House of Representatives

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.

General outline and financial impact

Energy Grants (Credits) Scheme

The Energy Grants (Credits) Scheme Bill 2003 replaces the DFRS and the DAFGS entitlement provisions with a single entitlement called the EG(C)S to commence on 1 July 2003.

The EG(C)S will maintain entitlements equivalent to those currently available under the DFRS administered under the Customs Act 1901 and the Excise Act 1901, and the DAFGS administered under the Diesel and Alternative Fuels Grants Scheme Act 1999.

The PGBAA will provide the administrative and compliance framework for the EG(C)S.

New provisions in the PGBAA allow the Commissioner to provide public and private rulings in respect of grants and benefits.

Under the PGBAA, claimants will be responsible for correctly self-assessing their entitlements and maintaining records to substantiate their entitlements.

This bill establishes the EG(C)S by:

•

replicating the existing entitlement provisions in the Diesel and Alternative Fuels Grants Scheme Act 1999, the Customs Act 1901 and the Excise Act 1901 to create an on-road credit and an off-road credit;

•

making minor amendments to the eligibility criteria for the existing schemes to clarify the Government's position on certain activities;

•

addressing current administrative inconsistencies between the 2 schemes. These include:

-

adopting a prospective entitlement point;

-

having a common provision for calculating entitlements;

-

applying entitlements to a credit to fuel that is purchased or imported into Australia; and

-

removing differences in determining the rebate/grant rate applicable to a claim; and

•

the inclusion under the EG(C)S of certain activities currently eligible for a remission, refund or rebate under the Customs Regulations 1926 and the Excise Regulations 1925.

Consequential Amendments

The Energy Grants (Credits) Scheme (Consequential Amendments) Bill 2003 amends or repeals certain Acts as a consequence of the implementation of the EG(C)S.

Consequential amendments are made to:

•

the PGBAA;

•

the Diesel and Alternative Fuels Grants Scheme Act 1999;

•

the Customs Act 1901;

•

the Excise Act 1901;

•

the TAA 1953;

•

A New Tax System (Australian Business Number) Act 1999; and

•

the ITAA 1936.

This bill:

•

brings the EG(C)S under the administration of the PGBAA to align it with the compliance and administrative framework of the other grant programs administered by the ATO;

•

updates the PGBAA provisions to address certain administrative issues that have been identified as a result of the ATO's experience in administering the schemes;

•

repeals the DFRS provisions contained in the Customs Act 1901, the Excise Act 1901 and the DAFGS provisions in the Diesel and Alternative Fuels Grants Scheme Act 1999;

•

provides transitional arrangements to allow for ongoing compliance activity for claims made under the DFRS and DAFGS. It also provides for the claiming of entitlements for fuel purchased before 1 July 2003;

•

amends the TAA 1953 to reflect the repeal of the Diesel and Alternative Fuels Grants Scheme Act 1999 and the new arrangements for administration of the EG(C)S under the PGBAA. Amendments are also made to Part IVAAA and Part IVAA of the TAA 1953 to bring the PGBAA within the scope of the public and private rulings regime in the TAA 1953; and

•

makes minor, ancillary amendments to the A New Tax System (Australian Business Number) Act 1999 and the ITAA 1936.

Date of effect: The EG(C)S will commence on 1 July 2003.

Proposal announced: These bills give effect to an announcement made by the Prime Minister on 28 May 1999 under Measures for a Better Environment to introduce an EG(C)S to replace the DFRS and DAFGS.

Financial impact: Amendments to the point of entitlement for the on-road credit and to the eligibility criteria to clarify the Government's position on certain activities under the EG(C)S will cost $19 million in the 2003-2004 financial year, $4 million in the 2004-2005 financial year, $5 million in the 2005-2006 financial year and $5 million in the 2006-2007 financial year.

Compliance cost impact: The amendments will reduce administrative complexity and compliance costs for claimants by replacing the dual compliance and administrative arrangements that exist under the DFRS and DAFGS with the single compliance and administrative framework of the PGBAA.

Chapter 1 - Interpretation

Outline of chapter

1.1 This chapter explains Part 2 of the Energy Grants (Credits) Scheme Bill 2003 that provides definitions for terms used generally in the bill, used only in relation to on-road credits, and used only in relation to off-road credits.

Detailed explanation of new law

Division 1 - List of definitions

1.2 Important terms used in the bill are listed and in some cases defined in Division 1. Terms that have application to the scheme in general are defined in clause 4 of the bill, while those listed but which are only applicable to either on-road or off-road credits are defined in Divisions 2 and 3 respectively (see Table 1.1).

1.3 A number of terms (listed in Table 1.2) have simply been transferred from the existing DAFGS and DFRS legislation (with minor modifications to allow for their operation in a scheme consisting of both on-road and off-road credits). Other terms have been expanded and new terms have been added to provide more clarity for claimants than was the case in the previous schemes.

1.4 Table 1.1 contains the terms listed in clause 4 that are defined in divisions other than Division 1.

1.5 Table 1.2 contains the terms that have been transferred with little or no change from the DAFGS and DFRS legislation.

1.6 The definition of gross vehicle mass has been altered from that which appears in the existing DAFGS legislation to account for the fact that there are situations where the gross vehicle mass of a vehicle, or gross combination mass of a prime mover, has not been specified by the manufacturer, or where the vehicle has been modified to the extent that the manufacturer's specifications are no longer appropriate. In these situations, the vehicle registration authority determines an appropriate gross vehicle mass or gross combination mass as the case may be. The existing DAFGS definitions do not allow for this possibility and merely rely on the manufacturer's specification.

1.7 The definition now comes in 2 parts, depending on whether the vehicle is registered for use on a public road or not. If it is registered, the gross vehicle mass (or gross combination mass for a prime mover) is that accepted by the authority that registered the vehicle, whether this is a State authority or the vehicle is registered under the Federal Interstate Registration Scheme. If it is not registered, the gross vehicle mass (or gross combination mass for a prime mover) is the road weight specified by the manufacturer as the maximum design weight of the vehicle, or in the absence of such a specification, the sum of the weight of the vehicle and the weight of the maximum load for which the vehicle is designed (including the weight of the driver and a full tank of fuel). [Clause 4]

1.8 Registered vehicle is defined to mean a vehicle registered for use on public roads. [Clause 4]

1.9 Road vehicle is defined to mean a vehicle of a kind ordinarily used on roads for transporting goods or passengers. [Clause 4]

Division 2 - Definitions used only for on-road credits

1.10 The metropolitan areas specified for the on-road credit are the same as those that apply for the DAFGS. Journeys undertaken by vehicles between 4.5 and 20 tonnes wholly within these areas will not qualify for the credit, unless undertaken by a primary producer, by a person carrying goods or passengers solely on behalf of a primary producer, by a bus using alternative fuel, or by an emergency vehicle. The actual area covered by each of the metropolitan areas will be detailed in the regulations to be prescribed. [Clause 6]

1.11 The definition of primary production business from the Diesel and Alternative Fuels Grants Scheme Act 1999 will apply for the on-road credit - it will be taken to have the same meaning as in the ITAA 1997. [Clause 7]

1.12 The Commissioner's powers under the Diesel and Alternative Fuels Grants Scheme Act 1999 to make a determination in writing as to the kinds of operations a vehicle undertakes between 2 points will be taken to be an eligible journey, and those that are not taken to be an eligible journey, has been retained for the on-road credit. A determination under this section will generally relate to the operations of vehicles of 4.5 tonnes or more, but less than 20 tonnes, that cross the metropolitan boundaries. [Clause 9]

1.13 The new term incidental use in relation to a vehicle has been introduced to extend entitlements to cover the incidental use of fuel in a vehicle. Incidental use covers certain circumstances where fuel is used in powering the vehicle, or auxiliary equipment in or on the vehicle, while the vehicle is stationary, or in moving the vehicle to or from a place where passengers or goods are loaded or unloaded. It also covers the use of the vehicle to train vehicle operators. [Clause 8]

Division 3 - Definitions used only for off-road credits

Subdivision B - Mining

1.14 For the off-road credit, mining operations means certain activities ranging from the exploration and prospecting for minerals to the recovery of minerals, including activities that fall within the definitions of the new terms listed in 1.15. [Clause 11]

1.15 The activities that fall within the definition of mining operations for the off-road credit are essentially the same (except for minor changes) as those activities that were eligible for a diesel fuel rebate for mining operations under the Customs Act 1901. The changes involve the deletion of references to transportation by sea and the deletion of the definitions of 'northern mining operations' and 'ship' (which are definitions for the purposes of transportation by sea) as this activity now qualifies under the definition of 'use in marine transport'. [Clause 11]

1.16 The mining operations definition has been drafted so as to provide greater certainty and clarity in comparison with the DFRS definition, by introducing the terms 'mining transport activity', 'mining rehabilitation activity', 'mining water activity', 'mining construction activity', 'mining waste activity', 'mining vehicle activity' and 'sundry mining activity'.

1.17 These terms are essentially headings for groupings of similar eligible activities from the definition of mining activities in the Customs Act 1901, collectively covering paragraphs (c) to (w) of the DFRS definition, and are defined by reference to the particular activities included in each. The introduction of this change is simply to make the reading and interpretation of the definition easier - that is to say the Government's intention is that the scope of activities included in mining operations will be the same for the off-road credit as it is for the DFRS. [Clause 11]

1.18 Operations for the recovery of a mineral will continue to be taken to have ceased when the process of beneficiation ceases. In the absence of a beneficiation process, they will be taken to have ceased when the mineral or ore is first stored or stockpiled at the place where the mining occurs, or where this does not apply, when they are removed from the ore body or deposit. [Clause 11]

1.19 As in paragraphs (x), (y) and (z) of the DFRS mining operations definition in subsection 164(7) of the Customs Act 1901, mining operations for the off-road credit will not include certain quarrying or dredging activities, the use of vehicles under 3.5 tonnes that are not extensively modified for use underground, and transport activities other than those included in the definitions of mining transport activity, mining water activity, and mining waste activity. [Clause 11]

1.20 The DFRS definition for the term minerals will continue to apply unchanged for the off-road credit. It continues to mean minerals in any form, whether solid, liquid or gaseous and whether organic or inorganic. As for the DFRS, certain substances continue to be excluded from the definition - these are sand, sandstone, soil, slate, clay (other than bentonite or kaolin), basalt, granite, gravel, water and limestone (other than agricultural use limestone).

Subdivision C - Primary production

1.21 The definition of primary production for the off-road credit will be the same as that which applied for the DFRS. It means agriculture, fishing operations, or forestry. [Clause 21]

Agriculture

1.22 For the off-road credit, agriculture means:

•

the cultivation of the soil;

•

the cultivation or gathering in of crops;

•

the rearing of live-stock;

•

viticulture;

•

horticulture;

•

pasturage; or

•

apiculture,

including activities that fall within the definitions of the terms listed in paragraph 1.23. [Clause 22]

1.23 The activities that fall within the definition of agriculture for the off-road credit are the same as those that were eligible for a diesel fuel rebate for agriculture under the Customs Act 1901. The definition, as with the definition of mining operations, has been drafted so as to provide greater certainty and clarity in comparison with the DFRS definition, by introducing the terms 'live-stock activity', 'agricultural soil/water activity', 'agricultural construction activity', 'agricultural waste activity' and 'sundry agricultural activity'.

1.24 In the same manner as in the mining operations definition, these terms are essentially headings for groupings of similar eligible activities from the definition of agricultural activities in the Customs Act 1901, collectively covering paragraphs (e) to (zba) of the DFRS definition, and are defined by reference to the particular activities included in each. Again, the introduction of this change is simply to make the reading and interpretation of the definition easier - that is to say the Government's intention is that the scope of activities included in agriculture will be the same for the off-road credit as for the DFRS. [Clause 22]

1.25 Fishing operations and forestry will continue to be considered separately from agriculture for the off-road credit, and the requirement that to be included in the definition of agriculture, any activity referred to in the definition must be carried out for the purposes of a business undertaken to obtain produce for sale, or purposes that will directly benefit such a business, will be maintained. [Clause 22]

1.26 The expression live-stock includes any animal reared for the production of food, fibres, skins, furs or feathers, or for its use in the farming of land, which is the same as the DFRS definition. [Clause 23]

1.27 Agricultural activity means an activity referred to in any of the paragraphs of the definition of agriculture (other than in hunting and trapping, or use at residential premises in generating electricity, under the 'sundry agricultural activity' heading), provided they are carried out for the purposes of, or for purposes that will directly benefit, a business undertaken to obtain produce for sale. This definition is the same as for the DFRS. [Clause 28]

1.28 The position of subcontractors in relation to certain operations referred to in the definitions of live-stock activity, agricultural soil/water activity, agricultural construction activity, and sundry agricultural activity is clarified at subclause 28(2). It provides that these operations are included in the definition of agricultural activity when carried out by a subcontractor of the person contracted to carry out the activity.

[Clause 28]

1.29 Agricultural use limestone, as in the DFRS, means limestone for use in the de-acidification of soil in any agricultural activity, other than for the purpose of soil or water conservation on an agricultural property where a core agricultural activity is carried on. [Clause 29]

1.30 The expression approved catchment area has the same meaning as in the DFRS. It means an area in respect of which a soil or water conservation plan has been adopted by, or soil and water conservation agreement made between, the persons who carry on a core agricultural activity within that area. [Clause 30]

1.31 Core agricultural activity means an activity undertaken in the cultivation of the soil, the cultivation or the gathering in of crops, the rearing of livestock, or in viticulture, horticulture, pasturage or apiculture (paragraphs (a), (b), (c) and (d) of the definition of agriculture in subclause 22(1)), if that activity is carried out for the purposes of, or for purposes that will directly benefit, a business undertaken to obtain produce for sale. This definition is the same as for the DFRS. [Clause 31]

1.32 Earthworks, as in the DFRS, means the forming or maintenance of levee banks or windbreaks; contour banking; or land levelling and land grading. [Clause 32]

1.33 Horticulture retains the same meaning as in the DFRS, which includes:

•

the cultivation or gathering in of fruit, vegetables, herbs, edible fungi, nuts, flowers, trees, shrubs or plants;

•

the propagation of tress, shrubs or plants; or

•

the production of seeds, bulbs, corms, tubers or rhizomes.

[Clause 33]

Fishing operations

1.34 The definition of fishing operations is largely the same as that appearing in the Customs Act 1901 for the DFRS, with the exception that a paragraph has been included in order to clarify the eligibility of construction activities undertaken for the purpose of containing fish to be farmed. Unlike the provisions relating to mining, the agriculture provisions in the Customs Act 1901 are silent as to whether diesel fuel used in the construction of ponds, tanks and the like that will be used to contain fish in a farm, is eligible for the rebate.

1.35 The introduction of provisions confirming the eligibility of the construction of ponds, tanks, and other structures to contain the fish to be farmed, will provide certainty for claimants and assurance to the ATO in its administration of the scheme. Except for this change which is to address a technical anomaly in the previous legislation, it is the Government's intention that the scope of activities including in fishing operations will be the same for the off-road credit as for the DFRS.

[Clause 34]

1.36 In addition to such construction activities, the following activities continue to be included in the definition of fishing operations:

•

the taking, catching, or capturing of fish;

•

the farming of fish;

•

the processing of fish on board vessels;

•

pearling operations;

•

the operation of a dedicated mother vessel in connection with the preceding activities; or

•

voyages to or from a port for the purposes of, or trials in connection with, refitting or repairing the vessel or its equipment for purposes integral to the performance of any of the preceding activities.

None of these activities are included if they are conducted otherwise than for the purposes of a business, or for business purposes connected with recreation, sport or tourism. [Clause 34]

1.37 The terms pearling operations and processing, associated with the fishing operations definition, also continue to have the same meaning as in the DFRS. The definition of the term fish has been expanded to include other freshwater resources, in the same way as other resources of the sea or sea-bed are included in the DFRS definition. Fish means freshwater or salt-water fish, and includes:

•

turtles;

•

dugong;

•

crustacea;

•

molluscs; or

•

any other living resources, whether of the sea or of the sea-bed or of freshwater or the bed below freshwater.

Pearling operations means:

•

the taking of pearl shell;

•

the culture of pearls or pearl shell; and

•

includes the taking or capturing of trochus, beche-de-mer or green snails.

Processing means:

•

the cutting up, dismembering, cleaning, sorting or packing of fish;

•

the preserving or preparing of fish; or

•

the production of any substance or article from fish.

[Clause 34]

Forestry

1.38 The expression forestry means the planting or tending of trees intended for felling, or the thinning or felling of standing timber, in a forest or plantation. It specifically includes:

•

the transporting, milling or processing of timber felled in a forest or plantation, in that forest or plantation;

•

the milling of timber at a sawmill or chipmill not situated in the forest or plantation where the timber was felled; and

•

where it is milled at a sawmill or chipmill situated in the forest or plantation where the timber was felled - the transportation of the timber to the mill.

Also included is the making and maintaining, in a forest or plantation, of a road integral to the activities of forestry conducted within that forest or plantation. This is the same definition as is contained in the Customs Act 1901 for the DFRS. [Clause 35]

Subdivision D - Use in marine transport and rail transport

1.39 Marine transport in the DFRS is defined in the Customs Act 1901 to include transport by vessels in or on fresh water, but does not include any transport relating to forestry. The ATO has released administrative guidelines on which activities are eligible for a rebate under the marine transport category, but as there is no further clarification of the meaning in the Customs Act 1901, there has continued to be uncertainty surrounding which activities are actually eligible.

1.40 The situation for rail transport in the DFRS is largely the same as that described in paragraph 1.39 for marine transport.

1.41 In order to remove this uncertainty and align the current administration of the marine transport and rail transport categories with the legislation, the new expressions 'use in marine transport' and 'use in rail transport' have been introduced into the EG(C)S, so as to set out clearly in the legislation which activities in these categories will qualify for the off-road credit.

1.42 For the purposes of the off-road credit, use in marine transport is use in a vessel in marine transport. [Clause 36]

1.43 The term is further defined to include use in a vessel in marine transport for any of the following purposes:

•

loading anything onto, or enabling persons to board, the vessel for transport by it;

•

unloading anything, or enabling persons to disembark, from the vessel after being transported by it;

•

providing towing, mooring or piloting services;

•

providing rescue, firefighting or other emergency services;

•

exploring for, or mining, oil, gas or other minerals;

•

conducting trials of the vessel;

•

conducting aquatic or other scientific research; or

•

hiring out or chartering of a vessel by a tourism business for use in fishing or other recreational activities.

[Clause 36]

1.44 In addition, use on the forward journey of a vessel for the purpose of using the vessel in marine transport or any of the purposes specified in paragraph 1.43, or the return journey after any such use; or on a journey for transporting the vessel to or from a purchaser, seller or person undertaking repairs or improvements to, or maintenance of, the vessel, is also use in marine transport. [Clause 36]

1.45 Finally, use for air-conditioning, heating, lighting, or for any purpose incidental to use of the vessel in marine transport or the purposes discussed in paragraphs 1.43 and 1.44 is also use in marine transport. However, use in a dredge, or in equipment used in or on a dredge is not included. [Clause 36]

1.46 As for the DFRS, the expression marine transport includes transport in or on fresh water for the off-road credit. [Clause 37]

1.47 The definition of use in rail transport is set out in the Energy Grants (Credits) Scheme Bill 2003 in much the same format as that of use in marine transport. It is defined generally to mean that use in a rail vehicle in rail transport or light rail transport is use in rail transport. [Clause 38]

1.48 The term is further defined to include use in a rail vehicle, or in equipment in or on a rail vehicle, for any of the following purposes:

•

loading anything onto, or enabling persons to board, the rail vehicle for transport by it;

•

unloading anything, or enabling persons to disembark, from the rail vehicle after being transported by it;

•

repairing or maintaining rails;

•

observing the condition of rails;

•

reducing fire hazards on or adjacent to rails;

•

rescuing or recovering derailed rail vehicles or carriages or other parts of rail vehicles; or

•

any purpose in connection with using the vehicle in rail transport, or in any of the previously listed purposes.

[Clause 38]

1.49 In addition, use on the forward journey of a rail vehicle for the purpose of rail transport, or any but the last of the purposes listed in paragraph 1.48, or its return journey after any such use, is also use in rail transport. [Clause 38]

1.50 Finally, use for air-conditioning, heating, lighting, or for any purpose incidental to use of the rail vehicle in rail transport or the purposes discussed in paragraphs 1.48 (except the final purpose) and 1.49 is also use in rail transport. [Clause 38]

1.51 The term rail vehicle is defined to mean a train, tram or any other vehicle operating on rails. [Clause 39]

Chapter 2 - Entitlement to credits and grants

Outline of chapter

2.1 This chapter explains Parts 3, 4 and 5 of the Energy Grants (Credits) Scheme Bill 2003, which determine entitlement to on-road credits, off-road credits and energy grants.

Detailed explanation of new law

Entitlement to on-road credits

2.2 Part 3 of the Energy Grants (Credits) Scheme Bill 2003 reproduces the entitlement provisions from the Diesel and Alternative Fuels Grants Scheme Act 1999 for the purposes of the new scheme. Except for the changes discussed in paragraphs 2.3 to 2.12, the Government's intention is that the scope of the on-road credit will be the same as that of the DAFGS.

2.3 Claimants will be required to register before they are entitled to claim an on-road credit, however if they submit a claim on or after the day they apply for registration, but prior to being registered, the claim will be taken to have been made just after being registered. [Clause 41]

2.4 The major change to entitlement for an on-road credit in comparison with the DAFGS is that it will become prospective - that is claimants will be able to make a claim for an on-road credit in relation to fuel they have purchased or imported into Australia, that they propose to use in an eligible activity, but which may not yet have been used. Currently under the DAFGS the fuel must have been used before a claim for the on-road grant can be made. This will align the on-road credit with the situation as it currently stands for the DFRS, which will continue under the off-road credit. [Clauses 42 to 47]

2.5 The provisions that relate to the eligible vehicle types and purposes remain much the same as under the DAFGS. Different rules will continue to apply to vehicles of 20 tonnes or more, and those over 4.5 tonnes but less than 20 tonnes, with the general rule being that vehicles weighing 20 tonnes or more are eligible for an on-road credit for operation on any road in Australia, but vehicles between 4.5 and 20 tonnes must be for transporting goods or passengers and are generally not eligible for operations wholly within designated metropolitan areas. [Clauses 42 and 43]

2.6 The metropolitan areas restriction will continue not to apply to vehicles of 4.5 tonnes or more, but less than 20 tonnes that are:

•

operated by primary producers;

•

used for transporting goods or passengers solely on behalf of primary producers; or

•

buses using alternative fuel.

Emergency vehicles of 4.5 tonnes or more will continue to be eligible for all operations in Australia. [Clauses 44 to 47]

2.7 The concept of 'incidental use' has been introduced for all vehicles regardless of their weight, in recognition of the fact that there are incidental uses of fuel while the vehicle is stationary (e.g. in loading or unloading goods or passengers, turning the agitator on a cement truck, or where the vehicle is being moved off-road) that are considered integral to normal transport operations. In the past, these activities have generally been ineligible to receive a grant where the stationary use was more than 20% of total fuel use in a grant period, under the stationary use provisions of the DAFGS Regulations. [Clauses 42 to 46]

2.8 The stationary use provisions in DAFGS were developed to counter the situation where vehicles over 20 tonnes could arrive at a location, remain on a public road and commence operations unrelated to the movement or transport operations of the vehicle (e.g. stationary construction activities such as in operating a crane) which would otherwise all qualify for the grant. In order to ensure these activities do not qualify for a credit, a requirement has been introduced that vehicles of 20 tonnes or more must be for transporting goods or passengers in order to be eligible for an on-road credit for all of their operations. If a vehicle is not for transporting goods or passengers (e.g. special purpose vehicles such as mobile cranes), it will only be eligible for the movement to or from the place where it is to be, or has been used. [Clause 42]

2.9 The requirement under DAFGS that activities be conducted on a public road for them to be eligible has been removed for the on-road credit. The construction of the DAFGS public road definition precluded certain activities that were part of normal transport operations, such as those conducted on private access roads to mine sites and primary production properties, to transport depots and in the depots themselves, from being eligible for an on-road grant. This situation will be rectified in the on-road credit by removing the public road definition, and instead allowing that transport operations on any road will be eligible, provided they are conducted by a vehicle registered for use on a public road.

2.10 The eligibility of subcontractors transporting goods or passengers on behalf of primary producers is clarified in subclause 45(3). It provides that a person is carrying goods or passengers on behalf of a primary producer if they are a subcontractor of a person contracted by the primary producer to carry the goods or passengers. [Clause 45]

2.11 A claimant will only be entitled to an on-road credit under one of the categories discussed above, even if they are eligible under more than one category. If that is the case, they will be able to choose the category under which they are entitled. [Clause 48]

2.12 A claimant will not be entitled, and will be taken to never have been entitled, to an on-credit for fuel they purchased or imported for a particular use if they:

•

use it for some other purpose (unless that purpose is also eligible for the same amount of grant);

•

sell or otherwise dispose of it; or

•

lose it.

This provision is necessary due to the change to prospective entitlement for the on-road credit, and reproduces the current arrangement in the DFRS. [Clause 49]

2.13 Finally, a claimant will not be entitled to an on-road credit in respect of on-road diesel or alternative fuel if they are entitled to an off-road credit for the fuel under Part 4. [Clause 50]

Entitlement to off-road credits

2.14 Part 4 of the Energy Grants (Credits) Scheme Bill 2003 reproduces the entitlement provisions for the DFRS from the Customs Act 1901 and the Excise Act 1901 for the purposes of the new scheme. The provisions have been re-drafted to allow for the inclusion of benefits similar to those of the DFRS that are currently administered under the Customs Regulations 1926 and Excise Regulations 1926. Except for the changes discussed below, the Government's intention is that the scope of the off-road credit will be the same as that of the DFRS.

2.15 Claimants will be required to register before they are entitled to an off-road credit, however if they submit a claim on or after the day they apply for registration, but prior to being registered, the claim will be taken to have been made just after being registered. [Clause 52]

2.16 The entitlement provisions from the DFRS have been re-framed to ensure that a person is entitled to an off-road credit if they purchase or import into Australia off-road diesel fuel for their own use in a use that qualifies. Use in the existing DFRS categories of:

•

mining operations;

•

primary production;

•

rail transport;

•

marine transport;

•

electricity generation in an off-grid retail or hospitality business;

•

electricity generation at residential premises;

•

hospitals and nursing homes; and

•

homes for aged persons, which are reproduced without change,

continue to qualify for an off-road credit. [Clause 53]

2.17 In addition, eligibility categories will be included under the off-road credit that are equivalent to certain off-road uses of diesel fuel currently eligible for a remission, refund or rebate of duty under the Customs Regulations 1926 and Excise Regulations 1925. Benefits for these uses are more appropriately administered under a grants program, and their inclusion will allow for a migration of entities accessing benefits through these means to a grants based mechanism, underpinned by the compliance and administrative framework of the PGBAA.

2.18 The newly included categories include certain uses in the industrial processes for the production of:

•

elemental nickel and cobalt;

•

refining of bauxite into alumina; or

•

in the manufacture of explosives,

as qualifying uses for the off-road credit.

2.19 Also included will be use of off-road diesel fuel, other than as fuel, where the use is:

•

as a solvent;

•

as a mould release agent; or

•

in road construction other than as a fuel.

2.20 The provision will also exist to allow other eligible uses to be specified in the regulations.

2.21 In addition, certain uses of off-road diesel fuel where the use is as a fuel not in an internal combustion engine will be included. [Clause 53]

2.22 A claimant will only be entitled to an off-road credit under one of the categories discussed above, even if they are eligible under more than one category. If that is the case, they will be able to choose the category under which they are entitled. [Clause 54]

2.23 A claimant will not be entitled, and will be taken to never have been entitled, to an off-road credit for fuel they purchased or imported for a particular use if they:

•

use it for some other purpose (unless that purpose is also eligible);

•

sell or otherwise dispose of it; or

•

lose it.

This provision reproduces the current arrangement in the DFRS. [Clause 55]

Entitlement to energy grant

2.24 The provisions in Part 5 of the Energy Grants (Credits) Scheme Bill 2003 specify that if a claimant is entitled to an on-road or off-road credit, they are entitled to an energy grant [Clause 56]. The entitlement to a grant is largely determined through a self-assessment process by the claimant. Part 5 sets out the ways in which the amount of the energy grant will be calculated [Clause 57]. If a claimant is uncertain as to whether they are entitled to an energy grant, they may apply for a private ruling.

2.25 The basic rule for working out the amount of the energy grant will be the number of whole litres (or whole cubic metres if the fuel is a gas) of the fuel to which the on-road or off-road credit relates, multiplied by the amount per litre (or cubic metre) specified in, or worked out in accordance with the regulations to be prescribed. [Clause 57]

2.26 The regulations will be able to set out different amounts of grant per litre (or cubic metre) for different types of fuels or different proposed uses, including that the amount of grant is nil, and how the grant is to be calculated if the regulations set out different amounts. [Clause 57]

2.27 In relation to the use of the fuel, if a claimant's actual use of the fuel differs from the proposed use, the actual use will be treated as if it was the proposed use. The regulations will be able to prescribe methods for working out the quantity of fuel that the claimant proposes to, or actually uses, and these methods will be able to differ according to various criteria such as the quantity of fuel purchased, the type of fuel, or the user's patterns of fuel usage. This will allow the claimant scope to determine the type of record keeping method, and method of claiming, that is most appropriate to their circumstances. [Clause 57]

2.28 In certain circumstances, a person may be entitled to a drawback, refund, rebate or remission of duty under the Customs Regulations 1926 or the Excise Regulations 1925, on diesel fuel for which they also qualify for an off-road credit. Where this is the case, the amount of off-road credit payable will be reduced by the amount of any drawback, refund, rebate, or remission of duty paid to the person. [Clause 57]

Chapter 3 - Consequential amendments

Outline of chapter

3.1 This chapter explains the consequential amendments to the Product Grants and Benefits Administration Act 2000, the Diesel and Alternative Fuels Grants Scheme Act 1999, the Customs Act 1901, the Excise Act 1901, the TAA 1953, the A New Tax System (Australian Business Number) Act 1999 and the ITAA 1936 made by Schedules 1 to 6 to the Energy Grants (Credits) Scheme (Consequential Amendments) Bill 2003.

3.2 This chapter also explains the transitional arrangements applying to the EG(C)S.

THE AMENDMENT OF THE PGBAA

Context of amendments

3.3 These amendments make changes to the PGBAA to accommodate the prospective nature of the EG(C)S and to incorporate some of the administrative and compliance features of the DFRS and DAFGS. The amendments also provide for the seamless transition of existing DFRS and DAFGS claimants to the new administrative framework.

3.4 The amendments also provide for the application of the public and private rulings provisions in the TAA 1953 to grants and benefits administered under the PGBAA.

Detailed explanation of new law

Registration for grants and benefits

3.5 Under the new arrangements an approved form of application for registration is application by telephone. A telephone signature within the meaning of subsection 388-75(4) of Schedule 1 to the TAA 1953 does not have to be provided when applying for registration for entitlement to a specific grant or benefit. [Schedule 1, items 4 and 5]

3.6 Registration is a prerequisite for the claiming of a grant or benefit but it is not a confirmation that a grant or benefit will be paid on presentation of a claim. The Commissioner will generally permit claimants to self-assess their eligibility for purposes of registration. If a claimant is uncertain as to whether they are entitled to an energy grant, they may apply for a private ruling.

3.7 Paragraphs 9(2)(a) to (c) amend the existing general requirements for registration to allow for registrations of persons who do not have an ABN. If a claimant does not have an ABN and is not entitled to have an ABN they may provide evidence of a kind determined by the Commissioner of their identity and address. [Schedule 1, item 6]

3.8 The specific requirement for registration for energy grants is that the Commissioner is satisfied that a potential claimant would be entitled to a fuel grant under the EG(C)S. [Schedule 1, item 7, subsection 9(4)]

3.9 The Commissioner may cancel a registration if the Commissioner is satisfied that the claimant at the time of registration did not satisfy the registration requirements contained in section 9, or subsequently ceased to satisfy those requirements. [Schedule 1, item 8, subsection 11(2)]

Payments of grants and benefits

3.10 A claimant may make a claim for purchases over any period the claimant chooses, subject to any determination by the Commissioner. [Schedule 1, item 9, section 12]

Advances

3.11 The Commissioner may issue guidelines providing that advances are not to be made in respect of a particular grant or benefit. [Schedule 1, item 10, subsection 14(1A)]

Claim periods

3.12 A claimant is not entitled to a grant or benefit unless they make a claim for payment of the grant or benefit in respect of a claim period during which the entitlement arose. [Schedule 1, item 11, subsection 15(1)]

3.13 The existing prohibition on submitting more than one claim for the same or overlapping periods has been removed. [Schedule 1, item 12, paragraph 15(2)(a)]

3.14 A claim for a grant or benefit must be given to the Commissioner within 3 years after the earliest purchase of the fuel during the claim period. [Schedule 1, item 13, paragraph 15(2)(e)]

Third party arrangements

3.15 Claimants may apply to the Commissioner for permission to authorise a third party to make claims on their behalf. [Schedule 1, item 15, section 15A]

Drawback, refund, rebate or remission

3.16 An applicant for an off-road credit is required to notify the Commissioner when making a claim for a grant of any drawback, refund, rebate, or remission that they have received in respect of the same fuel. The amount of off-road credit payable may be reduced by the amount of drawback, refund, rebate remission received by the applicant. [Schedule 1, item 16, section 16A]

Assessment

3.17 The existing arrangements are amended to provide that a notice of assessment need not issue unless the assessment of entitlements is different to the amount of the grant or benefit claimed. [Schedule 1, item 17, subsection 19(1)]

3.18 Under section 19 the Commissioner may give a notice of assessment in any manner or form. [Schedule 1, item 18]

3.19 Where the Commissioner gives a notice of assessment under Part 4, the production of that notice is conclusive evidence that the assessment was properly made, and except when the assessment itself is the subject of review proceedings, that the amounts and particulars in the assessment are correct. [Schedule 1, item 19, section 22]

Public and private rulings

3.20 A system of binding rulings has applied to income tax (and fringe benefits tax) matters for some years. The new provisions in the PGBAA will largely mirror existing provisions in the ITAA 1997 in relation to public and private rulings, and will be legally binding on the Commissioner where they are favourable to a claimant. This will provide claimants with the ability to determine with certainty the grants and benefits they are entitled to receive.

3.21 In some instance, provisions in the income tax legislation would serve no purpose in the PGBAA and have not been replicated. In addition, various terms appearing in the income tax legislation have been replaced with other terms to suit the requirements of the PGBAA. For example, the term 'claim period' is used in the PGBAA instead of the term 'income year'.

3.22 The new binding rulings provisions will apply to all grants and benefits payable under the PGBAA.

3.23 Public and private rulings will affect product grant or benefit assessments where:

•

a ruling states that the law applies to a claimant in a particular way; and

•

the ruling would result in the claimant being entitled to a higher energy grant in respect of an assessment for a particular claim period than it would if the law were applied in the absence of the ruling.

In these cases, the assessment and the amount of the grant or benefit must be calculated in accordance with the ruling. [Schedule 1, item 20, subsections 24B(2), 24C(2) and 24D(3)]

3.24 Under the provisions of the Energy Grants (Credits) Scheme Bill 2003 an entity will not be able to use the new rulings provisions to obtain a double grant or benefit.

Arrangements that are covered by a binding ruling

3.25 A public ruling applies to an entity to the extent to which it relates to an arrangement entered into by that entity. Private rulings are more specific than public rulings in that they specify the entity, claim period and arrangement covered by the ruling. A private ruling will apply to an entity in relation to an arrangement, provided the arrangement is materially the same as the arrangement described in the ruling. There may be some minor differences between an arrangement dealt with in a ruling and the arrangement actually carried out, but provided the differences are not so material that the Commissioner might have given a different ruling, the ruling will still apply to the actual arrangement.

Example 3.1

A claimant obtains a private ruling confirming their entitlement to an on-road credit in respect of a particular type of fuel they propose to purchase from a particular fuel supplier and use in a particular manner. If the claimant obtains fuel of the same type but from another supplier, the ruling will still be effective.

Assessments affected by ruling

3.26 The binding rulings provisions [Schedule 1, item 20, sections 24B, 24C and 24D] will only apply in relation to an assessment for a claim period if there is a binding ruling that deals with an arrangement wholly or partly carried out in the same claim period. For instance, a claimant may have obtained a private ruling to the effect that certain fuel purchased in December 2003 in relation to an arrangement being carried out in that period gives rise to an on-road credit. The claimant's energy grant entitlement will be calculated in accordance with the ruling if this would give rise to a higher grant entitlement than would be allowable if the law were to be applied in the absence of the ruling. The binding rulings provisions will effectively ensure that a grant is allowed for the expenditure that would otherwise not be claimable.

Example 3.2

The Commissioner gives a claimant a private ruling that an amount of $5,000 spent on fuel in December gives the claimant an entitlement to an on-road credit, despite the fact the claimant stated in their ruling request that the fuel was to be used in a truck weighing only 3 tonnes.

As the truck weighs less than 4.5 tonnes, no credit is properly allowable under the law.

However, if the assessment was made in accordance with the private ruling, a credit would be available in respect of the $5,000 fuel purchase.

In this case, the amount of the grant under an assessment made in accordance with the law would be less than the grant if an assessment was made in accordance with the ruling. The binding rulings provisions would apply so that a grant would be payable in respect of the $5,000 fuel purchase.

Dealing with conflicting rulings

3.27 There will be occasions where two or more rulings may apply to the same claimant in respect of the same claim period. For example, a public ruling may be withdrawn and replaced with another public ruling. The old ruling will continue to apply to arrangements that a claimant had commenced prior to the withdrawal of the ruling (existing section 14ZAAL of the TAA 1953). The new ruling will have a past, present and future effect (existing subsection 14ZAAH(1) of the TAA 1953). Therefore if the former and current rulings would result in an entity enjoying a different grant entitlement, but both rulings would result in a higher entitlement than would be the case if the law were applied in the absence of the rulings, section 24B would apply in respect of both rulings.

3.28 There could be a similar conflict between public and private rulings. For example, a public ruling may be issued that conflicts with an existing private ruling. If the claimant has already commenced the arrangement to which the private ruling relates, the private ruling cannot be withdrawn (except in limited circumstances) and both rulings could potentially apply. The same potential for conflict should not arise with private rulings, because they are required to be specific to a claim period, and where a private ruling is withdrawn, it is taken to have never been of effect.

3.29 The law will deal with cases involving conflicting rulings by ensuring there is only one application of the binding rulings provisions and that it is the one which provides the entity with the greatest benefit. [Schedule 1, item 20, subsection 24D(3)]

Tribunal Decision about private ruling

3.30 Where the AAT reviews an objection decision about a private ruling and determines the way the product grant or benefit law applies to a claimant in respect of a claim period in relation to an arrangement, the AAT's decision will override any decision of the Commissioner as to the application of the law and will also overrule the private ruling. The law will apply to the claimant, in respect of that period, in respect of that arrangement in the manner decided by the AAT. [Schedule 1, item 20, section 24E]

3.31 The AAT's decision has effect when the decision is final, that is, when the period for lodging an appeal against the decision has expired and an appeal has not been lodged, and the arrangement covered by the ruling has commenced.

3.32 The AAT's decision about how the law applies will be effective regardless of any conflicting decision by the AAT or court about the application of that particular law to someone else [Schedule 1, item 20, subsection 24E(3)]. This means that claimants affected by an AAT decision are not entitled to self amend to give effect to a subsequent AAT or court decision in respect of someone else that would be more favourable to them.

Court order about private ruling

3.33 Where a court makes an order that a product grant or benefit law applies in a particular way to a claimant in respect of a claim period in relation to an arrangement, the law will apply in that way [Schedule 1, item 20, section 24F]. Nothing can change that, not even a conflicting decision by a higher court about the application of that law to another claimant [Schedule 1, item 20, subsection 24F(3)].

3.34 As with decisions of the AAT, a court's order becomes effective in deciding the law when the order is final and the particular arrangement has commenced to be carried out. [Schedule 1, item 20, subsection 24F(4)]

3.35 There will be cases where a court order about a private ruling does not decide the law that is to apply. This will happen where a court is asked to decide whether the Commissioner can lawfully exercise a discretion in the way specified in a private ruling (a court cannot exercise the Commissioner's discretions but the AAT can). If the court orders that the Commissioner can lawfully exercise the discretion in that way, and the Commissioner does so, the Commissioner will have acted lawfully [Schedule 1, item 20, subsection 24G(3)]. There could not be any further review of the matter.

3.36 An order of the court to the effect that, if the Commissioner exercised a discretion in a particular way, the Commissioner will have acted lawfully, does not prevent the Commissioner from exercising the discretion in a different way. If the Commissioner does exercise the discretion in a different way and in a way that would cause the grant or benefit under an assessment to be less than if the ruling applied, the binding rulings provision [Schedule 1, item 20, section 24C] ensures that any assessment that would be affected by the Commissioner's contrary decision is made on the basis of the private ruling [Schedule 1, item 20].

Record keeping

3.37 In relation to a claim for an energy grant claimants must keep records after they have made a claim to enable them to substantiate that they have not lost their entitlement to a grant because of any disqualifying use set out in sections 225 and 255 of the Energy Grants (Credits) Scheme Bill 2003. [Schedule 1, item 22, subsections 27(1A) to (1D)]

3.38 A claimant must notify the Commissioner within 90 days or such longer period as the Commissioner allows, of fuel for which a grant has been paid that has subsequently been used in an ineligible activity, or an activity that does not qualify for the same amount of grant, is lost, stolen or otherwise disposed of. [Schedule 1, item 23, section 27A]

Disqualification for aiding or abetting fraud

3.39 A claimant will be disqualified from receiving a grant or benefit for aiding or abetting a fraud. The period of disqualification is 2 years or such shorter period as the Commissioner determines. [Schedule 1, item 24]

Information gathering powers

3.40 Under section 42(2) of the PGBAA, if the Commissioner has reason to believe that a person has information and is capable of giving evidence to the Commissioner that is relevant to the operation of a grants or benefits scheme, the Commissioner has the power to compel the person to provide information.

3.41 After giving written notice to the person the Commissioner may require the person to provide information, attend and give evidence and produce documents.

3.42 The amendment to insert subsection 42(2A) provides that if a claimant fails to comply with a written notice by the Commissioner under subsection 42(2), the Commissioner must not make an assessment in relation to an existing or new claim to entitlement to a grant or benefit until the claimant complies with the requirement. [Schedule 1, item 26]

3.43 Under subsection 45A(2) if a claim is made for entitlement to a grant or benefit the Commissioner may, in writing require the claimant to demonstrate the method, or the operation of any record keeping or accounting system used in arriving at particulars or estimates included in the claim.

3.44 The Commissioner may conduct testing of such record keeping or accounting system as is reasonably necessary to determine the accuracy or the system in arriving at particulars or estimates.

3.45 If a claimant fails to comply with a written notice by the Commissioner under subsection 45A(2), the Commissioner must not make an assessment in relation to an existing or new claim for entitlement to a grant or benefit until the claimant complies with the requirement. [Schedule 1, item 27, section 45A]

Application and transitional provisions

3.46 The amendments made by Schedule 1 to sections 9 and 15 of the PGBAA apply to applications or claims after commencement of that Schedule.

3.47 The amendments made to subsection 11(2) apply to registrations taking place before or after the commencement of item 8. [Schedule 1, item 28]

3.48 If a claimant was registered at the end of 30 June 2003 for entitlement to fuel grants under section 7 of the Diesel and Alternative Fuels Grants Scheme Act 1999, or a claimant was recorded as at the end of 30 June 2003 in the generic payments system administered by the ATO as a participant in the DFRS, a claimant will be taken as registered at the start of 1 July 2003 under the PGBAA for entitlement to an energy grant. [Schedule 1, item 29]

3.49 If at the end of 30 June 2003 a claimant had given authorisation for a third party to make claims under the Diesel and Alternative Fuels Grants Scheme Act 1999 or on their behalf applications for the DFRS under the Customs Act 1901 or the Excise Act 1901, that authorisation will continue to have effect under the PGBAA from 1 July 2003 and will be subject to any terms and conditions the authorisation was subject to. [Schedule 1, item 30]

REPEAL OF THE DIESEL AND ALTERNATIVE FUELS GRANTS SCHEME ACT 1999

Context of amendments

3.50 The Diesel and Alternative Fuels Grants Scheme Act 1999 is to be replaced by the EG(C)S. The EG(C)S will maintain entitlements equivalent to those currently available in respect of the DAFGS administered under the Diesel and Alternative Fuels Grants Scheme Act 1999. The Diesel and Alternative Fuels Grants Scheme Act 1999 is therefore to be repealed. [Schedule 2, item 1]

Application and transitional provisions

3.51 Under the transitional provision DAFGS claims made under section 15 of the Diesel and Alternative Fuels Grants Scheme Act 1999 before 1 July 2003 in respect of diesel fuel or alternative fuel used during a grant period ending before 1 July 2003 will continue to be subject to the Diesel and Alternative Fuels Grants Scheme Act 1999 as if it had not been amended by this bill. [Schedule 2, item 2]

3.52 In addition, claims under section 15 of the Diesel and Alternative Fuels Grants Scheme Act 1999 can be made in relation to fuel used before 1 July 2003 at any time from 1 July 2003 until the end of 30 November 2003 provided no claim for an energy grant has been made in respect of the same fuel under the PGBAA. Such applications will continue to be subject to the Diesel and Alternative Fuels Grants Scheme Act 1999 as if it had not been amended by this bill. [Schedule 2, item 2]

3.53 A determination in force under section 10A of the Diesel and Alternative Fuels Grants Scheme Act 1999 at the end of 30 June 2003 will continue to have application at the start of July 2003 as if it had been made under section 30 of the Energy Grants (Credits) Scheme Act 2003.

AMENDMENT OF THE CUSTOMS ACT 1901 AND THE EXCISE ACT 1901

Context of amendments

3.54 The DFRS is to be replaced by the EG(C)S . The EG(C)S will maintain entitlements equivalent to those currently available in respect of the DFRS administered under the Customs Act 1901 and Excise Act 1901. These amendments will repeal the DFRS provisions in the Customs Act 1901 and the Excise Act 1901 and amend associated provisions accordingly.

Application and transitional provisions

3.55 Under the transitional provisions diesel fuel rebate applications made under section 164 of the Customs Act 1901 (section 78A of the Excise Act 1901) before 1 July 2003 in respect of fuel purchased before 1 July 2003 will continue to be subject to the Customs Act 1901 (or Excise Act 1901) as if it (they) had not been amended by this bill.

3.56 In addition, an application under section 164 of the Customs Act 1901(section 78A of the Excise Act 1901) can be made in relation to fuel purchased before 1 July 2003 at any time from 1 July 2003 until the end of 30 November 2003 provided no claim for an energy grant has been made in respect of the same fuel under the PGBAA. Such applications will continue to be subject to the Customs Act 1901 (or Excise Act 1901) as if it (they) had not been amended by this bill. [Schedule 3, item 25; Schedule 4, item 18]

AMENDMENT OF THE TAXATION ADMINISTRATION ACT 1953

Context of amendments

3.57 The amendments to Schedule 5 make changes to the TAA 1953 to accommodate the new arrangements under the PGBAA for the administration of the EG(C)S.

Detailed explanation of the new law

3.58 The amendments to the TAA 1953 repeal references to the DFRS and the Diesel and Alternative Fuels Grants Scheme Act 1999, exclude the PGBAA from the application of the running balance account provisions in Part IIB, and include the PGBAA in the application of sections 8AAZMA (electronic payment of tax debts) and 8AAZM (when payments are treated as received). [Schedule 5, items 9 to 12]

3.59 Amendments are also made to the TAA 1953 to bring the PGBAA within the scope of the public and private rulings regime in parts IVAAA and IVAA of the TAA 1953. [Schedule 5, items 15 to 26]

Application and transitional provisions

3.60 The transitional provisions ensure the continued application of the TAA 1953 provisions for claims lodged before 1 July 2003 under the Diesel and Alternative Fuels Grants Scheme Act 1999. [Schedule 5, item 29]

Transitional extension of Energy Grants (Credits) Scheme

3.61 The DFRS and DAFGS will end on 30 June 2003.

3.62 These transitional arrangements provide for entitlements that would otherwise expire because of the sunset provisions of the DFRS and DAFGS to be preserved for 3 years under the EG(C)S. A person will be able to claim an energy grant for fuel purchased within 3 years of a claim being made, provided that a claim has not already been made for the fuel under the DFRS provisions or the Diesel and Alternative Fuels Grants Scheme Act 1999. [Schedule 7, item 1]

Index

Energy Grants (Credits) Scheme Bill 2002

Energy Grants (Credits) Scheme (Consequential Amendments) Bill 2002

Schedule 1: Amendment of the Product Grants and Benefits Administration Act 2000

Schedule 2: Repeal of the Diesel and Alternative Fuels Grants Scheme Act 1999

Schedule 3: Amendment of the Customs Act 1901

Schedule 4: Amendment of the Excise Act 1901

Schedule 5: Amendment of the Taxation Administration Act 1953

Schedule 7: Transitional extension of Energy Grants (Credits) Scheme