Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)Glossary
The following abbreviations and acronyms are used throughout this explanatory memorandum.
| Abbreviation | Definition |
| Customs Act | Customs Act 1901 |
| Excise Act | Excise Act 1901 |
| DFRS | Diesel Fuel Rebate Scheme |
General outline and financial impact
Diesel Fuel Rebate Scheme Amendment Bill 2002
This bill amends the Customs Act and the Excise Act to extend the DFRS to power generation by retail/hospitality businesses.
Date of effect: The amendments to be made by this bill will commence on 1 July 2002.
Proposal announced: The amendments give effect to a policy initiative announced by the Government during the 2001 federal election campaign.
Financial impact: The estimated cost of this measure is $20 million per year in a full financial year. The cost assumes no change in the volume of diesel used by eligible businesses as a result of the policy. This is because of the remoteness in location of many of these businesses and the difficulty of substituting away from other forms of energy supply. However, to the extent that substitution takes place, the cost estimates can vary.
Compliance cost impact: Businesses will need to retain records of the purchase and use of fuel to substantiate their rebate entitlements.
Chapter 1 - Extension of the Diesel Fuel Rebate Scheme
Amendment of the Customs Act
1.1 The amendment to insert paragraph 164(1)(ad) into the Customs Act extends the DFRS to retail and hospitality businesses in remote areas who generate electricity for their own use when there is no ready access to a commercial supply of electricity. [Schedule 1, Part 1, item 1]
1.2 To be eligible for a rebate the fuel must be used at premises where the retail or hospitality business is carried on. The fuel does not need to be used in the premises, but the use of the fuel must nevertheless be geographically proximate to the premises. The location of the plant using the fuel must be in sufficient proximity to the premises as to enable it to be identified with the premises. [Schedule 1, Part 1, item 1]
1.3 There is no requirement that the enterprise that generates the electricity has to be the sole user of the electricity. However rebate is only payable for the diesel fuel used to generate that portion of electricity that the enterprise itself actually uses. [Schedule 1, Part 1, item 1]
Example 1.1
South Seas Pty Ltd operates a tourist resort in a remote part of Western Australia that does not have ready access to a commercial supply of electricity. It uses diesel fuel to generate power for its own use in van sites, motel accommodation, a retail store and residential accommodation. It also provides power to nearby private residences and businesses who have no other access to electricity.
South Seas Pty Ltd is eligible for a rebate for diesel fuel used to generate electricity for its own business including the residential accommodation, as the principal purpose of its enterprise is the provision of hospitality services. Diesel fuel used in generating electricity for supply to the private residences and other businesses, however, is not eligible for a rebate as the electricity is not used by South Seas Pty Ltd. South Seas Pty Ltd can determine the amount of fuel eligible for a rebate by apportioning the total amount of fuel used in the generator on the basis of the amount of electricity generated for use in its enterprise, compared to the total amount of electricity generated.
1.4 The amendment does not extend to businesses with ready access to a commercial supply of electricity who generate their own power or who operate an emergency backup generator. A business would be regarded as having ready access if a commercial supply of electricity was present or convenient to the business and immediately available for connection. [Schedule 1, Part 1, item 1]
1.5 The electricity has to be used in the course of carrying on an enterprise whose principal purpose is the retail sale of goods or services or the provision of hospitality. Rebate is not payable to an enterprise for the generation of electricity for supply to retail and hospitality businesses. [Schedule 1, Part 1, item 1]
Example 1.2
ABC Corporationoperates a diesel generator to generate electricity in a small remote township in South Australia. ABC Corporation supplies electricity to the residents and businesses in the township, including various retail and hospitality businesses, on a commercial basis.
ABC Corporation is able to determine by apportionment the amount of diesel used to generate the electricity it provides to the retail and hospitality businesses. ABC Corporation, however, is not eligible for a rebate for the diesel fuel used to generate the electricity it provides to the various retail and hospitality businesses as the electricity is not used by ABC Corporation in the course of carrying on a retail and hospitality enterprise. The various retail and hospitality businesses are not eligible for a rebate as they have not purchased the fuel and used it to generate the electricity in the course of carrying out their various enterprises.
1.6 The amendment to subsection 164(4C) allows for a rebate under subsection 164(1) for the generation of electricity by an enterprise for retail or hospitality purposes to be payable at the same rate as if the diesel fuel had been used in primary production. [Schedule 1, Part 1, item 2]
1.7 The amendment inserts a definition for retail sale in subsection 164(7). This definition excludes enterprises whose principal purpose is the generation of electricity from falling within the meaning of an enterprise, under paragraph 164(1)(ad), that has as its principle purpose the retail sale of goods and services. [Schedule 1, Part 1, item 3]
1.8 The amendment to subsection 164AC(5) extends the restriction on the power of an authorised officer to examine premises, under paragraph 164AC(2)(e), to include those premises specified in paragraph 164(1)(ad). An authorised officer can examine the residential areas of premises prescribed in paragraph 164(1)(ad) only if the rebate application relates to fuel purchased for use at those premises and the occupant of the premises consents. [Schedule 1, Part 1, item 4]
1.9 The amendment will apply only to diesel fuel that is purchased on or after 1 July 2002. [Schedule 1, Part 1, item 5]
Amendment of the Excise Act
1.10 The amendment to insert paragraph 78A(1)(ad) into the Excise Act extends the DFRS to retail and hospitality businesses who generate electricity for their own use where there is no ready access to a commercial supply of electricity. [Schedule 1, Part 2, item 6]
1.11 To be eligible for a rebate the fuel must be used at premises where the retail or hospitality business is carried on. The fuel does not need to be used at the premises, but the use of the fuel must nevertheless be geographically proximate to the premises. The location of the plant using the fuel must be in sufficient proximity to the premises as to enable it to be identified with the premises. [Schedule 1, Part 2, item 6]
1.12 There is no requirement that the enterprise that generates the electricity has to be the sole user of the electricity. However rebate is only payable for the diesel fuel used to generate that portion of electricity that the enterprise itself actually uses. [Schedule 1, Part 2, item 6]
Example 1.3
South Seas Pty Ltd operates a tourist resort in a remote part of Western Australia that does not have ready access to a commercial supply of electricity. It uses diesel fuel to generate power for its own use in van sites, motel accommodation, a retail store and residential accommodation. It also provides power to nearby private residences and businesses who have no other access to electricity.
South Seas Pty Ltd is eligible for a rebate for diesel fuel used to generate electricity for its own business including the residential accommodation, as the principal purpose of its enterprise is the provision of hospitality services. Diesel fuel used in generating electricity for supply to the private residences and other businesses, however, is not eligible for a rebate as the electricity is not used by South Seas Pty Ltd. South Seas Pty Ltd can determine the amount of fuel eligible for a rebate by apportioning the total amount of fuel used in the generator on the basis of the amount of electricity generated for use in its enterprise, compared to the total amount of electricity generated.
1.13 The amendment does not extend to businesses with ready access to a commercial supply of electricity who generate their own power or who operate an emergency backup generator. A business would be regarded as having ready access if a commercial supply of electricity was present or convenient to the business and immediately available for connection. [Schedule 1, Part 2, item 6]
1.14 The electricity has to be used in the course of carrying on an enterprise whose principal purpose is the retail sale of goods or services or the provision of hospitality. Rebate is not payable to an enterprise for the generation of electricity for supply to retail and hospitality businesses. [Schedule 1, Part 2, item 6]
Example 1.4
ABC Corporationoperates a diesel generator to generate electricity in a small remote township in South Australia. ABC Corporation supplies electricity to the residents and businesses in the township, including various retail and hospitality businesses, on a commercial basis.
ABC Corporation is able to determine by apportionment the amount of diesel used to generate the electricity it provides to the retail and hospitality businesses. ABC Corporation, however, is not eligible for a rebate for the diesel fuel used to generate the electricity it provides to the various retail and hospitality businesses as the electricity is not used by ABC Corporation in the course of carrying on a retail and hospitality enterprise. The various retail and hospitality businesses are not eligible for a rebate as they have not purchased the fuel and used it to generate the electricity in the course of carrying out their various enterprises.
1.15 The amendment to subsection 78A(4C) allows for a rebate under subsection 78A(1) for the generation of electricity by an enterprise for retail or hospitality purposes to be payable at the same rate as if the diesel fuel had been used in primary production. [Schedule 1, Part 2, item 7]
1.16 The amendment inserts retail sale in subsection 78A(7) to have the same meaning as in section 164 of the Customs Act 1901. [Schedule 1, Part 2, item 8]
1.17 The amendment to subsection 78AD(5) extends the restriction on the power of an authorised officer to examine premises, under paragraph 78AD(2)(e), to include those premises specified in paragraph 78A(1)(ad). An authorised officer can examine the residential areas of premises prescribed in paragraph 78A(1)(ad) only if the rebate application relates to fuel purchased for use at those premises and the occupant of the premises consents. [Schedule 1, Part 1, item 9]
1.18 The amendment will apply only to diesel fuel that is purchased on or after 1 July 2002. [Schedule 1, Part 2, item 10]