal Party) Share this | Link to this | Hansard source

I am not happy with the Fuel Tax Bill 2006 and the Fuel Tax (Consequential and Transitional Provisions) Bill 2006 before the parliament at the moment. I live in rural Australia and, for most of the 15 years or more that I have been in the Senate, I have been the only Queensland senator living in and representing rural and regional Australia. In that time I have come to understand very precisely the impact of fuel on rural and regional Australia. If I want to go to a specialist from where I live, I will have to drive a round trip of about 200 kilometres. If the people in the Gulf Country, in western Queensland and up in the cape want to see a specialist, they will have to drive a round trip of over 1,000 kilometres. If children in my community want to go to university, they have to drive a round trip of 200 kilometres. Children in the cape, the gulf and western Queensland have to drive thousands of kilometres to do that. If you happen to be lucky enough to live in Brisbane, which most senators in this chamber from Queensland do, you have to drive five, 10 or perhaps 20 kilometres to get to university or a specialist.

That just highlights that, for rural and regional people, fuel is a real expense. At the present time, the cost of fuel, through international circumstances—there is nothing at all that this government or any other government in the world can do about that—is crippling for rural and regional Australia, not just for the people who live there but for people who travel up my way in caravans. The grey nomads, as they are called, come up and add an economic benefit to rural and regional Australia.

These bills contain a lot of benefits. Senator Boswell mentioned some of them and, if time permits, I will come back to them later in order to highlight that there are a lot of advantages in these bills. But there are impacts of these bills that particularly affect regional Australia and, despite the best attempts of the Assistant Treasurer and Minister for Revenue, and others, I do not think those impacts have been properly addressed in the package of bills before us.

In Croydon, on Tuesday morning when I inquired, you were paying something like $1.48 a litre for fuel, and that was after the Queensland government’s 8c a litre subsidy. I might add, that is a subsidy that was introduced by a non-Labor government in Queensland, but it has been wisely continued by the current government. That is an enormous cost. Today, that fuel is subsidised to an extent of 2c or 3c a litre, whether you happen to live in Georgetown, Croydon or Karumba. In two weeks time, that 2c or 3c subsidy will disappear. I guess you could say that 2c or 3c is not a big amount when you are paying $1.60, but there are 10 customers of a petrol supplier in Georgetown who will pay, according to the proprietor of the fuel distributor, about $4,000 extra each with the removal of the 2c or 3c a litre subsidy.

Whilst that is being provided for in this bill, the decision was actually made a couple of years ago. The argument for removing it was that the 2c a litre subsidy was not getting through to the consumer, that some of the suppliers were snaffling it and that it was not making a difference. That came from a report that the government commissioned. Unfortunately and regrettably, I did not take as much notice of that at the time as I should have—I was busy as a minister at the time—and it escaped through. I do not recall what the evidence was, but I am suspicious of it. The government decided, on the basis of the report and this recommendation, that the subsidy should be scrapped and the money should go to roads—from memory, something like $297 million. The government believes that it is doing a good thing by putting that money into roads. It is putting it into Roads to Recovery, which is a great program that I was very instrumental in devising at the time that it was first implemented. It is one of the best programs that this government has ever devised. Roads are going to get another $297 million.

I will use the example of a council in the Gulf Country which desperately needs road infrastructure. They will probably get an additional $300,000 a year. By the same token, Brisbane will get $20 million a year from Roads to Recovery. Good on Brisbane. Brisbane desperately needs it. But the towns of Croydon and Georgetown up in the gulf desperately need road infrastructure and are going to get a little bit out of it. So the 2c or 3c a litre that country Australia was getting as a subsidy is being put into AusLink and Roads to Recovery. The main beneficiaries of that, I have to say with some regret, will be the more populated areas, usually in the south-east part of our country. I am concerned about that particular aspect of the matter.

In the same area there is now a new arrangement whereby trucks that are over 10 years old and over 4.5 tonnes will be paying 18c a litre extra for their fuel from 1 July. Currently they get a subsidy from their excise, but that will be removed if they have a truck that is over 10 years old. It does not apply to farmers on agricultural properties—and good luck to farmers—but there are many small business operators in the remote parts of Queensland, which I represent and that I travel to very often, who are not farmers and use their trucks, and they will be paying 18c a litre more for fuel.

I must say that there was not a lot of help in doing further research into this area, but I hope my staffer, Mr Crisafulli, who did this for me has been accurate. He tells me that you can overcome that problem if you conduct regular engine maintenance and maintenance of the vehicle in accordance with the requirements set out in some material. This does seem to mean that, even if you have a 10-year-old or older vehicle, if you do adhere to the manufacturer’s specified maintenance schedule for the vehicle or do some other things like changing oil and oil filters regularly—there is a list of things in criterion 4—perhaps you can overcome that. That is not known well. I did not know about it until a couple of hours ago. So for those truckies who are despairing about having to pay 18c a litre more from 1 July—and that will put many of them out of business—I would certainly urge them to get a bit more information or give my office a call, if need be, and we can refer them to the material that is on a government website. Unfortunately, I cannot indicate what that is, but my office will be able to tell them that. So there may be ways to overcome this, but it is an impost which has to be addressed.

The third thing that I am concerned about with this bill relates to the fishermen and to certain farming users. At the present time, fishermen pay the excise but they get it immediately refunded because the fuel companies have been able to claim the excise for them. So the fuel companies have actually sold them the fuel excise free. So the fishermen pay it but get it back. The effect has been that they have been able to buy their fuel 38c a litre cheaper. Under this proposal, the 38c a litre excise will have to be paid upfront. It can be claimed back through the BAS in the normal course. Whether that is done three monthly or monthly, you will get it back.

But for the fishing industry, currently struggling under a lot of circumstances beyond their control, that immediate cash flow problem is going to be a real difficulty. This decision was made back in 2004, and this was a difficulty that the then Minister for Revenue and Assistant Treasurer, Mal Brough, raised with me about 12 months ago when I was then the fisheries minister. We were charged with understanding that that was government policy—it is sensible that everyone in Australia should have the same rules and that fishermen should not have a different set of arrangements to others—and we were tasked with trying to address the negative short-term effects of that on fishermen.

There has been a lot of work done between Treasury and the Department of Agriculture, Fisheries and Forestry over the year. They came up with the solution that, for a two-year period, fishermen will be able to claim back their excise almost immediately. ‘Almost immediately’ means that, if they put in the claim now, they will get it back within four and 14 days, according to Treasury. This claim has to be done on paper. Apparently, you cannot do it electronically. With the huge facilities the Australian Taxation Office has, one wonders why it cannot be done electronically and why it cannot be done instantaneously. Some of these fishermen do get substantial amounts of fuel and go out for two or three weeks at a time, and it will be a real impost to them.

Unfortunately, I left the position of Minister for Fisheries, Forestry and Conservation—which is a nice way of putting it—part way through this, and what has transpired is that the government has adopted this as a way to ameliorate the problems over a two-year period. My solution was that it would have been better to get each fisherman to calculate the actual cash flow implication to him and then for the government to pay them a grant. Once they get over the cash flow problem, things will right themselves because each three months or each month, as they put in their BAS, they will be getting back the excise from the previous one. So it was only that first period that needed to be compensated.

The Labor Party have said in their minority report on the Senate investigation into this that, if this is going to work for two years—because this transition period of getting instantaneous refunds is needed—why can this not be done consistently, for ever and a day? I must say that I am rather attracted to that proposition. I am not quite sure whether the Labor Party are moving such an amendment. Unlike some of my colleagues, I do not go and speak to the media about these things and I do not go and negotiate with the Labor Party over things—so I do not know whether the Labor Party are moving such an amendment. But we do need to ensure that the impact on fishermen is carefully followed and, if there is a real problem to them, that some ameliorating work is done. I think my suggestion of giving a cash grant to fishermen would have been very appropriate.

Many of the fishermen who do not have big fuel bills will be surprised at the narrowness of the effect on them. If you work it out, it is really only the interest on the extra money you will have to borrow to bring forward your payments. But many in the fishing industry think it will be a problem for them. The Mooloolah River Fisheries wrote to me about this. They say:

We represent a considerable number of fishing and seafood operators in the Queensland area. On top of the huge increased costs of fuel, fishing closures, industry rationalization, and competition with global markets, the additional impact of an increase in the up front payment for fuel will represent increases of up to 40% in operating costs.

I do not think that is right, but they are the experts and that is what they tell me. They continue:

The conversion of fuel rebates to tax credits will take huge additional working capital amounts that are not viable.

And they go on:

Providers of fuel to fishing operations will no longer provide the necessary credit to operators, as their carrying costs will exceed any viable considerations. The impact will extend well beyond the direct operations of the industry, as it will severely impact on a huge range of companies and individuals who are totally or substantially dependent upon cash flow from the industry, through the supply of goods and services.

The Queensland Seafood Industry Association provided me with a copy of a letter from a fuel supplier regarding the situation if this scheme comes in. In their letter they say:

We wish to confirm that—

and they mention the name of their company—

will not be providing extended trading terms to customers affected by these changes.

Therefore, it is important that you address any concerns with your Accountant or the Tax Office immediately.

So I am concerned about the impact this might have on fishermen.

They are the issues over which I have some real difficulty with this legislation. I have had a number of discussions with Mr Dutton and with the Treasurer, Peter Costello, who has been, as ever, particularly helpful. I agree with them that this bill in its other form brings particular benefits to the farming, fishing, and rural and regional Australian areas. One benefit I just mention in passing is that the excise on petrol fuel for outboard motors will eventually under this legislation become completely refundable. That is going to be great for a lot of the inshore fishermen. So there are real benefits in this. I did intend to go through and highlight some of the benefits that this bill does have—it is not all negative—and in fact there are very substantial benefits, but time is not going to allow me to highlight some of these substantial benefits that will follow from this.

There are problems with it that I believe could have been looked at a little more closely. There has been some discussion about biofuels and the excise on biofuels. Perhaps I have not read this properly, but I am not sure that issue is dealt with in this particular bill. The amelioration that is currently there—the extension by five years from 2006 up to 2011 of the so-called ‘five-by-five’ excise arrangements—is something that I would particularly like to give due credit to the Economics Legislation Committee for. That committee put down a report a few years ago. The committee chairman was Senator Brandis and I see that Senator Stephens was deputy chairman. I congratulate that committee for their perspicacity. The recommendation was adopted by the government, and congratulations to Senator Brandis for highlighting that those years ago and getting a better outcome for the biodiesel industry.

There is a lot more that I would like to say on this. In the last few minutes available to me I want to reflect on a couple of the comments from the Labor Party. They are very critical of some aspects of this bill. When I first came here in 1990, in every budget, and twice a year in between, we used to get an automatic increase in the excise. At the time that Mr Hawke became Prime Minister, I think—don’t hold me to this but it is around this order—excise was about 6c to 8c a litre. I think that Fraser had brought it in as an extra road subsidy and it was hypothecated to roads. Labor got in of course and increased the excise from 8c to somewhere over 40c a litre. One thing our government have done, and done very well, is to stop the automatic indexation of excise. We have actually reduced the excise over the period of time. So to hear some of the Labor people now criticising these issues—as I am criticising them, though I come with clean hands—is interesting. When Labor are in government they just whack up the excise because it is just another form of revenue. It impacts, as I said right at the beginning of my speech, on rural and regional people far more than it does on the majority of Australians—and I regret to say that by far the majority of people in this chamber live in the capital cities and in the major provincial cities. It is a problem. Our government has done much better. This bill in itself will do a lot of positive things. There are a few aspects of the bill, which I have highlighted at some length, with which I have some real difficulties that I have spoken with the Treasurer about. I will be participating in the committee stage of the debate to see whether there is some way or other that we can achieve resolutions to the issues that I have concerns about.

Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

Senator Eggleston, I understand you have some relevant documents to table.

Alan Eggleston (WA, Liberal Party) Share this | Link to this | Hansard source

Yes, Mr Acting Deputy President. On behalf of the Chair of the Economics Legislation Committee, Senator Brandis, I present additional information received by the committee on its inquiry into the provisions of the Fuel Tax Bill 2006 and a related bill.

Christine Milne (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I rise today to say that I am deeply disappointed by this Fuel Tax Bill 2006 because it shifts all of the costs to our children and to future generations. I fail to see any advantage in this bill. I listened to Senator Ian Macdonald a moment ago saying that there were some positive aspects of the bill, but I cannot see them. I will explain why. The first question I ask is: what is the purpose of taxation? Why would you have a fuel tax? What is the purpose of it? It is an economic lever to achieve some sort of policy objective, otherwise why do you have taxes? You would assume that that policy objective is something to do with the good of the nation, regardless of your perspective in politics. I would argue that this Fuel Tax Bill is not reform; it is business as usual, and business as usual that is going to cost us all very dearly in the future.

The government does not have an integrated energy industry employment policy. There is no such policy. It is all ad hoc initiatives brought in here—one problem arises so they rush in with an ad hoc solution, and then another problem arises and they rush in with a supposed solution to that. Often they undermine one another. In its objectives for this particular legislation the government says that it wants to:

... apply in a consistent and transparent way to all relevant fuels and fuel users ... to be competitively neutral ... minimise [fuel] tax on business inputs ... minimise compliance and administration costs for business and government [and] take account of the government’s environmental, social and fiscal objectives.

What are these environmental, social and fiscal objectives? They are in no way stated. I have heard the government spokespeople saying the government cannot do anything about high oil prices. Where has the government been for the last decade in developing a strategic plan to reduce Australia’s dependence on imported oil? There has been no plan at all. Yesterday the figures came out saying Australia’s single biggest monthly bill—

Ian Macdonald (Queensland, Liberal Party) Share this | Link to this | Hansard source

You oppose nuclear power; you oppose hydro power; you oppose renewable forest power.

Christine Milne (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I draw Senator Macdonald’s attention to the fact that hydro power does not drive vehicles. I am talking about transport fuels. Australia’s single biggest monthly bill is for imported oil, and that is threatening to blow out the nation’s trade deficit as well as inflict more pain on motorists. The average trade deficit in the previous 12 months was $1.4 billion, meaning that, despite record commodity prices and strong global growth, the trade deficit has shown little improvement over the past year. When I came into the Senate I was horrified to find that the government had failed to understand that we are facing an era of oil depletion. We are already in a situation where the age of cheap, plentiful, easily accessible oil is over. I moved a motion in this Senate for an oil inquiry, which we are undertaking, and the community is welcoming it because it wants a strategic plan for addressing Australia’s future transport fuels.

Secondly, the government says that this will somehow help small business because it will extend, if you like, the ability to buy diesel without paying the excise—reducing excise to make diesel more easily available. But it does not address the fact that oil prices are going to continue to go up. It is not about trying to give people short-term relief on fuel prices; it is about the long-term switching of people onto alternative fuel supplies so we are not dependent on imported oil and ever-increasing high costs. That is the strategic nature of going with an alternative fuels plan—it is addressing a long-term reality that Australia cannot provide for its own oil so we need to go into a system of providing an alternative transport fuel.

This particular bill does not address climate issues, and I will get to that in a minute. In my view, it shows there is no long-term thinking. It is a complete missed opportunity. It does not address urban congestion; it does not address the public health issues to do with air quality because of vehicle emissions; it does not address the accessibility of cities and the economic cost to Australia of congestion; it does not address the oil issue; it does not address the climate issues; it does not address regional growth, regional development and regional jobs by way of the development of biofuels; and it does not address the opportunities for new export industries around those alternative fuels. As I said, it does not help small business. What it does do is help the big oil companies. The government’s predisposition in all these fuel tax areas has been, regardless of what it says about small business, to facilitate the big oil companies.

I will talk about the changed nature of the world. If you talk about reform then you look around and ask: how has the world changed and how do I have to respond to it? The world has changed because it is a world suffering global warming and oil depletion. Let me talk about global warming first. It is real. We know the icecaps are shrinking, the sea levels are rising, there is acidification of the oceans and there are extreme weather events by way of floods, droughts and fires. We are now looking at climate accidents whereby, if the West Antarctic icesheet or the Greenland ice were to disappear and slip into the ocean, we would have a five- to seven-metre rise in sea level. Your fuel tax reform does not look too hot in those circumstances.

We have human induced climate change; the issue is urgent. We have 10 to 15 years. We in the Senate right now have the opportunity to deal with it, but after that it is too late. You cannot leave it for a change of government. You cannot leave it for the next generation of senators. It is up to us. We have 10 or 15 years. We are the ones who are going to have to look at people in the future when they say, ‘Why didn’t you do anything about it when you had the opportunity to do so?’

The minister has said that we need a 60 per cent reduction in greenhouse gases by 2050. I ask: how much of that reduction are we going to expect as a result of a reduction in transport emissions? How are we going to get to this? What is our short-term target to reduce the transport effort in greenhouse gases, and what is the target for doing so? We know that, at the moment, transport and energy emissions are the greenhouse gas contributors: 50 per cent come from energy, 14 per cent from transport. From the Greenhouse Office we know that between 1990 and 2004, transport emissions grew by 23.4 per cent. What is worse still—and I would like the government members to take this in—is that by 2020 it is expected that there will be a 78 per cent increase in greenhouse gases from transport over 1990 levels.

Surely it is appropriate for a fuel taxation regime to address our greenhouse gas emissions. What is more, the fuel tax inquiry in 2002 said that fuel tax is an appropriate instrument to address greenhouse gas emissions. Obviously some forms of taxation are not, but this one is—fuel tax can address greenhouse gas emissions. Also, fuel tax arrangements should not impede or distort future developments of innovative technical solutions which can address fuel policy objectives. That is precisely the point that is being made here on alternative fuels. So you should have a fuel tax regime which assists us in our effort on greenhouse gases and which does not stop or impede the development of innovative technologies. How should we work to achieve this?

Fuel tax should not be based on energy content; it should be based on carbon emissions. If you had done that you would have internalised the externalities, or the costs, of CO. So you would have a range, with at one end biofuels, alternative fuels having very little or no fuel tax, and at the other end the worst fossil fuels would be on the highest level of fuel tax, based on life-cycle analysis. Real reform would change the basis of fuel tax. That would deal with Senator Joyce’s issues and with my issues. It would deal with rural development, employment and a whole range of things. All you have to do is change your head space: stop thinking about fuel tax based on energy content and look at it in terms of its carbon content.

Secondly, you would need to have a fuel tax system that encouraged the development of alternative technical innovation. One of those innovations is, for example, the electric car. In Australia we have had a real effort to stymie the production of electric cars. The Reva car is still stuck in limbo because no government in the country will license it at the moment. There is the potential to go with small electric cars for commuting in Australian cities.

The government has taken away incentives for renewables in the non-transport sector, using oil for electricity. I cannot believe this. The Greens brought in a sun bill many years ago that would have abandoned the diesel fuel rebate and instead returned that rebate for investment in photovoltaics. Rural, remote and regional areas could have made the shift from diesel generators across to photovoltaics and other renewables. It would have stimulated the renewable industry and it would have meant that the cost of production, the cost of living in those areas, would be significantly less than it is now, because they are having to pay higher and higher diesel fuel prices. Okay, so you have taken the excise off them, but it does not matter; the costs are still ultimately going up. The government could have done something about it. It could have embraced the sun bill. It could have helped in the transition to get the monkey off the back of the rural sector in terms of the ongoing higher costs of diesel and fossil fuel based transport.

We have had many speeches on biofuels. It is clear that this legislation completely undermines the Energy Grants (Credits) Scheme Act 2003 and the Energy Grants (Cleaner Fuels) Scheme Act 2004, and it impedes the development of a sustainable biofuels industry. It stops the promotion of biofuels as an alternative fuel source in Australia. That is an absolute disgrace. There have been endless submissions to the oil inquiry. Numerous people have contacted me about that. What we are obviously seeing is the government extending the number of diesel users not only in the country but also in metropolitan areas and, at the same time, taking away the excise rebate received by rural users of biofuels. It is totally discriminatory and it is undermining the development of a whole new industry sector.

We should be going with that broader industry sector and we should have a total policy. It is no good just having an ethanol policy. It is no good just having a natural gas policy or an LPG policy. We need a fuel policy for Australia which looks at those sectors that do rely on existing oil supplies more heavily than most—and one is the aviation sector. Where there is not an easily replaceable, substitutable fuel, they are the sectors that are going to take the most oil in the future. We have to help other people to move across to alternative sources of fuel to address greenhouse gases.

What should we do? Firstly, we should identify the size of the transport emission reduction task. What are our short-term, medium-term and long-term tasks to 2050 to reduce greenhouse gases in the transport sector? Secondly, we should develop an integrated energy industry employment policy and a road map to get us to those targets. We should see fuel taxes as part of achieving that plan by asking: how do we reduce greenhouse gases in the transport sector and create jobs and industry innovation at the same time? How do we help those people in Australia who are currently dependent on fossil fuels, on petroleum and diesel products, to get off that dependence and onto alternatives?

When I talk about an alternative fuels policy, the reason I say that it is not just about ethanol or natural gas is that we need the whole mix. We need a strategy for having the whole mix. We need to consider what land area would be needed to grow some energy crops and whether that would threaten food security and food supply in the longer term in a global context. We need to consider whether it would have adverse consequences by driving tropical deforestation to put in palm oil plantations and the like. We need to look at where the opportunities are for biomass development and where the opportunities are for cellulose, for example, to get into the alternative fuels market and so on. There are lots of things that would need to be considered in an alternative fuels policy, within the context of an Australian industry energy employment policy. That is where the government is completely lacking and is letting Australia down.

In conjunction with the fuel tax, what you would need to do would be, first of all, to reduce the impact of the vehicles that you have on the road. That is where you would bring in mandatory minimum fuel efficiency standards and mandatory minimum vehicle emission standards. Then you would set stamp duty on the environmental performance of cars in a formula that looked at both fuel efficiency and emissions. You would promote alternative fuels, through the fuel tax and, as I said, by taxing fuel on the basis of carbon emissions. Then you would do all the things we are trying to do with alternative fuels. You would also remove the perverse incentive to fuel from the fringe benefits tax. You would upgrade government car fleets. As I have indicated previously, you would promote hybrid vehicles. You would also reduce vehicle use overall by investing in public transport and urban planning measures that would get more people off the roads and onto public transport, walkways, bicycle ways and the like. You would get transport off the road and onto rail. You would also work on travel demand reduction. They are the obvious things that we should be doing in this country.

When it comes to vehicle efficiency standards, I have made this point over and over again, and I will continue to make it: China has set much higher vehicle fuel efficiency standards than we have. Theirs are mandatory and ours are only voluntary. The environment considerations in this bill are a total joke. All that participants in the Greenhouse Challenge Plus program have to do is to identify their greenhouse gas emissions, develop action plans for greenhouse gas abatement and report to the government on their actions. They are not required to do anything other than report on what they might do. They are not actually forced to do anything.

This whole thing is a joke. This is where the government lacks any kind of integrated strategy. You have Senator Ian Campbell talking about the need to reduce greenhouse gases, acknowledging the role of transport, and then you have Senator Ian Macdonald saying we have to take off the excise and make it cheaper out there, which effectively means ‘use more oil’. Then we have a trade deficit because we are importing oil, and we are taking away the incentives, promotion and development of innovative alternative fuels. This is madness. You have not got a comprehensive policy objective of taxation. What is your policy objective of taxation in this country, apart from getting revenue to buy votes at election time? That is an obvious strategy. Apart from that, where is it taking the country? The country has stalled. We have no direction in Australia. It is business as usual. In fact, it is a step back to the past and a resource based economy with virtually no manufacturing sector, no cleverness and no innovation. All that is going overseas, and being driven overseas by this head in the sand approach that the world has not changed and that the industrial age is still with us—and it is not.

Real tax reform, real transport reform and real fuel tax reform would have seen the shift to taxing greenhouse gas emissions. It would have dealt with climate change and it would have dealt with oil depletion. These are the two greatest factors affecting civilisation—not just the Australian economy, but civilisation. We only have 10 to 15 years to deal with them. I put to the government: let us have a discussion about real reform. Let us achieve a comprehensive way of looking at the world, which would mean that we would not have these constant fights over ad hoc measures that contradict one another. That is why I will not be supporting these bills.

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

We have heard some interesting speeches here tonight. I believe in the overall sentiment of the Fuel Tax Bill 2006 and the Fuel Tax (Consequential and Transitional Provisions) Bill 2006, but there are particular areas that I disagree with. I hear the arguments for renewable and photovoltaic energy. Unfortunately, in regional areas we are not going to have photovoltaic tractors. We are not going to have photovoltaic fishing boats or solar driven mining plants. I do not think it will work. We have just finished putting a wheat crop in on the property I own, and I cannot imagine how many solar panels you would need to have driven that planting. So we have to accept the fact that we will have to rely on a hydrocarbon based or a liquid based fuel to drive our industry.

Senator Ian Macdonald brought up some issues. He has clearly put on the record that he has some concerns and that he will be taking up those concerns in the committee. I look forward to an active engagement by Senator Macdonald in getting some direction on some of those issues that he brought up. We should come up with results and amendments that deal with the issues that Senator Macdonald has put on the agenda in this second reading stage.

Senator Boswell gave a very good outline of the benefits of the bills and, all in all, I agree with him. He also brought to our attention one area about which I am particularly concerned. Since everybody else has covered so many aspects of these bills, I will concentrate specifically on this one—that is, the argument about the biodiesel industry, which, whether by an anomaly or for whatever reason, since 2003-04 has been in place and has been developing and which, after the passage of this piece of legislation, will be severely affected. I know that because of the representations the peak industry body has made to my office.

We can sit down and have an argument about semantics—about who knew what when and what was the purpose of it. It is completely irrelevant. The purpose is for us to drive for a renewable biofuel industry through ethanol or biodiesel. That is an objective of the government; it is an objective of the National Party. The passage of this piece of legislation—and I refer particularly to clause 43-5(3)(b)—will inhibit the development of the renewable biofuel industry. There is no transitional arrangement that has been worked out to talk to the people who have made multimillion dollar investments in this part of the industry, to take them from where they are now to a position that is not going to send them bankrupt. There is no discussion of a partial offset to deal with this issue. I understand the argument that people are making: ‘Look, it is excise free. You cannot claim a rebate on something you never paid a tax on.’ But the position is clearly argued—and it is certainly up for debate—that they saw the cleaner fuels grants scheme as a production grant and something to enhance the development of the industry.

Since that time, by reason of a regulatory instrument, there was the power to change it if that were not the case. There was the capacity to change it and it was not changed. By custom and practice, these people believed that they had an industry that they could develop, and they invested in it—not just small investors but also big investors. We have got Transfield and we have had letters from the ANZ Bank talking about $40 million investments in this sector of the industry. So there is a major concern that this change is immediate and abrupt. Good government does not bring about immediate and abrupt changes; good government, even if it wants a change of direction, brings about a transitionary process so as to bring the least amount of pain that they can to the people involved in the industry.

However, apart from that, I believe that this is an example of a renewable biofuel section of the market which is actually going ahead, where we are achieving our objectives and where we are developing a biorenewable component. There is a range of reasons why this is good. I am going to go through a couple of the reasons. Tonight we heard one of the other speakers mention that he was one of the only senators from regional Australia. Well, I beg to differ. That might have been true in the past, but it is certainly not the case now. I can assure you that I live further from the coast than any other senator in this nation. I have a clear understanding of regional issues. Sitting in front of me is Senator Nash, who I would suggest comes second.

Regional development is a driver of the requirement for a biorenewable fuel industry, because it is an industry that speaks to our regional areas and to the development and broadening of regional economies. The biodiesel industry talks specifically to the smaller regional towns, which are specifically the areas we want to develop. It has the capacity to be the catalyst for developing those smaller regional areas. Biodiesel is biorenewable, so it has an environmental aspect in respect of our capacity to deal with or be recycling our carbon emissions rather than always putting more into the atmosphere.

There is also an issue in that B5, which is five per cent ethanol and 95 per cent diesel, will be deemed to be something that you can claim a rebate on, but that will not be the case for B49, which is 49 per cent biodiesel and 51 per cent diesel. The issue is, of course, that that plays straight into the major oil companies’ hands. It means that for every one part of biodiesel you need 19 parts of diesel. That means that your production plant is going to be moving from regional areas, if the industry is sustained, in order to be proximate to the refining capacity. That is a bad outcome; that means that the small regional towns which have the capacity to develop a biodiesel plant will become an inhibitor on the industry.

The bottom line is that after the passage of this bill, if you are using biodiesel in your tractor, mining plant or fishing trawler, the net result will be that there is no price advantage in buying it. Because the industry is still developing its plants, it is still in a development phase and has to make capital payments to cover that capital overhead, so biodiesel becomes an uncompetitive product. It becomes uncompetitive because the farmer turns up and says, ‘I can get the diesel fuel rebate if I buy this product off the oil company and I can’t if I buy the biodiesel product, so I am going to buy the oil company’s.’ And that will be the end of the biodiesel line.

The biodiesel line relies on the fact that the industry has believed that the position of the government has been to enhance the roll-out of the industry. The industry have seen what is, by custom and practice and regardless of the semantics, a production grant to help develop the industry. That is what we want to do. That is what we intended to do. We intended to develop a biorenewable fuel industry. And now that we have started down the path of developing one, unless we get some amendments to this bill, we are going to chop it off at the knees.

There is argument and contention about whether Treasury clearly communicated their intentions. Treasury says they did. Others say they did not. It goes round and round in circles and never goes anywhere. But it is clearly on the record that in the past there was the capacity to put forward a regulatory instrument that would have dealt with this issue. There was conjecture that there was the capacity to deal with it via regulatory instrument, but that was not done; and that was deemed by or seemed to most to be an imprimatur that that was the position that would go forward.

The issue, really, is this: we have a bill that I believe in general is a good piece of legislation, and I would want to support it. There are issues within the bill. Senator Macdonald has brought up concerns he has with it, as has Senator Boswell and members on the other side. The issue comes down to whether or not the Senate has the power to bring these amendments. In some areas it has. The issue that goes beyond anything to do with biorenewable fuels is whether the lower house is going to accept the amendments. Do we have a reviewing house that has the ability to ask for amendments, as it is constitutionally asked to? All of us in this chamber have no doubt put a hand on the bible or the Constitution and said we would fulfil our duty. We have the expectation that if amendments are reasonable they will be dealt with.

When the Senate, not one senator in particular, has asked for amendments in the past year—and I refer to the Trade Practices Legislation Amendment Bill (No. 1)—the bill has gone down to the other place, to the House, and they have sat on it. And then they cast aspersions out into the Australian public which suggest what they would like the public to think has happened. I imagine that is what will happen with the legislation we are debating today. That is my conjecture. The Australian Senate will ask for an amendment—that is, the Australian Senate that has a responsibility to the Australian people and that is not owned by anybody or any party will call for an amendment—and when the bill gets down to the other place, the next thing that will come out is that the Senate or one senator in particular has blocked the passage of the whole legislation.

In conveying that sentiment to the Australian public, they are lying. They are lying because the bill will go through. Amendments might be asked for; I will certainly be endeavouring to get amendments. But the issue is the way the system works after that. I hope and implore that the lower house respects the intent of the Senate, and that when a majority is attained in the Senate the lower house takes its views on board. I hope to the core of my being that we do not have a lower house that tries to manipulate the process of the Senate by implying a lie to the Australian people about why a certain piece of legislation has or has not gone through.

So this comes irregardless of your voting intention on this bill; whichever way you are going to do it, everybody in this chamber has a role to play. I imagine that by tonight we will have played it. And by tonight, a piece of legislation—I imagine it will have amendments—will go back down to the lower house. And then we will see whether the lower house has any intention of acting in a constitutional or a conciliatory manner with its upper house, or whether it has become a case of, ‘We’ll never ever tolerate the Senate ever asking for any change.’ I feel that issue is more important than this piece of legislation itself. I think that actually cuts to the core of the issue.

I have no concerns whatsoever, when people talk about a majority in the upper house. It should not matter, and it does not matter, because senators should be doing their job. I believe in the content and the character of the people here, that they will do their job to the best of their abilities, and they will not keep alternative agendas in the backs of their minds that stop them from doing their jobs in this chamber. They will reflect on the honour that has been given to them to have a position in here. I do not give any credence to ‘having control of the Senate’. You never have control of this Senate; this Senate has its own life, it has its own ethos, and it has a responsibility to the Australian people and the people of their states, way beyond their allegiance to any other group—or that should be the case.

This issue tonight has implications beyond just this piece of legislation. I ask my colleagues opposite to remember the allegiance that they should have to their nation and to their role in this Senate. It should go beyond bloc voting, which is something that completely disenfranchises the people who sent them here. It is going to be an interesting process. If Australia believes in a renewable biofuel industry, if we have, whether it was by mistake or not, created a piece of legislation that actually starts developing it, starts producing outcomes for regional Australia, then what on earth are we doing stymieing it? Why are we not enhancing it? Why are we not rolling it out further? At the very least, if we do not believe that, if we believe we made a mistake for goodness sake, then surely we should be making transitional arrangements to help these people—especially those people in small regional towns, and especially in Western Australia. I do not know why, but it is big issue for Western Australians.

We should be giving them some sort of transitional package to alleviate the financial pain that this will cause them. They did not ask for this. In the law that was before them, they have worked in good faith within the bounds of that law. They have not done anything illegal, they have not broken any rules; they have picked up the legislation and worked with it. At this point in time, we cannot turn around and just say: ‘Without any understanding of the consequences of our actions, we’re going to change this process that we could’ve changed years ago. The financial consequences to you are dire, but we have no care about that.’ I do not agree with that process of doing business, and, in general, I do not think the government does either. It is pretty good, it has done some marvellous work in other packages to assist in this process, and I ask for that with this.

But more important than that is the reflection of how these two chambers operate. The reflection of how the Senate operates, and whether people believe that this Senate has a right to call for amendments in a robust form of debate in the committee stage, where it is supposed to—in the committee stage, in a public chamber, in front of the Australian people so that they can understand exactly how our parliamentary democracy works. That will be a bigger issue than just the essence of this bill alone. This is merely the stage where, later on, we will see how the constitutionalities of these two chambers work.

Richard Colbeck (Tasmania, Liberal Party, Parliamentary Secretary to the Minister for Finance and Administration) Share this | Link to this | Hansard source

I thank all senators for their contributions to the debate on the Fuel Tax Bill 2006 and the Fuel Tax (Consequential and Transitional Provisions) Bill 2006. The Fuel Tax Bill 2006 gives effect to the government’s announcement in its energy white paper Securing Australia’s energy future, of 15 June 2004, that the current array of fuel tax concessions be replaced by a single fuel credit system from 1 July 2006. The Fuel Tax (Consequential and Transitional Provisions) Bill 2006 provides the transitional arrangements to phase in the new system while phasing out the following schemes for which entitlements will cease to exist for fuel sales or deliveries made after 30 June 2006: the Energy Grants Credits Scheme, the Fuel Sales Grant Scheme—and in mentioning the Fuel Sales Grant Scheme, I am delighted to hear of the Labor senators’, particularly senators Webber and Stephens, new-found virtue in relation to Fuel Sales Grant Scheme given that they went to the last election with the policy of repealing the scheme, effective from January 2005, so your new-found virtue is delightful, Senator Stephens—

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

Always virtuous.

Richard Colbeck (Tasmania, Liberal Party, Parliamentary Secretary to the Minister for Finance and Administration) Share this | Link to this | Hansard source

I am sure—and the Petroleum Products Freight Subsidy Scheme. These bills combine the means of providing fuel tax relief to businesses and households in one piece of legislation. Changes to implement the new system will be phased in from 1 July 2006, with final changes taking effect from 1 July 2012.

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 liquefied petroleum gas, liquefied natural gas and compressed natural gas. Under the fuel tax credit system, all fuel, including petrol consumed off-road for business purposes, will become effectively tax-free over time. This will provide fuel tax relief to a number of businesses for the first time, and will benefit businesses involved in manufacturing, quarrying, construction, primary production, mining or commercial power generation.

The fuel tax credit system reform also expands fuel tax relief for fuel consumed in road transport by allowing partial fuel tax credits for all taxable fuels, including petrol, consumed on-road for all business purposes in registered vehicles with a gross vehicle mass of 4.5 tonnes or more. Presently, fuel tax relief is provided in the form of remissions, refunds and rebates under the Excise Act 1901, the Customs Act 1901 and the Energy Grants Credits Scheme. These schemes have restrictive and complex eligibility criteria and apply to different fuels and fuel uses in different ways. The changes will lower compliance costs, reduce tax on business and remove fuel tax for thousands of 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, to fuel used on-road in light vehicles for business purposes, and to aviation fuels where tax is imposed for cost recovery reasons.

The changes to the system of providing fuel tax relief will allow businesses to claim their fuel credits through their business activity statements in the same way they claim goods and services tax input credits. A separate claiming mechanism will be available to allow householders to claim a fuel tax credit for fuel used in the generation of electricity.

In response to the Senate Economics Legislation Committee report into these bills, it is worth recalling that, as announced in the energy white paper of 2004, the government’s policy is to bring all fuels into the fuel tax system so that, to the greatest extent possible, all fuels and fuel users are treated in a consistent and transparent way and the fuel tax system is competitively neutral, avoiding instances where taxed fuels compete with untaxed fuels. Consistent with that policy, these bills deliver the fuel tax credit system, which is intended to remove or reduce the incidence of effective fuel tax on business. The government recognises the matters reflected in the committee’s report, including with respect to those industries highlighted in the committee’s recommendations. The government will continue to monitor the effect of fuel tax reform upon business during the transition period, to ensure that there are no unintended consequences or impacts of the policy on industry. In response to Senator Macdonald’s concerns, expressed in the chamber earlier, the government will assess the new claiming arrangements on the fishing industry before the transitional arrangements cease.

I would like to make a couple of comments on the second reading amendment proposed by Senator Stephens on behalf of the opposition. This bill removes the incidence of fuel tax on business inputs in accordance with government policy. The reforms will effectively reduce fuel tax collections from businesses and households by $1.5 billion over the period of 2012 to 2013. The government’s decision not to increase the road user charge will effectively reduce fuel tax on heavy vehicles by a further $1.2 billion over the forward estimates. Business and household use of fuel to generate electricity will be effectively fuel tax free from 1 July 2006. Business and household use of burner fuel such as heating oil and kerosene will be effectively fuel tax free from 1 July 2006. Partial fuel tax credits will apply to all fuels, including petrol, used on-road in heavy vehicles from 1 July 2006, and the existing metropolitan boundaries will be removed. All off-road business use of fuel will become effectively fuel tax free over time. Currently ineligible activities will receive a half credit from 1 July 2008 and a full credit from 1 July 2012.

Although the opposition amendment may be well intentioned, it is misdirected. The excise arrangements for biofuels are not determined by this bill. Excise and customs duty on fuel ethanol and biodiesel is imposed by excise and customs legislation; the effective fuel tax status is then delivered by offsets through either the Energy Grants (Cleaner Fuels) Scheme Act 2004 or contracts administered by the department of industry. I repeat and emphasise that this bill does not change the effective tax status of the import or manufacture of fuel ethanol or biodiesel. The whole purpose of fuel tax reform is to lead to a system where all fuels are brought into the fuel tax system so that, to the greatest extent possible, all fuels and fuel users are treated in a consistent and transparent way and the fuel tax system is competitively neutral, avoiding instances where taxed fuels compete with untaxed fuels.

The government has clearly set out a long-term framework to allow biofuels to establish their credentials in the marketplace. The Prime Minister announced the industry biofuels action plan on 22 December 2005. He also noted that industry projections show that industry expects not only to meet but to exceed the government’s biofuels target of 350 megalitres by 2010. The Australian government will monitor and review progress towards these targets on a six-monthly basis, and the industry players have committed to annually update their company action plans. In these circumstances the government considers the opposition amendment is unnecessary, and as such the government does not support it. In conclusion, I suggest that the measures proposed in these bills contain positive improvements to the system of providing fuel tax relief. They will modernise and simplify the fuel tax system. For these reasons and the reasons outlined above, I commend the bills to the chamber.

Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

The chamber has before it a second reading amendment moved by Senator Stephens, circulated on sheet 4995. The question before the Senate is that the amendment be agreed to.