Senate

Revised Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello MP)

Chapter 3 Transitional and consequential provisions

Outline of chapter

3.1 Schedules 1 to 3 to the Fuel Tax (Consequential and Transitional Provisions) Bill 2006 amend the:

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Fuel Sales Grants Act 2000;

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Energy Grants (Credits) Scheme Act 2003;

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Product Grants and Benefits Administration Act 2000;

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States Grants (Petroleum Products) Act 1965; and

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Fuel Tax Bill 2006,

to provide transitional arrangements for the fuel tax credit system canvassed in the Fuel Tax Bill 2006.

Context of reform

A fuel tax credit system

3.2 As part of the Government's fuel tax system reform, a single fuel tax credit system is implemented from 1 July 2006 to replace the existing complex system of grants and rebates.

Existing schemes of fuel tax relief

3.3 Fuel grants affected by the Fuel Tax (Consequential and Transitional Provisions) Bill 2006 exist under the Energy Grants (Credits) Scheme Act 2003 and the Fuel Sales Grants Act 2000 that are administered under the Product Grants Benefits Administration Act 2000 . A states-administered scheme also exists under the States Grants (Petroleum Products) Act 1965 .

3.4 The Energy Grants (Credits) Scheme (EGCS) provides an energy grant for the use of diesel fuel (and alternative fuels in the case of the on-road credit) in activities that are eligible for an off-road credit and an on-road credit.

3.5 Eligibility for the off-road credit under the EGCS is restricted to the business use of diesel and diesel-like fuels (such as fuel oil and burner fuels) in specified activities. These activities mainly occur in mining, primary production and rail and marine transport. Other activities include the generation of electricity at retail/hospitality and residential premises, and the use of fuel at hospitals, nursing homes and aged persons homes.

3.6 Eligibility for the on-road credit is confined to the use of diesel and specified alternative fuels (liquefied petroleum gas, liquefied natural gas, compressed natural gas, biodiesel and ethanol). Its purpose is to reduce transport costs, particularly for regional and rural Australia where costs are more pronounced. It is also intended to maintain the pre-GST (goods and services tax) price relativities between diesel and alternative fuels by providing a credit for the use of specified alternative fuels in applications that are eligible for a diesel on-road credit. Eligibility for the on-road credit is restricted to the use of eligible fuels in vehicles weighing:

•

over 20 tonnes gross vehicle mass operating in all areas;

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between 4.5 tonnes and 20 tonnes gross vehicle mass only when operating outside of or across defined metropolitan boundaries. The metropolitan boundaries do not apply to emergency vehicles, primary producers and buses using alternative fuels.

3.7 The Fuel Sales Grants Scheme provides a fuel sales grant for the sale of gasoline or diesel (not used as an aviation fuel) that is sold in a non-metropolitan or remote area after 30 June 2000.

3.8 The States Grants (Petroleum Products) Act 1965 gives financial assistance to users of petroleum-based fuels in designated remote regional and rural locations in Australia who would otherwise have to pay higher prices for fuels due to the additional costs in transporting and distributing fuel to those locations.

Phased changes

3.9 The Fuel Tax Bill 2006 implements the Government's decision that a fuel tax credit system commence from 1 July 2006. That Bill sets out the general principle that a taxpayer is entitled to a fuel tax credit for fuel acquired or manufactured in, or imported into, Australia for use in carrying on their enterprise, as well as setting out further rules affecting eligibility and how credits are claimed.

3.10 The Fuel Tax (Consequential and Transitional Provisions) Bill 2006 provides for the phased implementation of the fuel tax credit system to particular uses of fuel at certain times from 1 July 2006 to 1 July 2012, when the final changes are in place.

3.11 The Fuel Tax (Consequential and Transitional Provisions) Bill 2006 also provides for the phasing out of the existing grants schemes between 1 July 2006 and 1 July 2010, while allowing outstanding claims to be made, before abolishing these schemes by 1 July 2012.

Timeframe of the transitional provisions

The fuel tax credit system

3.12 The fuel tax credit system applies from 1 July 2006 to fuels acquired or manufactured in, or imported into, Australia.

Application of current schemes

3.13 Entitlement to a fuel sales grant is limited to sales of fuel to end users occurring before 1 July 2006. Taxpayers entitled to a fuel sales grant have six months after that to claim outstanding entitlements.

3.14 Entitlement to an energy grant for diesel is limited to fuel purchased or imported before 1 July 2006. Taxpayers entitled to an energy grant will have 12 months after that to claim outstanding entitlements under the EGCS.

3.15 Entitlement to an energy grant for alternative fuels purchased or imported for eligible on-road activities is limited to fuel purchased before 1 July 2010. Taxpayers entitled to an energy grant for on-road alternative fuel are provided with a 12-month transitional period to claim outstanding entitlements under the EGCS.

Eligibility for a fuel tax credit

3.16 Between 1 July 2006 and 30 June 2012, a taxpayer who would have been eligible for an off-road credit under the EGCS is entitled to a fuel tax credit.

3.17 From 1 July 2006, a taxpayer is entitled to a fuel tax credit for the on-road business use of all taxable fuels (generally, fuels subject to excise and customs duty) in vehicles weighing over 4.5 tonnes gross vehicle mass. Any pre-existing entitlement to a grant for fuel use in vehicles weighing 4.5 tonnes gross vehicle mass, acquired before 1 July 2006, is preserved in the fuel tax credit system.

3.18 From 1 July 2008, eligibility for a fuel tax credit for currently eligible off-road activities expands to include petrol.

3.19 From 1 July 2008, eligibility for a fuel tax credit extends to diesel or petrol used in off-road business activities currently ineligible for an energy grant. This takes the form of a half credit until 1 July 2012, when it becomes a full credit.

3.20 From 1 July 2011, coinciding with bringing alternative fuels into the fuel tax system, a taxpayer acquiring or importing an alternative fuel for off-road business use is entitled to claim a fuel tax credit.

When do the current schemes finish?

3.21 The Fuel Sales Grants Scheme and the Petroleum Products Freight Subsidy Scheme cease to operate from 1 January 2007 and 1 July 2007 respectively. The EGCS phases out from 1 July 2006, before ceasing to operate on and from 1 July 2012.

Early payment of fuel tax credits

3.22 The Fuel Tax (Consequential and Transitional Provisions) Bill 2006 provides for the early payment of fuel tax credits to certain entities for a two year transitional period.

3.23 Under the arrangement, eligible taxpayers may elect to make claims for the early payment of fuel tax credit entitlements. These amendments will ameliorate negative cash flow effects that may be associated with claiming credits via the business activity statement.

3.24 These amendments are transitional in nature and apply only in respect of fuel acquired, manufactured or imported between 1 July 2006 and 30 June 2008 (inclusive).

Detailed explanation of new law

3.25 The purpose of the Fuel Tax (Consequential and Transitional Provisions) Bill 2006 is to provide a seamless transition to the fuel tax credits system during the period from 1 July 2006 to 1 July 2012 by ensuring existing claimants are preserved and by setting out arrangements for outstanding claims arising out of the current grants systems.

3.26 In the transitional period, entitlement to a fuel tax credit is progressively phased in and entitlements under the Fuel Sales Grants Scheme, the EGCS and the Petroleum Products Freight Subsidy Scheme cease to arise from 1 July 2006.

Fuel Sales Grants Scheme

3.27 A fuel sales grant under the Fuel Sales Grants Act 2000 applies only to fuel sales before 1 July 2006. [Schedule 1, item 1, paragraph 7(c) of the Fuel Sales Grants Act 2000]

3.28 Fuel sales grant claims under the Product Grants and Benefits Administration Act 2000 must be lodged with the Commissioner of Taxation (Commissioner) before 1 January 2007, even if 1 January 2007 is within the three-year claiming period from the start of the claim period. [Schedule 1, items 2 and 3, and paragraph 15(2)(da) of the Product Grants and Benefits Administration Act 2000]

3.29 The Fuel Sales Grants Scheme ceases to operate on 1 January 2007 and the Fuel Sales Grants Act 2000 is repealed from that date. References in the Product Grants and Benefits Administration Act 2000 to fuel sales grants are deleted in accordance with the repeal of the Fuel Sales Grants Act 2000 . [Schedule 1, items 4 to 8, section 8 (item 1 in the table), subsection 9(3), paragraph 15(2)(da) and subparagraphs 47(3)(c)(ia) and (d)(ia) of the Product Grants and Benefits Administration Act 2000]

Petroleum Products Freight Subsidy Scheme

3.30 The Petroleum Products Freight Subsidy Scheme, administered by the States and Territories, ceases to apply to fuel sales and deliveries of petroleum products after 30 June 2006.

3.31 The Fuel Tax (Consequential and Transitional) Bill 2006 repeals the State Grants (Petroleum Products) Act 1965 on 1 July 2007, allowing outstanding claims to be made until 30 June 2007. [Schedule 2, items 1 to 5]

Energy Grants (Credits) Scheme

3.32 Entitlement to an energy grant for an on-road credit or an off-road credit for diesel applies only to diesel fuel purchased or imported before 1 July 2006. [Schedule 3, items 2 to 5, and sections 40 and 51 of the Energy Grants (Credits) Scheme Act 2003]

3.33 Energy grant claims for diesel under the Product Grants and Benefits Administration Act 2000 must be lodged with the Commissioner before 1 July 2007, even if 1 January 2007 is within the three-year claiming period from the start of the claim period. [Schedule 3, items 3, 5 and 6, notes to sections 40 and 51 of the Energy Grants (Credits) Scheme Act 2003 and paragraphs 15(2)(db) and 15(2)(e) of the Products Grants and Benefits Administration Act 2000]

3.34 An alternative mechanism, under the Fuel Tax Bill 2006, allows an entitlement for an on-road or an off-road credit for diesel fuel purchased or imported between 1 July 2003 and 30 June 2006 to be claimed as a decreasing fuel tax adjustment. [Schedule 3, items 3, 5 and 9, and notes to sections 40 and 51 of the Energy Grants (Credits) Scheme Act 2003]

3.35 The amount of the adjustment is equivalent to the amount of the credit that would have been payable under the Energy Grants (Credits) Scheme Act 2003 . [Schedule 3, item 9]

3.36 Only one claim can be made with respect to the fuel, through either of the claiming avenues described in paragraphs 3.29 to 3.32. [Schedule 3, items 7 and 9, and subsection 15(2) of the Product Grants and Benefits Administration Act 2000]

Example 3.1

On 26 June 2006 Maxwell buys diesel fuel for use in cultivating his potato crops and is entitled to an off-road credit under the Energy Grants (Credits) Scheme Act 2003 . Maxwell may make a claim in one of two ways. He can claim a grant from the Commissioner through the current claiming mechanism under the Product Grants and Benefits Administration Act 2000 or, alternatively, he can claim a credit under the fuel tax credit system by making a decreasing fuel tax adjustment on his business activity statement (BAS). If he wishes to use the current claiming mechanism, he must do so before 1 July 2007. Alternatively, if he does not wish to make a claim under the Product Grants and Benefits Administration Act 2000 before 1 July 2007 he may claim a credit of an equivalent amount under the fuel tax credit system provided the adjustment is made for a tax period that ends before 1 July 2009.

3.37 Entitlement to an energy grant for an on-road credit for on-road alternative fuel use continues for alternative fuels acquired or imported before 1 July 2010. [Schedule 3, items 13 to 17, and section 15 of the Product Grants and Benefits Administration Act 2000]

3.38 Similar to the transitional arrangements for outstanding claims for energy grants for diesel use, a claimant has a 12-month period up to and including 30 June 2011 in which to lodge a claim with the Commissioner for an energy grant under the Product Grants and Benefits Administration Act 2000 with respect to on-road alternative fuel. [Schedule 3, item 13, and paragraph 15(2)(da) of the Products Grants and Benefits Administration Act 2000]

3.39 An alternative claiming mechanism also exists under the Fuel Tax Bill 2006 where a taxpayer can make a decreasing fuel tax adjustment, of an amount equivalent to the amount of the credit that would have been payable under the Energy Grants (Credits) Scheme Act 2003 , for the eligible use of on-road alternative fuel acquired or imported before 1 July 2010. [Schedule 3, item 17]

3.40 Only one claim can be made with respect to the fuel, through either of the claiming avenues described in paragraphs 3.34 to 3.36 [Schedule 3, items 15 to 17, and subsection 15(2A) of the Product Grants and Benefits Administration Act 2000]

Phasing in of new credit entitlements - 1 July 2006

3.41 When the fuel tax credit system commences on 1 July 2006, a taxpayer is only entitled to a credit for fuel for use in a vehicle travelling on a public road (including incidental use in relation to the vehicle) and for certain specified off-road activities. [Schedule 3, items 10 and 11]

3.42 A taxpayer using fuel off-road in generating electricity, other than as a fuel, as a fuel in an internal combustion engine, or as heating oil, is entitled to a credit. [Schedule 3, items 10 and 11]

3.43 In addition, a taxpayer using diesel fuel for travel on-road that is not a public road, in an activity that would have given rise to an on-road credit under the Energy Grants (Credits) Scheme Act 2003 (but for on-road use other than on a public road), is eligible for a credit as though the travel on-road were travel on a public road. [Schedule 3, items 10 and 11]

3.44 However, where the fuel use is in vehicles of gross vehicle mass over 4.5 tonnes, the amount of fuel tax credit a claimant is entitled to from 1 July 2006 is decreased by the amount of the road-user charge, in accordance with the general entitlement rules of the fuel tax credit system.

Example 3.2

Malicia's Transport Pty Ltd has a contract to transport munitions to a large defence training area. After driving to this training area on public roads, trucks must travel long distances on roads around the training area to deliver munitions to different areas before leaving. As all of this transport activity would have been eligible for an energy grant under the EGCS, the company is entitled to a fuel tax credit for the diesel fuel it acquires after 1 July 2006 for use in the same activity. For the purposes of calculating the amount of fuel tax credit entitlements, the fuel is treated as if it had been purchased for use in a vehicle travelling on a public road. The amount that Malicia's Transport Pty Ltd can claim as a fuel tax credit will therefore take into account any applicable road-user charge.

3.45 A taxpayer using diesel in an activity that would have given rise to an off-road credit under the Energy Grants (Credits) Scheme Act 2003 is eligible for a credit. [Schedule 3, items 10 and 11]

Example 3.3

Maloney's Transport Pty Ltd transports logs from a forest coupe to a saw mill for processing. As the company's transportation of logs on private roads is forestry, and forestry was an eligible activity of primary production under the EGCS, Maloney's Transport Pty Ltd would have been entitled to an off-road credit. From 1 July 2006, the company is eligible for a fuel tax credit for the diesel fuel it acquires for the same activity of transporting logs on private roads.

Phasing in of new credit entitlements - 1 July 2008 to 1 July 2012

3.46 Entitlement to a credit under the Fuel Tax Bill 2006 broadens from 1 July 2008 to include circumstances where taxpayers acquire or manufacture in, or import into, Australia diesel or petrol that would not have been eligible for an energy grants off-road credit under the EGCS. This is initially a half credit from 1 July 2008 and becomes a full credit from 1 July 2012. [Schedule 3, item 11]

Example 3.4

Madagascar Earthmoving Contractors currently uses diesel to power earthmoving equipment used in civil construction activities. Civil construction activities are not eligible for an off-road credit under the Energy Grants (Credits) Scheme Act 2003 . Madagascar Earthmoving Contractors is eligible for a credit of 50 per cent for fuel it buys from 1 July 2008 for use not on a public road in civil construction. From 1 July 2012, the company is eligible for a full credit for the fuel it buys.

3.47 From 1 July 2011, when effective fuel tax begins to be imposed on alternative fuels, a taxpayer is eligible for a full credit for acquiring, manufacturing or importing any alternative fuel for use off-road. [Schedule 3, item 11]

3.48 The Energy Grants (Credits) Scheme Act 2003 is repealed on 1 July 2012 when the fuel tax credit scheme has been fully implemented. References in the Product Grants and Benefits Administration Act 2000 to energy grants credits are also deleted in accordance with the repeal of the Energy Grants (Credits) Scheme Act 2003 . [Schedule 3, items 13 to 16B, sections 5, 8 and 27A, and subsections 9(4) and 27(1A) of the Product Grants and Benefits Administration Act 2000]

Credits for vehicles of 4.5 tonnes

3.49 The Fuel Tax (Consequential and Transitional Provisions) Bill 2006 grandfathers entitlements that previously existed under the Energy Grants (Credits) Scheme Act 2003 for the on-road use of diesel fuel in vehicles with a gross vehicle mass of 4.5 tonnes. A credit applies to certain uses of diesel fuel in a vehicle with a gross vehicle mass of 4.5 tonnes where the taxpayer has acquired the vehicle prior to 1 July 2006. This entitlement continues under the fuel tax credit scheme beyond when the EGCS is abolished. [Schedule 3, item 12]

Example 3.5

Mustafa bought his 12-seater mini bus (gross vehicle mass 4.5 tonnes) in January 2006. He uses it for his business of transporting passengers and has been entitled to claim an on-road credit for the diesel fuel he purchases for use in his mini bus. From 1 July 2006 Mustafa is entitled to a fuel tax credit for diesel fuel for use in the mini-bus for travelling on a public road, for incidental use in relation to the vehicle and for any other use that would have previously entitled him to an on-road credit.

Early payment of fuel tax credits

3.50 The Fuel Tax (Consequential and Transitional Provisions) Bill 2006 enables eligible taxpayers to make a claim for the payment of a credit without having to wait until they lodge a BAS.

3.51 This arrangement is transitional in nature and applies only in respect of fuel acquired, manufactured or imported between 1 July 2006 and 30 June 2008 (inclusive). [Schedule 3, items 12A, 23A, 23B, 34A and 34B]

Eligibility for the arrangement

3.52 The arrangement for early payment of fuel tax credits ensures a smooth transition to the new claiming arrangements for taxpayers that currently claim energy grants or receive fuel excise-free or at a concessional rate. Eligibility for the arrangement is restricted to entities that:

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were entitled to an energy grant under the Energy Grants (Credits) Scheme Act 2003 ;

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acquire, manufacture or import fuel for use other than as a fuel;

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use burner fuels for business use;

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supply burner fuels to private consumers for domestic heating; or

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package and sell fuel, such as kerosene, in small containers for use other than in an internal combustion engine.

[Schedule 3, paragraph 12A(1)(c )]

3.53 A special rule applies to goods and services tax (GST) groups and GST joint ventures, in view of the fact that they, in their capacity as single entities, could not have been entitled to an energy grant under the Energy Grants (Credits) Scheme (EGCS) but their members may have been.

3.54 Under this special rule, the representative member of a GST group will be entitled to receive early payments on behalf of the group if it or another member of the group was entitled to an energy grant under the EGCS. Similarly, the joint venture operator of a GST joint venture will be entitled to receive early payments on behalf of the joint venture if it or another participant in the joint venture was entitled to an energy grant [Schedule 3, subparagraph 12A(1)(c)(i )].

Example 3.6

ABC Pty Ltd is the representative member of a GST group which includes DEF Pty Ltd and XYZ Pty Ltd.

Prior to 1 July 2006, XYZ Pty Ltd was entitled to receive energy grants under the Energy Grants (Credits) Scheme Act 2003 . ABC Pty Ltd and DEF Pty Ltd were not entitled to receive energy grants.

As one member of the group was entitled to an energy grant, ABC Pty Ltd may, on behalf of the group, make an election to receive early payments of fuel tax credits.

Requirement to elect

3.55 Taxpayers that wish to participate in the arrangement must elect to do so, in a form approved by the Commissioner of Taxation (Commissioner), before 31 December 2006. [Schedule 3, paragraph 12A(1)(a )]

3.66 An election will allow a taxpayer to make claims for the early payment of fuel tax credits that are attributable to the tax period in which the election is made or any period thereafter. However, claims cannot be made in respect of fuel that is acquired, manufactured or imported after 30 June 2008. [Schedule 3, paragraph 12A(1)(b )]

Example 3.7

Rose makes an election on 1 November 2006. Rose receives quarterly BASs. Rose's election will enable her to make claims for early payments of fuel tax credits that are attributable to the quarterly tax period spanning 1 October 2006 to 31 December 2006 or any period thereafter. However, she may not make a claim in respect of fuel that she acquired, manufactured or imported after 30 June 2008.

Credits that can be claimed early

3.77 An eligible taxpayer that has elected to receive early payments may only make a claim for an early payment of a fuel tax credit if:

•

they are entitled to the credit;

•

the credit, or part of the credit, is attributable to:

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if the credit relates to fuel acquired by a taxpayer that accounts for GST on a cash basis - the tax period in which the claim for the early payment is made or a later tax period [Schedule 3, subparagraph 12A(1)(e)(i )]; or

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in all other cases - the tax period in which the claim for the early payment is made [Schedule 3, subparagraph 12A(1)(e)(ii )];

•

the taxpayer has not previously received an early payment of the credit for the fuel [Schedule 3, paragraph 12A(1)(f )]; and

•

the credit relates to fuel that the taxpayer acquired, manufactured or imported between 1 July 2006 and 30 June 2008 (inclusive) [Schedule 3, paragraph 12A(1)(b )].

3.78 In order to be entitled to a fuel tax credit, a taxpayer must have acquired, manufactured, or imported taxable fuel. A taxpayer that merely intends or expects to acquire, manufacture or import fuel at a later date will not be entitled to a fuel tax credit and thus will not be entitled to an early payment.

3.79 Taxpayers that account for GST on a cash basis may make a claim for the early payment of a credit that is attributable to a later tax period, providing that an entitlement to the credit exists at the time the claim is made. This ensures that taxpayers that are entitled to a fuel tax credit for fuel they acquire need not wait until they pay for the fuel before being able to make a claim for an early payment. [Schedule 3, subparagraph 12A(1)(e)(i )]

Example 3.8

Phil accounts for GST on a cash basis. He acquires fuel on 15 August 2006 and pays in full on 14 October 2006. Phil is entitled to a fuel tax credit for the fuel. The credit is attributable to Phil's quarterly tax period which spans 1 October 2006 to 31 December 2006. Phil has not previously received an early payment in respect of the particular credit. Prior to 1 July 2006, Phil was entitled to energy grants. Phil has elected to receive early payments of fuel tax credits.

Phil may make a claim for an early payment of the credit during his quarterly tax period ending on September 2006. However, Phil may not make a claim prior to 15 August 2006 as an entitlement to the credit would not have existed at the time.

Claims must be made in the approved form

3.80 All claims for the early payment of fuel tax credits must be in the approved form [Schedule 3, paragraph 12A(1)(g )]. The rules governing approved forms are contained in Division 388 in Schedule 1 to the TAA 1953.

No obligation to make claims

3.81 A taxpayer that has elected to receive early payments is not obliged to claim all fuel tax credits early. Fuel tax credits that are not claimed early can simply be claimed on the BAS for the relevant tax period.

Amount of an early payment

3.82 The amount of an early payment is equivalent to the amount of the fuel tax credit to which the taxpayer is entitled. [Schedule 3, paragraph 12A(2 )]

3.83 Taxpayers are expressly prevented from receiving more than one early payment in respect of a particular credit. [Schedule 3, paragraph 12A(1)(f )]

Offsetting increasing fuel tax adjustment

3.84 A fuel tax credit a taxpayer receives via an early payment will still form part of the taxpayer's net fuel amount for a tax period or tax periods. To ensure the early payment is offset against a subsequent claim or claims in the taxpayer's BAS, an increasing fuel tax adjustment arises. [Schedule 3, paragraph12A(3 )]

3.85 Generally, the amount of that increasing fuel tax adjustment will be equivalent to the amount of the early payment. The fuel tax adjustment will be attributable to the earliest tax period to which the fuel tax credit can be attributed. [Schedule 3, paragraph 12A(3)(b )]

3.86 A special rule applies in instances where fuel is acquired by a taxpayer that accounts for GST on a cash basis. In these instances, the credit to which the taxpayer is entitled may be attributable to more than one tax period. To ensure that each part of the credit is offset, an increasing fuel tax adjustment will arise in each period in which the taxpayer pays for the fuel. The amount of the increasing fuel tax adjustment will be equivalent to the amount of the early payment the taxpayer receives, but only to the extent that the taxpayer pays for the fuel in the tax period. Together, the increasing fuel tax adjustments will add up to the amount of the early payment. [Schedule 3, paragraph 12A(3)(a )]

Example 3.9

Robyn accounts for GST on a cash basis. In March 2007, she makes a claim for an early fuel tax credit payment of $1,000. The Commissioner provides Robyn with this payment. Robyn acquired the fuel and paid in two equal instalments. She paid one of these instalments on 31 March 2007 and the other on 30 April 2007.

Robyn reports part of the fuel tax credit ($500) in her BAS for her quarterly tax period ending 31 March 2007. In this BAS she must also report an increasing fuel tax adjustment of $500. The two amounts reported in the BAS effectively cancel one another out.

Robyn reports the other part of her fuel tax credit ($500) in her BAS for the tax period ending 30 June 2007. She must also report an increasing fuel tax adjustment of $500 in this BAS.

Together, the two increasing fuel tax adjustments add up to the amount of the early payment ($1,000).

Review rights

3.87 The Commissioner must not make a payment that is greater than the amount of the credit to which a taxpayer is entitled. Therefore, if the Commissioner has reason to believe that a taxpayer has notified an amount that is greater than the amount to which they are actually entitled, the Commissioner will only make a payment of the lesser of these two amounts. No express objections rights exist in relation to this payment. However a taxpayer may, once the relevant tax period has ended, request the Commissioner to make an assessment of their net fuel amount for the tax period. In making this assessment, the Commissioner will have to take into account the amount of the fuel tax credit to which the early payment relates. A taxpayer may object to this assessment if they are of the view that the early payment they received was less than the amount they were entitled to.

Example 3.10

On 1 August 2006, Andrew notifies the Commissioner that he is entitled to a payment of $2,000 in respect of taxable fuel he acquired. The fuel tax credit for the fuel is attributable to Andrew's quarterly tax period which ends on 30 September 2006. The Commissioner, however, has reason to believe that the amount of the credit to which Andrew is entitled is only $1,500. On this basis, the Commissioner makes a payment of $1,500 to Andrew.

In his BAS for the period ending 30 September 2006, Andrew claims a fuel tax credit of $2,000. He also reports an increasing fuel tax adjustment of $1,500. His BAS therefore indicates that he is entitled to a $500 refund ($2,000 - $1,500).

The Commissioner makes an assessment of Andrew's net fuel amount for the relevant tax period. The assessment states that Andrew's net fuel amount for the period is $0, on the basis that the amount of the credit is $1,500 and the amount of the increasing fuel tax adjustment is also $1,500. Andrew may object to this assessment.

Application and transitional provisions

3.88 The fuel tax credit system created by the Fuel Tax Bill 2006 takes effect by phased implementation from 1 July 2006 to 30 June 2012.

Consequential amendments

Amendments to streamline legislation in the transitional period

3.89 Provisions of the Fuel Tax Bill 2006 and the Product Grants and Benefits Administration Act 2000 are amended by the Fuel Tax (Consequential and Transitional Provisions) Bill 2006 to accommodate the phasing in of the new credit system and phasing out of the current grants systems during the transitional period of the fuel tax credit reform until 1 July 2012. Amendments remove references to provisions that no longer apply as certain phase-in or phase-out timeframes are met. [Schedule 3, items 17 to 29, notes to subsection 41-5(1), section 41-15 and subsection 65-10(1), paragraph 43-5(3)(b) and section 110-5 of the Fuel Tax Bill 2006, and sections 5, 15, 16A and 27A of the Product Grants and Benefits Administration Act 2000]

Other amendments to the Fuel Tax Bill 2006

3.90 The definition of the term 'increasing fuel tax adjustment', contained in section 110-5 of the Fuel Tax Bill 2006, and the note to section 65-10 of the Fuel Tax Bill 2006 are amended to take into account increasing fuel tax adjustments that arise to offset early payments between 1 July 2006 and 30 June 2008. [Schedule 3, items 23A and 23B, and sections 65-10 and 110-5 of the Fuel Tax Bill 2006]

3.91 From 1 July 2008, following the end of the transitional arrangement for early payment of fuel tax credits, the reference to the offsetting increasing fuel tax adjustment will be removed from both the definition in section 110-5 of the Fuel Tax Bill 2006 and the note to section 65-10 of that Bill. [Schedule 3, items 34A and 34B and sections 65-10 and 110-5 of the Fuel Tax Bill 2006]

Miscellaneous amendments

3.92 Minor amendments to the Product Grants and Benefits Administration Act 2000 correct a technical error in the definition of 'scheme,' so that criteria as to whether a 'scheme' exists appear as alternate conditions. [Schedule 4, item 2, and subsection 34(3) of the Product Grants and Benefits Administration Act 2000]

3.93 The Fuel Tax (Consequential and Transitional Provisions) Bill 2006 also repeals provisions of the Product Grants and Benefits Administration Act 2000 referring to other provisions in that Act that no longer operate. The amendments are retrospective from the date those other provisions ceased operating. [Schedule 4, items 3, 5 and 6, and subsection 53(2) of the Product Grants and Benefits Administration Act 2000]