NO.048

FUEL EXCISE REFORMS

Today the Government is announcing the details of a comprehensive overhaul

of Australia’s fuel excise system.

The changes, which begin to take effect from 1 July 2006, will provide excise

relief for a wide range of businesses and households. They ensure that a consistent

excise framework will apply to all relevant fuels. Combined with other measures

announced in the Government’s Energy White Paper, the changes will

result in an integrated policy which addresses economic, transport, environmental

and social objectives.

These excise reforms augment the measures for alternative fuels previously

announced by the Government.

When fully implemented, these reforms will significantly reduce the excise

burden for tens of thousands of businesses and a significant number of households.

Under the new arrangements:

• from 1July2012, all off-road business use of all fuels will be effectively

  excise free, removing a range of artificial distortions from the system and

  substantially increasing the range of commercial activities eligible for excise

  relief

  • the Government will introduce this measure in stages, with a credit

    of half of the fuel excise incurred in all currently-ineligible off-road

    activities available between 1July2008 and 1 July 2012, and a full credit

    from 1July2012;

  • excise relief will be provided to a range of commercial activities

    for the first time (for example, tomanufacturing and construction, and

    to all aspects of quarrying) and other major beneficiaries include primary

    producers, miners and commercial power generators;

  • off-road business use of petrol (for example in utility vehicles and

    four-wheel motorcycles) will be effectively excise free for the first

    time;

• from 1 July2006, the on-road credit paid to users of diesel in on-road

  vehicles weighing over 4.5tonnesGVM will be extended to users of all excisable

  fuels — benefiting the operators of around 57000 heavy petrol vehicles

  — and the metropolitan boundaries governing eligibility for this credit

  will be abolished — making all journeys in these vehicles eligible for

  the credit;

• the partial excise paid on fuels used in heavy vehicles will be declared

  an official, non-hypothecated road-user charge from 1 July 2006 (this charge

  will be set consistent with future determinations of the National Transport

  Commission);

• all private and business use of all fuels for electricity generation will

  be effectively excise free from 1 July 2006;

• the excise currently levied on burner fuels —such as heating oil

  and kerosene — will be effectively removed from 1 July 2006, reducing

  the excise burden on up to 90,000 households and a range of businesses.

To implement these changes, the Government will introduce a new business credit

system. This system will replace all existing rebates and subsidies. Businesses

will be able to claim their fuel excise credits through their Business Activity

Statement in the same way as they claim their GST credits.

Business will only be required to fill in one form, and will have only one

point of contact with the Australian Tax Office.

These reforms, when fully implemented, will dramatically reduce record-keeping

requirements for a large number of businesses. They will also substantially

reduce the need for wasteful litigation.

The changes include an integrated set of environmental initiatives.

For the first time, eligibility for excise relief will depend on key players

meeting appropriate environmental safeguards.

Under the environmental measures, which commence on 1 July 2006:

• firms receiving more than $3 million in business credits will be required

  to participate in the government’s Greenhouse Challenge Programme; and

• heavy on-road vehicles will be required to meet one of five emissions-performance

  criteria designed to show they are not a high polluter.

These measures have been designed to deliver real environmental benefits, while

minimising the compliance burden on business.

The reforms will coincide with the introduction of new fuel standards for petrol

and diesel, which will substantially reduce air pollution in Australia’s

capital cities.

Full details of the reforms are provided in the Government’s Energy

White Paper, released by the Prime Minister today.

15June2004

CANBERRA

White Paper details are available at

www.pmc.gov.au/energy_future

Contact: David Alexander

02 6277 7340