Senate

Revised Explanatory Memorandum

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

General outline and financial impact

Diesel and Alternative Fuels Grants Scheme Amendment Bill 2000

This Bill amends the Diesel and Alternative Fuels Grants Scheme Act 1999 (DAFGSA 1999) to eliminate problems identified in administering the Scheme and to ensure that it better reflects the Government's policy intent. This Bill also makes consequential amendments to the Tax Administration Act 1953 (TAA 1953).

The DAFGSA1999 represents a commitment that the Government made to Australia's rural and regional heartland in the lead up to the 1998 election.

Date of effect: The provisions will commence from the date of Royal Assent. It is intended that the grant will be payable for fuel purchased from 1 July 2000.

Proposal announced: The Diesel and Alternative Fuels Grants Scheme was announced by the Government on 28 May 1999 as part of the agreement between the Government and the Australian Democrats.

Financial impact: The extensions to the grant will cost approximately $17 million in the 2000-2001 financial year.

Compliance cost impact: The substantiation requirements for those entitled to claim the grant as a consequence of these amendments will be the same as for those previously entitled.

Chapter 1 - Commencement and general amendments

Outline of Chapter

1.1 This Chapter explains new entitlement and administrative provisions for the Diesel and Alternative Fuels Grants Scheme Act 1999 (DAFGSA 1999).

Summary of new law

1.2 The amendments deal with the short title of this Act, commencement provisions, the insertion of additional definitions and the following changes to entitlement and general administrative provisions.

1.3 The amendments insert additional entitlement provisions to:

•

extend eligibility to primary production businesses and to contractors carrying passengers or goods on behalf of primary production businesses, operating within the metropolitan areas;

•

extend eligibility to buses using alternative fuels operating in metropolitan areas; and

•

extend eligibility to emergency vehicles of over 4.5 tonnes gross vehicle mass operating on public roads in both metropolitan and non-metropolitan areas;

and the following general operational provisions to:

•

extend the entitlement to vehicles that satisfy the entitlement criteria for some part of the grant period although the vehicle is not registered with the scheme at the time of the claim being made;

•

accept registration of additional vehicles at the same time a claim is made in respect of those or other vehicles;

•

ensure clients who seek to correct a mistake or omission for a previous claim do not lose their entitlements for both claims;

•

provide for the payment of interest to clients on the underpaid amount of fuel grants which are paid or applied against debts as a result of an objection against a fuel grant assessment;

•

clarify that journeys between metropolitan areas and non-metropolitan areas are eligible in both directions; and

•

repeal Part 8 of the DAFGSA 1999 dealing with Recovery of Scheme Debts and to insert a new section dealing with recovery by set-off.

Detailed explanation of new law

Short Title

1.4 Upon commencement this Bill will be cited as the Diesel and Alternative Fuels Grants Scheme Amendment Act 2000.

Commencement

1.5 It is intended that the amendments will commence on the day the Bill receives Royal Assent. Item 14 of Schedule 1 commences immediately after the commencement of item 2 of Schedule 2 to the A New Tax System (Tax Administration) Act (No. 2) 2000.

Definitions

1.6 This Bill amends section 5 of the DAFGSA 1999 to insert the following new definitions:

•

'primary production business' which will have the same meaning as in the Income Tax Assessment Act 1997; and

•

emergency vehicle which will mean a vehicle that is specified in the regulations to be an emergency vehicle, or that is in a class of vehicles that are specified in the regulations to be emergency vehicles.

Chapter 2 - Eligibility of primary producers in metropolitan areas

Outline of Chapter

2.1 This Chapter explains new entitlement provisions for the Diesel and Alternative Fuels Grants Scheme Act 1999 (DAFGSA 1999) for primary production businesses and contractors carrying passengers or goods on behalf of primary production businesses operating in metropolitan areas.

Context of reform

2.2 The policy concept that lies behind the modified package agreed with the Australian Democrats is to preserve most of the lower cost benefits of the ANTS diesel credits for rural and regional Australia while addressing concerns relating to the environmental impact of diesel use in large cities.

2.3 In determining the boundaries of metropolitan areas it is not possible to draw the boundaries in a way that excludes rural areas entirely.

2.4 The amendment will extend eligibility for the grant to transport operations for primary production businesses operating in metropolitan areas.

Summary of new law

2.5 Primary production businesses will be eligible for the grant when operating an eligible vehicle exclusively for primary production business activities on a public road within the metropolitan areas. The transportation of goods or passengers by a contractor, freight company or agent carrying passengers or goods on behalf of a primary production business will also be eligible where the only goods being carried are being carried on behalf of one or more primary production businesses.

Detailed explanation of new law

2.6 Amendments are necessary to give effect to the Government's decision to extend the fuel grant to primary production businesses located within the metropolitan areas and their contractors. As the legislation currently stands, entitlement to the grant is limited for vehicles between 4.5 tonnes and 20 tonnes. Journeys undertaken by these vehicles solely within the metropolitan areas are ineligible for the grant thus excluding in some cases, rural businesses located within the metropolitan areas. This amendment will extend the eligibility for the grant for primary production businesses and contractors carrying passengers or goods on behalf of primary production businesses operating in metropolitan areas. [Schedule 1, items 2, 5 and 6, new sections 10AA and 10AB]

Chapter 3 - Eligibility of buses using alternative fuels in metropolitan areas

Outline of Chapter

3.1 This Chapter explains the entitlement in the Diesel and Alternative Fuels Grants Scheme Act 1999 (DAFGSA 1999) for buses using alternative fuels and operating in metropolitan areas.

Context of reform

3.2 The Government intends to amend the DAFGSA 1999 to extend eligibility for a grant to all buses using alternative fuels and operating in metropolitan areas.

Summary of new law

3.3 The amendments ensure the grant is payable for alternative fuels used in buses operating within the metropolitan areas.

Detailed explanation of new law

3.4 The amendments will extend the Diesel and Alternative Grants Scheme to buses operating in metropolitan areas and using alternative fuels. Journeys undertaken by buses solely within the metropolitan areas are currently ineligible for the grant under the entitlement provisions in section 10 of the DAFGSA 1999. Buses between 4.5 and 20 tonnes gross vehicle mass using alternative fuels will now be eligible for the grant when on a public road within the metropolitan area. [Schedule 1, items 5 and 6, new section 10AC]

Chapter 4 - Eligibility of emergency vehicles

Outline of Chapter

4.1 This Chapter explains new entitlement provisions for the Diesel and Alternative Fuels Grants Scheme Act 1999 (DAFGSA 1999) for emergency vehicles.

Context of reform

4.2 The Government intends to amend the DAFGSA 1999 to extend eligibility for the grant to all emergency vehicles regardless of location using diesel and alternative fuels in their operations.

Summary of new law

4.3 The amendment will extend eligibility to emergency vehicles of over 4.5 tonnes gross vehicle mass (GVM) using diesel and alternative fuels.

Detailed explanation of new law

4.4 It is proposed to extend the Diesel and Alternative Fuels Grant Scheme to emergency vehicles over 4.5 tonnes GVM using diesel and alternative fuels. This amendment would remove an anomaly whereby these vehicles could otherwise be excluded if they were considered to be special purpose vehicles not designed to carry goods or passengers. The amendment will primarily assist fire fighting services and will apply regardless of whether they operate in metropolitan areas or non-metropolitan areas. [Schedule 1, items 1, 5 and 6, new section 10AD]

Chapter 5 - Miscellaneous administrative amendments

Outline of Chapter

5.1 This Chapter makes some miscellaneous administrative amendments to the Diesel and Alternative Fuels Grants Scheme Act 1999 (DAFGSA 1999).

Context of reform

5.2 In developing business processes to implement the Diesel and Alternative Fuels Grants Scheme (Scheme) and through discussions with industry representatives, the Australian Tax Office (ATO) has become aware of a number of administrative difficulties in the current wording of the DAFGSA 1999.

Summary of new law

5.3 The amendments deal with the insertion of the general operational provisions to:

•

ensure a grant is only claimed under one entitlement;

•

extend the entitlement to vehicles that satisfy the entitlement criteria for some part of the grant period although the vehicle is not registered with the scheme at the time of the claim being made;

•

accept registration of additional vehicles at the same time a claim is made in respect of those or other vehicles;

•

ensure clients who seek to correct a mistake or omission for a previous claim do not lose their entitlements for both claims;

•

provide for the payment of interest to clients on the underpaid amount of fuel grants which are paid or applied against debts as a result of an objection against a fuel grant assessment;

•

clarify that journeys between metropolitan areas and non-metropolitan areas are eligible in both directions;

•

substitute the existing collection and recovery rules in the DAFGSA 1999 with the standardised rules which apply to tax-related liabilities from 1 July 2000; and

•

exclude fuel used in stationary vehicles.

Detailed explanation of new law

Entitlement not lost where vehicle is de-registered

5.4 Section 6B of the DAFGSA 1999 provides that clients are not entitled to a fuel grant in respect of the use, during a grant period, of diesel fuel or alternative fuel in operating a particular vehicle unless registered for entitlement to fuel grants in respect of the vehicle when a claim for payment of the grant was made.

5.5 Section 8A of the DAFGSA 1999 provides for cancellation of registration. If a particular vehicle is cancelled in a claim period, the entity cannot claim for that vehicle. The current legislation does not allow the payment to an entity that is not registered in respect of a vehicle at the time a claim is made in respect of that vehicle. The problem would arise where an entity de-registers a vehicle or itself and then attempts to claim for the period within the grant period for which they were eligible. The claimant should not forfeit their entitlement as a result.

5.6 The entitlement provisions of the DAFGSA 1999 have been amended so that vehicles which satisfy the entitlement criteria for the grant for some part of a grant period, but which are not registered with the Scheme at the time of the claim being made (usually at the end of the grant period) would be eligible for payment for any part of that grant period. [Schedule 1, item 3, new section 6B]

Registration of additional vehicles

5.7 The registration provisions have been amended to accept the registration of additional vehicles at the same time that claims are made in respect of those or other vehicles. The ability to allow simultaneous registrations and claims reduces the number of potential interactions with the ATO, and is closer to the spirit of the Scheme. It also represents a more commonsense approach to situations where:

•

vehicles are added close to the end of a grant period;

•

registration details may not be known in advance (e.g. hire vehicles); and

•

individuals become aware of their entitlement after the commencement of the Scheme.

[Schedule 1, item 3, new section 6B]

Amending a claim

5.8 Under the existing entitlement provisions clients who seek to correct a mistake or omission from a previous claim lose their entitlements for both the original and the amended claim. Section 15(3) of the DAFGSA 1999 provides that a client cannot make more than one claim in respect of a grant period relating to the same type of fuel. Under section 15(3A) if the client contravenes section 15(3) in relation to a particular grant period, they are not entitled, and are taken never to have been entitled, to a fuel grant in respect of that grant period. The amendment will ensure that any client who seeks to correct a mistake will not be treated as if they were seeking to dishonestly manipulate the Scheme and will not lose their entitlement. [Schedule 1, item 9, new subsection 15(3AA)]

5.9 The client may request the Commissioner on the approved form to make an amended assessment and the Commissioner must comply with the request. [Schedule 1, item 11, new section 15EA]

Interest on underpayments

5.10 Interest will be paid to clients on the underpaid amount of fuel grants which are paid, or applied against debts, as a result of an objection against a fuel grant assessment. Part III (sections 9 to 12) of the Taxation (Interest on Overpayments and Early Payments) Act 1983 (T(IOEP)A 1983) provides for the payment of interest to a taxpayer on an amount of relevant tax, which is overpaid as a result of a decision to which that Act applies, in particular, as a result of a successful objection or appeal against, or review, of an assessment (and which is refunded or applied against another tax liability). Amendments are needed to confer an entitlement to interest, in the circumstances listed within the provisions of the DAFGSA 1999. Interest is to be calculated in accordance with section 10 of the T(IOEP)A 1983, from the day on which the original notice of assessment of the fuel grant was issued. [Schedule 1, item 12, new section 16B]

Journeys

5.11 Journeys between metropolitan areas and non-metropolitan areas are eligible in both directions. For a vehicle of 4.5 tonnes or more, but less than 20 tonnes, one of the requirements in section 10 of DAFGSA 1999 is that the fuel must be used, in carrying on an enterprise, in operating the vehicle on a public road in Australia on a journey between a point outside the metropolitan area and a point inside a metropolitan area. It was always the Government's intention that a journey from inside the metropolitan area to a point outside the metropolitan area is also eligible. This amendment clarifies and makes certain that position. [Schedule 1, item 4, new paragraph 10(2)(ba)]

Standardised rules for collection and recovery for tax-related liabilities

5.12 The amendments will promote consistency in the law governing the management of receivables by the ATO and remove the duplication of provisions in laws administered by the Commissioner of Taxation (Commissioner).

5.13 Standardised rules for the collection and recovery of tax-related liabilities that remain unpaid after they become due and payable were inserted in Schedule 1 of the TAA 1953 by the A New Tax System (Tax Administration) Act 1999. These rules consolidated and replaced the debt recovery provisions contained in various taxation laws.

5.14 The standardised rules were not applied to the Scheme at that time because amendments to the DAFGSA 1999 were being concurrently considered by Parliament. The amendments to the DAFGSA 1999 inserted specific provisions for the recovery of debts arising under the Scheme that duplicated provisions contained in other taxation laws.

5.15 The amendments to be made by this Bill will ensure that a common set of rules will apply to debts arising under the Scheme as they do to debts arising under other laws administered by the Commissioner. [Schedule 1, item 8, new subsection 14A(3) and items 12 to 16]

Only one grant for a particular use of fuel

5.16 A client may only claim an entitlement under one section in relation to the use of diesel fuel or alternative fuel. [Schedule 1, item 5, new section 10AE]

5.17 Subsection 10B of the DAFGSA 1999 provides a statutory formula for calculating the amount of fuel used in a vehicle that is eligible for a grant within a grant period.

5.18 An amendment to subsection 10B is required to ensure that fuel used to operate equipment while the vehicle is stationary (e.g. a mobile crane operating on a construction site) is deducted from the total quantity of fuel before applying the statutory formula. The deduction will only be necessary where the quantity of fuel used while the vehicle is stationary is more than 20% of the fuel used in the vehicle during a grant period. [Schedule 1, item 7A]

Chapter 6 - Amendment to the Taxation Administration Act 1953

Outline of Chapter

6.1 The proposed amendments in Schedule 2 to this Bill will make consequential amendments to Taxation Administration Act 1953 (TAA 1953) to introduce references to the Diesel and Alternative Fuels Grants Scheme Act 1999.

Detailed explanation of new law

6.2 Item 1 of Schedule 2 amends subsection 250-10(2) of the TAA 1953 to insert a reference to the Diesel and Alternative Fuels Grants Scheme Act 1999 into the definitions of 'amount of advance to be repaid' and 'amount payable as a result of an amended assessment'.

Index

Schedule 1: Amendment of the Diesel and Alternative Fuels Grants Scheme Act 1999