Revised Explanatory Memorandum
(Circulated by the authority of the Treasurer, the Hon J. B. Hockey MP)General outline and financial impact
Taxation changes to fuel ethanol and biodiesel
The Excise Tariff Amendment (Ethanol and Biodiesel) Bill 2015 amends the Excise Tariff Act 1921 to reduce the rates of excise for domestically manufactured biodiesel and fuel ethanol to nil for a one-year period commencing on 1 July 2015. The excise rates for these fuels then increase each financial year from 1 July 2016 until the excise rate for:
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- fuel ethanol will be approximately 33 per cent of the excise rate for petrol in the 2020-21 financial year and later financial years; and
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- biodiesel will be equivalent to 50 per cent of the excise rate for diesel in the 2030-31 financial year and later financial years.
The Energy Grants and Other Legislation Amendment (Ethanol and Biodiesel) Bill 2015 repeals the Energy Grants (Cleaner Fuels) Scheme Act 2004 to remove grants for renewable diesel and biodiesel from 1 July 2015.
Date of effect: The amendments to remove grants for renewable diesel and biodiesel and reduce the excise rates for domestically manufactured fuel ethanol and biodiesel to zero apply from 1 July 2015. Excise duty is then phased in each year commencing 1 July 2016 until the final excise rate is reached on 1 July 2020 for fuel ethanol and on 1 July 2030 for biodiesel.
Proposal announced: These measures were announced by the Treasurer in the 2014-15 Budget on 13 May 2014. The changes to provide a transition period until 1 July 2030 for biodiesel were not previously announced.
Financial impact: These measures will result in a net gain to the Budget of $250.5 million over the forward estimates period, comprising:
| 2014-15 | 2015-16 | 2016-17 | 2017-18 | 2018-19 | |
| Bills as introduced to Parliament | - | $52m | $61m | $67m | $77m |
| Parliamentary amendments biodiesel | - | - | -$1m | -$2.5m | -$3m |
| Total | - | $52m | $60m | $64.5m | $74m |
Human rights implications: These Bills do not raise any human rights issues. See Statement of Compatibility with Human Rights, paragraphs 1.50 to 1.57.
Compliance cost impact: The phasing in of net rates of excise duty from 1 July 2015 imposes transitional compliance costs for affected excise duty payers and affected fuel tax credit claimants. The removal of grant entitlements for fuel ethanol, biodiesel and renewable diesel reduces compliance costs for grant claimants.