House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Treasurer, the Hon. P.J. Keating, M.P.)

Chapter Eight: Termination of Excise

1. Summary of Proposed Changes

The proposed changes to the Excise Tariff Act 1921 and the Excise Act 1901 will exclude Bass Strait Petroleum production from the excise regime. As a result, only the North West Shelf area will remain subject to the excise regime. Excise previously imposed on the Bass Strait area will be terminated from 1 July 1991.

2. Background

Crude oil excise is levied on the volume weighted average of realised f.o.b. prices of all sales made from a prescribed production area. This average is known as the VOLWARE price. Excise is expressed as a percentage of the VOLWARE price.

Crude oil production is excised such that higher percentage rates of excise apply to progressively higher annual rates of oil production from a production area. Currently Bass Strait is the only location where oil production has attained the levels which attract excise.

3. Clauses involved in the Change

Part 3 - Amendments of the Excise Act 1901

Clause 23: states that in Part 5 of the Bill, the Principal Act is the Excise Act 1901.

Clause 24: amends section 58 of the Principal Act to exempt from its application a Resource Rent Tax area as defined in the Excise Tariff Act 1921

(Section 58 of the principal Act makes provision for the entry of excisable goods.)

Clause 25: repeals section 78B of the Principal Act.

(Section 78B of the principal Act provides the legislative basis for the payment of rebates of excise duty on exports and free market sales of Bass Strait crude oil.)

Part 4 - Amendments of the Excise Tariff Act 1921

Clause 26: states that in Part 5 of the Bill, the Principal Act is the Excise Tariff Act 1921.

Clause 27: amends section 3 of the Principal Act by omitting the present definition of "excepted area" and inserting a new definition of "Resource Rent Tax area."

Clause 28: amends section 5B of the Principal Act by omitting from subsection (4A) "an excepted area" and substituting a "Resource Rent Tax area".

Clause 29: amends sub items 17(A), (B) and (C) of the Schedule to the Principal Act.

Part 6 - Transitional and Application Provisions

Clause 37: limits the application of the amendments to the Excise Act 1901 and the Excise Tariff Act 1921 to petroleum recovered on or after 1 July 1991.

4. Explanation of the Amendments

The amendments have introduced into both Acts the new definition of "Resource Rent Tax area." The purpose of the new definition is to remove Bass Strait petroleum production from the excise regime and to make it subject to PRRT. The definition of "Resource Rent Tax area" excludes from its application any North West Shelf exploration permits which therefore remain excisable.

[Note: for explanation of those transitional provisions relevant to both excise and royalty payments, refer to Chapter 9 (clauses 41 and 42) and earlier Chapters 2 and 3 which deal specifically with Bass Strait]