House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon. Josh Frydenberg MP)

Chapter 9: Fuel duty amendments in the Customs Tariff Amendment (Cost of Living Support) Bill 2022 and Excise Tariff Amendment (Cost of Living Support) Bill 2022

Outline of chapter

9.1 The Excise Bill and Customs Bill amend the Excise Tariff Act and the Customs Tariff Act respectively to temporarily reduce the excise duty rates and excise-equivalent customs duty rates for fuels, including petrol and diesel and similar petroleum-based products, including oils and grease.

Context of amendments

9.2 In the 2022-23 Budget, the Government announced that it would temporarily reduce the excise and excise-equivalent customs duty rates for fuels, including petrol and diesel and similar petroleum-based products, including oils and grease to help reduce cost of living pressures for households and assist Australian businesses.

Summary of new law

Fuel excise and customs duty rates

9.3 The Excise Bill and the Customs Bill respectively amend the Excise Tariff Act and the Customs Tariff Act to temporarily reduce the excise and excise-equivalent customs duty rates applying to fuels, including petrol and diesel and similar petroleum-based products, including oils and grease.

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From 30 March 2022, the excise and excise-equivalent customs duty rates on fuels, including petrol and diesel and similar petroleum-based products, including oils and grease manufactured or produced in Australia or imported into Australia is reduced by 50 per cent for a period of six months until 28 September 2022.

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From 29 September 2022, the excise and excise-equivalent customs duty rates for these goods automatically return to the rates that would otherwise have applied on this date (including indexation during the reduction period) as if there had not been a temporary reduction in fuel excise and excise-equivalent customs duty rates.

Comparison of key features of new law and current law

Comparison of new law and current law

Detailed explanation of new law

Fuel excise and customs duty rates

9.4 From 30 March 2022:

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the excise and excise-equivalent customs duty rates for fuels, including petrol and diesel are reduced by 50 per cent from the rate applying since 1 February 2022 (see paragraph 9.8 below for the reduced rates); and

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the excise and excise-equivalent customs duty rates for similar oils and grease are reduced to:

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$0.043 per litre for oils; and

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$0.043 per kilogram for grease.

9.5 On 1 August 2022 (or the applicable indexation day in August 2022), the reduced rate for fuel duty rates is subject to indexation at the CPI indexed rate.

9.6 From 29 September 2022:

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the excise and excise-equivalent customs duty rates for fuels, including petrol and diesel, return to the 1 February 2022 rate and are subject to indexation at the CPI indexed rate (using the August 2022 indexation factor); and

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the excise and excise-equivalent customs duty rates for oils and grease return to:

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$0.085 per litre for oils; and

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$0.085 per kilogram for grease.

Temporary reduction in excise and excise-equivalent customs duty rates from 30 March 2022

9.7 From 30 March 2022, the fuel excise and excise-equivalent customs duty rates are reduced by 50 per cent from the rates that have applied since 1 February 2022. [Schedule 1, item 1, subsection 6K(1) of the Excise Tariff Act; and Schedule 1, item 1, subsection 19AABA(1) of the Customs Tariff Act]

9.8 Accordingly, from 30 March 2022, the excise and excise-equivalent customs duty rates applying to fuels, including petrol and diesel and similar products are as follows:

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petrol and diesel - $0.221 per litre;

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liquefied petroleum gas - $0.072 per litre;

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liquefied natural gas and compressed natural gas - $0.152 per litre;

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denatured ethanol for use in internal combustion engines - $0.073 per litre; and

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biodiesel - $0.044 per litre.

[Schedule 1, item 1, subsections 6K(1) and (2) of the Excise Tariff Act; and Schedule 1, item 1, subsections 19AABA(1) and (2) of the Customs Tariff Act]

9.9 The reduced fuel excise rates are included in the definition of CPI indexed fuel rate in subsection 6K(8) of the Excise Bill. This specifies that the reduced fuel excise rates are the ones covered in paragraphs (b) and (c) of the existing definition of CPI indexed rate in subsection 6A(10) of the Excise Tariff Act.

9.10 The current fuel excise and excise-equivalent customs duty rates are available from the Australian Taxation Office and Australian Border Force websites.

9.11 From 30 March 2022, the excise and excise-equivalent customs duty rates for oils and grease are reduced to:

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$0.043 per litre for oil; and

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$0.043 per kilogram for grease.

[Schedule 1, item 1, subsection 6L(1) of the Excise Tariff Act; and Schedule 1, item 1, subsections 19AABB(1), (5) and (6) of the Customs Tariff Act]

9.12 Reduced excise duty rates apply to fuels, including petrol and diesel and similar petroleum-based products, including oils and grease that were manufactured or produced in Australia:

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between the period beginning on 30 March 2022 and ending on 28 September 2022 (inclusive); and

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before 30 March 2022, if:

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on 30 March 2022, the goods were subject to the CEO's control or were in the stock, custody or possession of, or belonged to, a manufacturer or producer of goods; and

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no duty of excise had been paid on the goods before 30 March 2022.

[Schedule 1, item 1, subsections 6K(3) and (8) and subsection 6L(2) of the Excise Tariff Act]

9.13 Reduced excise-equivalent customs duty rates apply to fuels, including petrol and diesel and similar petroleum-based products, including oils and grease:

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imported into Australia between the period beginning on 30 March 2022 and ending on 28 September 2022 (inclusive); and

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imported into Australia before 30 March 2022, where the time for working out the rate of the import duty on the goods had not occurred before 30 March 2022.

[Schedule 1, item 1, subsections 19AABA(3) and (6) and subsection 19AABB(2) of the Customs Tariff Act]

9.14 The requirements for when the duty rate for imported goods must be paid and worked out are set out in section 132AA of the Customs Act 1901.

9.15 The reduced excise and excise-equivalent customs duty rates for fuels, including petrol and diesel and similar petroleum-based products, including oils and grease are rounded to three decimal places. [Schedule 1, item 1, subsection 6K(2) of the Excise Tariff Act; and Schedule 1, item 1, subsection 19AABA(2) of the Customs Tariff Act]

Exclusion for aviation fuels

9.16 There are no changes to the excise and excise-equivalent customs duty rates for aviation fuels (i.e., fuels used in aircraft). This is because excise and excise-equivalent customs duties on aviation fuels is wholly used to fund the Civil Aviation Safety Authority which is required under the Aviation Fuel Revenues (Special Appropriation) Act 1988.

Indexation of reduced fuel excise and excise-equivalent customs duty rates in August 2022

9.17 In accordance with existing sections 6A and 6AAA of the Excise Tariff Act and sections 19 and 19AAA of the Customs Tariff Act, excise and excise-equivalent customs duty rates for specified goods (including most fuels and similar products) are subject to twice yearly CPI indexation occurring in February and August each year (generally on the first of the month).

9.18 Excise and excise-equivalent customs duty rates on oil and grease are not subject to indexation.

9.19 In February and August each year (generally on the first of the month), the new excise and excise-equivalent customs duty rates are determined by the application of an indexation factor, which is calculated in accordance with the formula in subsection 6A(3) of the Excise Tariff Act and subsection 19(3) of the Customs Tariff Act.

9.20 CPI figures are available from the ABS website. If the ABS does not publish the CPI figure at least five days before the indexation day (i.e., before 1 February or 1 August), then the indexed rate does not take effect until the fifth day after the day the CPI figures are published. This may mean that in some limited situations, indexation may, for example, apply on 2 February or 2 August.

9.21 Under the existing law, on 1 August 2022 (or the later applicable indexation day in August 2022), the excise and excise-equivalent customs duty rates for fuels are subject to indexation at the CPI indexed rate.

9.22 CPI indexed fuel rate is defined as a sub-set of the definition of CPI indexed rate in subsection 6A(10) of the Excise Tariff Act. An equivalent definition of the CPI indexed rate is set out in subsection 19(10) of the Customs Tariff Act. [Schedule 1, item 1, subsection 6K(8) of the Excise Tariff Act]

9.23 The amendments in the Excise Bill and Customs Bill provide that the reduced fuel excise and excise-equivalent customs duty rates remain subject to indexation at the CPI indexed rate on the August adjustment day (that is, the indexation day).

9.24 The August adjustment day for the reduced rates for fuels, including petrol and diesel, is either:

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1 August 2022; or

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the replacement indexation day under section 6A of the Excise Tariff Act (or section 19 of the Customs Tariff Act).

[Schedule 1, item 1, subsection 6K(8) of the Excise Tariff Act; and Schedule 1, item 1, subsection 19AABA(7) of the Customs Tariff Act]

9.25 The replacement indexation day has been linked to the replacement day of a rate of duty under subsection 6A(5) of the Excise Tariff Act and subsection 19(5) of the Customs Tariff Act. This is to ensure that despite any amendment to indexation arrangements for fuel, there is a set indexation day that remains unchanged to replace the 1 August 2022 date if it is required.

Annual increase in excise duty on biodiesel on 1 July 2022

9.26 Similar to how indexation continues to apply for applicable fuels, the annual increase in the excise duty rate for biodiesel that applies on 1 July each year until 2030 continues to apply on 1 July 2022 but at 50 per cent for the rate reduction period.

Restoration of excise and excise-equivalent customs duty rates from 29 September 2022

9.27 From 29 September 2022, the excise and excise-equivalent customs duty rates for fuels, including petrol and diesel automatically return to the rates that would have applied had the rates not been reduced. [Schedule 1, item 1, subsections 6K(5) of the Excise Tariff Act; and Schedule 1, item 1, subsections 19AABA(4) of the Customs Tariff Act]

9.28 This means that from 29 September 2022, the excise and excise-equivalent customs duty rates for fuels, including petrol and diesel, return to the rates that applied on 1 February 2022 and are subject to indexation at the CPI-indexed rate (using the August 2022 indexation factor). These full rates continue to be subject to indexation twice each year (in February and August) on an ongoing basis.

9.29 Similarly, the full annual increase in the biodiesel excise rate is included in the biodiesel rate when the rate returns to the full rate on 29 September 2022 and annual increases continue until 2030 under section 6J of the Excise Tariff Act.

9.30 From 29 September 2022, the excise and excise-equivalent customs duty rates for similar petroleum-based products, including oils and grease, which are not subject to indexation, return to the rate that applied prior to the reduction which is:

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$0.085 per litre for oil; and

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$0.085 per kilogram for grease.

[Schedule 1, item 1, subsection 6L(4) of the Excise Tariff Act; and Schedule 1, item 1, subsection 19AABB(3) of the Customs Tariff Act]

9.31 The restoration of the excise duty rates applies to fuels, including petrol and diesel and similar petroleum-based products, including oils and grease manufactured or produced in Australia:

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on or after 29 September 2022; or

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before 29 September 2022 if:

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on 29 September 2022, the goods were subject to the CEO's control or were in the stock, custody or possession of, or belonged to, a manufacturer or producer of goods; and

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no duty of excise had been paid on the goods before 29 September 2022.

[Schedule 1, item 1, subsections 6K(6) and 6L(5) of the Excise Tariff Act]

9.32 The restoration of the excise-equivalent customs duty rates applies to fuels, including petrol and diesel and similar petroleum-based products, including oils and grease:

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imported into Australia on or after 29 September 2022; and

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imported into Australia before 29 September 2022, where the time for working out the rate of import duty on the goods had not occurred before 29 September 2022.

[Schedule 1, item 1, subsections 19AABA(5) and 19AABB(4) of the Customs Tariff Act]

Consequential amendments

9.33 The amendments include a consequential amendment to section 19AAC of the Customs Tariff Act to reference the newly inserted provisions. [Schedule 1, item 2, subsection 19AAC(1) of the Customs Tariff Act]

9.34 Schedule 9 to the Bill makes a consequential amendment to the Product Stewardship (Oil) Regulations 2000.

9.35 During the rate reduction period from 30 March 2022 to 28 September 2022, the levy on gazetted oils is $0.043 per litre. At any other time, the levy on these products is $0.085 per litre.

[Schedule 9, item 3, subregulation 4(1A) of the Product Stewardship (Oil) Regulations 2000]

9.36 The amendment ensures that the benefit available for gazetted oil (category 8) under the Product Stewardship for Oil Program continues to be equal to the rate of duty payable on petroleum-based lubricants and fluid oils and their synthetic equivalents despite the reduction in the duty rate during the period from 30 March 2022 to 28 September 2022. This ensures that the benefit available under the scheme for such gazetted oils continues to directly offset the duty rate on these oils that is imposed as a product stewardship for oil levy.

[Schedule 9, items 1 to 3, subregulations 4(1) and (1A) of the Product Stewardship (Oil) Regulations 2000]

Commencement, application, and transitional provisions

Commencement

9.37 The amendments to the Excise Tariff Act and the Customs Tariff Act commence on the day the amendments receive Royal Assent. [Clause 2 of the Excise Bill; and clause 2 of the Customs Bill]

9.38 The amendments in Schedule 9 to the Bill commence immediately after the commencement of the Excise Bill. However, the provisions in Schedule 9 to the Bill do not commence at all if the Excise Bill does not commence. This contingent commencement ensures that the amendments to the benefit rate under the Product Stewardship (Oil) Regulations 2000 only apply if the excise reduction occurs. [Clause 2 of the Bill]

Application provisions

Application date - reduction of excise and customs duties

9.39 The amendments to reduce fuel excise and excise-equivalent customs duty rates apply to goods that are:

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manufactured or produced in Australia on or after 30 March 2022 (the rate reduction period); or

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manufactured or produced in Australia prior to 30 March 2022 that were subject to the Commissioner's control or were held or belonged to a manufacturer or producer of the goods and no duty of excise had been paid on the goods before 30 March 2022; or

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imported into Australia on or after 30 March 2022; or

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imported before 30 March 2022 where the time for working out the rate of import duty for the goods had not occurred prior to 30 March 2022.

[Schedule 1, item 1, subsections 6K(3), 6K(8) and 6L(2) of the Excise Tariff Act; and Schedule 1, item 1, subsections 19AABA(3), 19AABA(6) and 19AABB(2) of the Customs Tariff Act]

Application date - restoration of excise and customs duties

9.40 The amendments to restore the fuel excise and excise-equivalent customs duty rates to the rates that would otherwise have applied if the amendments had not been made, apply to goods that are:

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manufactured or produced in Australia on or after 29 September 2022;

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manufactured or produced in Australia prior to 29 September 2022 that were subject to the Commissioner's control or were held or belonged to a manufacturer or producer of the goods and no duty of excise had been paid on the goods before 29 September 2022;

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imported into Australia on or after 29 September 2022; or

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imported before 29 September 2022 where the time for working out the rate of import duty for the goods had not occurred prior to 29 September 2022.

[Schedule 1, item 1, subsections 6K(6) and 6L(5) of the Excise Tariff Act; and Schedule 1, item 1, subsections 19AABA(5) and 19AABB(4) of the Customs Tariff Act]

9.41 This application provision for the reduction and restoration of excise duty rates in the Excise Tariff Act applies despite subsection 5(2) of the Excise Tariff Act. [Schedule 1, item 1, subsections 6K(4), 6K(7), 6L(3) and 6L(6) of the Excise Tariff Act]

9.42 Depending on when the Excise and Customs Bills receive Royal Assent, the amendments may apply retrospectively. However, the reduced duty rates that apply from 30 March 2022 are wholly beneficial for affected manufacturers, producers, importers and users of fuels, including petrol and diesel and similar petroleum-based products, including oils and grease as the Bills result in the temporary reduction in the rates of duty payable.

9.43 The reduction in the benefit payable for gazetted oils under the product stewardship for oil scheme similarly applies from 30 March 2022. The amendment ensures that the benefit payable continues to directly offset the duty rate on these oils that is imposed as a product stewardship for oil levy and does not give rise to a windfall gain.