Senate

Supplementary Explanatory Memorandum

(Circulated by the authority of the Treasurer, the Hon J. B. Hockey MP)

Glossary

The following abbreviations and acronyms are used throughout this explanatory memorandum.

General outline and financial impact

Amendment to the Excise Tariff Amendment (Ethanol and Biodiesel) Bill 2015

This amendment (the Senate amendment) to the Excise Tariff Amendment (Ethanol and Biodiesel) Bill 2015 ensures that excise duty on biodiesel increases in equal amounts annually from 1 July 2016 until reaching a final rate of 50 per cent of the diesel rate in the 2030-31 financial year and later financial years.

Date of effect: This amendment applies from 1 July 2016.

Proposal announced: In a joint Media Release of 17 June 2015 the Minister for Industry and Science and the Treasurer announced a change to the transitional duty rates for biodiesel to phase in excise payable in equal amounts over 16 years from a rate of zero in the 2015-16 financial year to a final rate of 50 per cent of the petrol and diesel rate in the 2030-31 financial year and later financial years.

Financial impact: This amendment will have a cost to revenue of $7.5 million over the forward estimates period comprising:

Human rights implications: See Statement of Compatibility with Human Rights at the end of the chapter.

Compliance cost impact: This amendment is not expected to impose any additional compliance costs on affected taxpayers.

Amendment to the Excise Tariff Amendment (Ethanol and Biodiesel) Bill 2015

Outline of chapter

1.1 This amendment (the Senate amendment) to the Excise Tariff Amendment (Ethanol and Biodiesel) Bill 2015 (the Bill) ensures that the excise duty on biodiesel increases in equal amounts annually from 1 July 2016 until reaching a final rate of 50 per cent of the diesel rate in the 2030-31 financial year and later financial years.

Detailed explanation of new law

Amendment - Excise duty on biodiesel

Biodiesel excise duty

1.2 The rate of excise and excise-equivalent customs duty that currently applies to biodiesel under the Excise Tariff Act 1921 and Customs Tariff Act 1995 is the same as the rate of excise and excise-equivalent customs duty that applies to petrol and diesel. Australian manufacturers and importers of biodiesel into Australia are entitled to claim a grant under the Energy Grants (Cleaner Fuels) Scheme Act 2004 (EGCFS 2004) equal to the amount of duty payable.

Revised transition period for biodiesel excise duty

1.3 The Bill, as introduced, would repeal the entitlement for grants for biodiesel under the EGCFS 2004 from 1 July 2015 and revise the rate of excise duty that applies from 1 July 2015 to zero, increasing progressively to 50 per cent of the diesel excise rate for the 2020-21 financial year and later financial years.

1.4 An amendment made to the Bill in the House of Representatives would change the period over which biodiesel excise duty transitions to a final rate of 50 per cent of the diesel excise rate. The amendment made by the House of Representatives would provide that the excise duty on biodiesel:

•

is imposed at the same excise duty rate as fuel ethanol in the period from 1 July 2015 until 30 June 2021; and

•

then increases by equal amounts over a ten year period until reaching a final rate of 50 per cent of the diesel rate for the 2030-31 financial year and later financial years.

1.5 By contrast, the Senate amendment changes the rate at which excise duty that is imposed on biodiesel phases in over the period from 1 July 2016 until 30 June 2030. Under the Senate amendment, the rate of excise duty on biodiesel increases by equal amounts annually from 1 July 2016 until the final rate of 50 per cent of the diesel excise rate applies for the 2030-31 financial year and later financial years.

1.6 The rates of excise duty for biodiesel that apply under the Senate amendment are as follows:

# the excise duty rate for the financial year 2015-16 remains unchanged (nil rate) consistent with the Bill as introduced and as amended by the House of Representatives.

* percentage of diesel excise duty rate.

* percentage of diesel excise duty rate.

^ the biodiesel excise duty rate of 50 per cent of the diesel excise duty rate applies for the 2030-31 financial year and later financial years.

1.7 The Senate amendment applies to the excise duty rate imposed on biodiesel from 1 July 2016. The rate of duty on biodiesel for the 2015-16 financial year (nil) applies in accordance with the Bill as introduced and as amended by the House of Representatives.

1.8 The Senate amendment does not change the rate of duty for fuel ethanol that applies under the Bill as introduced.

Statement of compatibility with human rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Amendment to the Excise Tariff Amendment (Ethanol and Biodiesel) Bill 2015

1.9 The Senate amendment to the Excise Tariff Amendment (Ethanol and Biodiesel) Bill 2015 is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview

1.10 The Senate amendment to the Excise Tariff Amendment (Ethanol and Biodiesel) Bill 2015 provides that the excise duty rate that applies to biodiesel transitions in equal annual increases from 1 July 2016 until reaching a final rate in the 2030-31 financial year of 50 per cent of the excise duty rate that applies to diesel.

Human rights implications

1.11 The Senate amendment to this Bill does not engage any of the applicable rights or freedoms.

Conclusion

1.12 The Senate amendment to this Bill is compatible with human rights as it does not raise any human rights issues.