Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)Chapter 2 - Entitlement to credits and grants
Outline of chapter
2.1 This chapter explains Parts 3, 4 and 5 of the Energy Grants (Credits) Scheme Bill 2003, which determine entitlement to on-road credits, off-road credits and energy grants.
Detailed explanation of new law
Entitlement to on-road credits
2.2 Part 3 of the Energy Grants (Credits) Scheme Bill 2003 reproduces the entitlement provisions from the Diesel and Alternative Fuels Grants Scheme Act 1999 for the purposes of the new scheme. Except for the changes discussed in paragraphs 2.3 to 2.12, the Government's intention is that the scope of the on-road credit will be the same as that of the DAFGS.
2.3 Claimants will be required to register before they are entitled to claim an on-road credit, however if they submit a claim on or after the day they apply for registration, but prior to being registered, the claim will be taken to have been made just after being registered. [Clause 41]
2.4 The major change to entitlement for an on-road credit in comparison with the DAFGS is that it will become prospective - that is claimants will be able to make a claim for an on-road credit in relation to fuel they have purchased or imported into Australia, that they propose to use in an eligible activity, but which may not yet have been used. Currently under the DAFGS the fuel must have been used before a claim for the on-road grant can be made. This will align the on-road credit with the situation as it currently stands for the DFRS, which will continue under the off-road credit. [Clauses 42 to 47]
2.5 The provisions that relate to the eligible vehicle types and purposes remain much the same as under the DAFGS. Different rules will continue to apply to vehicles of 20 tonnes or more, and those over 4.5 tonnes but less than 20 tonnes, with the general rule being that vehicles weighing 20 tonnes or more are eligible for an on-road credit for operation on any road in Australia, but vehicles between 4.5 and 20 tonnes must be for transporting goods or passengers and are generally not eligible for operations wholly within designated metropolitan areas. [Clauses 42 and 43]
2.6 The metropolitan areas restriction will continue not to apply to vehicles of 4.5 tonnes or more, but less than 20 tonnes that are:
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- operated by primary producers;
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- used for transporting goods or passengers solely on behalf of primary producers; or
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- buses using alternative fuel.
Emergency vehicles of 4.5 tonnes or more will continue to be eligible for all operations in Australia. [Clauses 44 to 47]
2.7 The concept of 'incidental use' has been introduced for all vehicles regardless of their weight, in recognition of the fact that there are incidental uses of fuel while the vehicle is stationary (e.g. in loading or unloading goods or passengers, turning the agitator on a cement truck, or where the vehicle is being moved off-road) that are considered integral to normal transport operations. In the past, these activities have generally been ineligible to receive a grant where the stationary use was more than 20% of total fuel use in a grant period, under the stationary use provisions of the DAFGS Regulations. [Clauses 42 to 46]
2.8 The stationary use provisions in DAFGS were developed to counter the situation where vehicles over 20 tonnes could arrive at a location, remain on a public road and commence operations unrelated to the movement or transport operations of the vehicle (e.g. stationary construction activities such as in operating a crane) which would otherwise all qualify for the grant. In order to ensure these activities do not qualify for a credit, a requirement has been introduced that vehicles of 20 tonnes or more must be for transporting goods or passengers in order to be eligible for an on-road credit for all of their operations. If a vehicle is not for transporting goods or passengers (e.g. special purpose vehicles such as mobile cranes), it will only be eligible for the movement to or from the place where it is to be, or has been used. [Clause 42]
2.9 The requirement under DAFGS that activities be conducted on a public road for them to be eligible has been removed for the on-road credit. The construction of the DAFGS public road definition precluded certain activities that were part of normal transport operations, such as those conducted on private access roads to mine sites and primary production properties, to transport depots and in the depots themselves, from being eligible for an on-road grant. This situation will be rectified in the on-road credit by removing the public road definition, and instead allowing that transport operations on any road will be eligible, provided they are conducted by a vehicle registered for use on a public road.
2.10 The eligibility of subcontractors transporting goods or passengers on behalf of primary producers is clarified in subclause 45(3). It provides that a person is carrying goods or passengers on behalf of a primary producer if they are a subcontractor of a person contracted by the primary producer to carry the goods or passengers. [Clause 45]
2.11 A claimant will only be entitled to an on-road credit under one of the categories discussed above, even if they are eligible under more than one category. If that is the case, they will be able to choose the category under which they are entitled. [Clause 48]
2.12 A claimant will not be entitled, and will be taken to never have been entitled, to an on-credit for fuel they purchased or imported for a particular use if they:
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- use it for some other purpose (unless that purpose is also eligible for the same amount of grant);
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- sell or otherwise dispose of it; or
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- lose it.
This provision is necessary due to the change to prospective entitlement for the on-road credit, and reproduces the current arrangement in the DFRS. [Clause 49]
2.13 Finally, a claimant will not be entitled to an on-road credit in respect of on-road diesel or alternative fuel if they are entitled to an off-road credit for the fuel under Part 4. [Clause 50]
Entitlement to off-road credits
2.14 Part 4 of the Energy Grants (Credits) Scheme Bill 2003 reproduces the entitlement provisions for the DFRS from the Customs Act 1901 and the Excise Act 1901 for the purposes of the new scheme. The provisions have been re-drafted to allow for the inclusion of benefits similar to those of the DFRS that are currently administered under the Customs Regulations 1926 and Excise Regulations 1926. Except for the changes discussed below, the Government's intention is that the scope of the off-road credit will be the same as that of the DFRS.
2.15 Claimants will be required to register before they are entitled to an off-road credit, however if they submit a claim on or after the day they apply for registration, but prior to being registered, the claim will be taken to have been made just after being registered. [Clause 52]
2.16 The entitlement provisions from the DFRS have been re-framed to ensure that a person is entitled to an off-road credit if they purchase or import into Australia off-road diesel fuel for their own use in a use that qualifies. Use in the existing DFRS categories of:
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- mining operations;
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- primary production;
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- rail transport;
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- marine transport;
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- electricity generation in an off-grid retail or hospitality business;
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- electricity generation at residential premises;
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- hospitals and nursing homes; and
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- homes for aged persons, which are reproduced without change,
continue to qualify for an off-road credit. [Clause 53]
2.17 In addition, eligibility categories will be included under the off-road credit that are equivalent to certain off-road uses of diesel fuel currently eligible for a remission, refund or rebate of duty under the Customs Regulations 1926 and Excise Regulations 1925. Benefits for these uses are more appropriately administered under a grants program, and their inclusion will allow for a migration of entities accessing benefits through these means to a grants based mechanism, underpinned by the compliance and administrative framework of the PGBAA.
2.18 The newly included categories include certain uses in the industrial processes for the production of:
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- elemental nickel and cobalt;
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- refining of bauxite into alumina; or
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- in the manufacture of explosives,
as qualifying uses for the off-road credit.
2.19 Also included will be use of off-road diesel fuel, other than as fuel, where the use is:
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- as a solvent;
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- as a mould release agent; or
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- in road construction other than as a fuel.
2.20 The provision will also exist to allow other eligible uses to be specified in the regulations.
2.21 In addition, certain uses of off-road diesel fuel where the use is as a fuel not in an internal combustion engine will be included. [Clause 53]
2.22 A claimant will only be entitled to an off-road credit under one of the categories discussed above, even if they are eligible under more than one category. If that is the case, they will be able to choose the category under which they are entitled. [Clause 54]
2.23 A claimant will not be entitled, and will be taken to never have been entitled, to an off-road credit for fuel they purchased or imported for a particular use if they:
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- use it for some other purpose (unless that purpose is also eligible);
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- sell or otherwise dispose of it; or
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- lose it.
This provision reproduces the current arrangement in the DFRS. [Clause 55]
2.24 The provisions in Part 5 of the Energy Grants (Credits) Scheme Bill 2003 specify that if a claimant is entitled to an on-road or off-road credit, they are entitled to an energy grant [Clause 56]. The entitlement to a grant is largely determined through a self-assessment process by the claimant. Part 5 sets out the ways in which the amount of the energy grant will be calculated [Clause 57]. If a claimant is uncertain as to whether they are entitled to an energy grant, they may apply for a private ruling.
2.25 The basic rule for working out the amount of the energy grant will be the number of whole litres (or whole cubic metres if the fuel is a gas) of the fuel to which the on-road or off-road credit relates, multiplied by the amount per litre (or cubic metre) specified in, or worked out in accordance with the regulations to be prescribed. [Clause 57]
2.26 The regulations will be able to set out different amounts of grant per litre (or cubic metre) for different types of fuels or different proposed uses, including that the amount of grant is nil, and how the grant is to be calculated if the regulations set out different amounts. [Clause 57]
2.27 In relation to the use of the fuel, if a claimant's actual use of the fuel differs from the proposed use, the actual use will be treated as if it was the proposed use. The regulations will be able to prescribe methods for working out the quantity of fuel that the claimant proposes to, or actually uses, and these methods will be able to differ according to various criteria such as the quantity of fuel purchased, the type of fuel, or the user's patterns of fuel usage. This will allow the claimant scope to determine the type of record keeping method, and method of claiming, that is most appropriate to their circumstances. [Clause 57]
2.28 In certain circumstances, a person may be entitled to a drawback, refund, rebate or remission of duty under the Customs Regulations 1926 or the Excise Regulations 1925, on diesel fuel for which they also qualify for an off-road credit. Where this is the case, the amount of off-road credit payable will be reduced by the amount of any drawback, refund, rebate, or remission of duty paid to the person. [Clause 57]