Senate

Revised Explanatory Memorandum

(Circulated by the authority of the Minister for the Environment, the Hon Greg Hunt MP and the Treasurer, the Hon J.B. Hockey MP)

Chapter 6 - Removal of equivalent carbon price from synthetic greenhouse gases

Outline of chapter

6.1 Chapter 6 describes the arrangements necessary for repealing the equivalent carbon price applied to SGGs and equipment containing SGGs through the Ozone Management Act, Ozone (Import Levy) Act and Ozone (Manufacture Levy) Act, including the following specific amendments:

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repealing the equivalent carbon price from the Ozone (Import Levy) Act;

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repealing the equivalent carbon price from the Ozone (Manufacture Levy) Act;

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allowing the importation or manufacture of SGGs to be used in medical equipment to be exempt from the Ozone (Import Levy) Act and Ozone (Manufacture Levy) Act;

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repealing provisions to allow for refund of the equivalent carbon price on SGGs and products containing these gases on export (export refund scheme); and

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providing transitional provisions for the export refund scheme.

Context of amendments

Repealing the equivalent carbon price

6.2 The Clean Energy Legislation introduced an equivalent carbon price, which applies to the import or manufacture of bulk SGGs and import of all products containing these gases. The equivalent carbon price is applied and calculated at the point of import or manufacture.

6.3 The equivalent carbon price for SGGs is calculated using the value of the carbon tax and the global warming potential for each gas relative to carbon dioxide. The combination of these is called the 'applicable charge rate' in the Ozone (Import Levy) Act or Ozone (Manufacture Levy) Act. The applicable charge rate is part of the levy charged on the import or manufacture of SGGs or products that contain these gases. The other part of the levy (the cost recovery component), outlined in section 65D of the Ozone Management Act, was applied before the introduction of the Clean Energy Legislation and will continue after the carbon tax is repealed as it relates to administering the Ozone Protection and SGG Program, including the legislation.

6.4 The Main Repeal Bill, the Ozone Manufacture Amendment Bill and the Ozone Import Amendment Bill remove the applicable charge rate from the Ozone Management Act, Ozone (Import Levy) Act and the Ozone (Manufacture Levy) Act from 1 July 2014. This ensures that importers and manufactures of SGG and products containing these gases will not incur a liability to pay the equivalent carbon price for gas manufactured, and gas and equipment imported, from 1 July 2014.

Comparison of key features of new law and current law

Detailed explanation of new law

General provisions

6.5 When enacted, the names of the Ozone Manufacture Amendment Bill and the Ozone Import Amendment Bill will be the Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Amendment (Carbon Tax Repeal) Act 2014 and the Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Amendment (Carbon Tax Repeal) Act 2014. [Ozone Manufacture Amendment Bill, clause 1] [Ozone Import Amendment Bill, clause 1]

6.6 All amendments made by the Ozone Manufacture Amendment Bill and the Ozone Import Amendment Bill have effect according to the terms set out in the Bills. [Ozone Manufacture Amendment Bill, clause 3] [Ozone Import Amendment Bill, clause 3]

6.7 The formal provisions in sections 1, 2 and 3 of the Ozone Manufacture Amendment Bill and the Ozone Import Amendment Bill commence on the day that the Governor-General gives the Royal Assent. The operative provisions commence on 1 July 2014. [Ozone Manufacture Amendment Bill, clause 2] [Ozone Import Amendment Bill, clause 2]

Repealing the equivalent carbon price

Repealing the equivalent carbon price

6.8 The equivalent carbon price does not apply to the importation or manufacture of SGGs or products that contain these gases on or after 1 July 2014. This is achieved by repealing the applicable charge rate of the levy applied to the import or manufacture of SGGs or products containing these gases and removing all definitions that are associated with these provisions. [Ozone Manufacture Amendment Bill, items 1 to 9 and 13, sections 2A, 2B and 3A, Ozone (Manufacture Levy) Act] [Ozone Import Amendment Bill, items 1 to 9, 13 to 14, sections 2A, 2B, 3A and 4A, Ozone (Import Levy) Act ]

Payment of levies after the repeal of the equivalent carbon price

6.9 Prior to the introduction of the Clean Energy Legislation, all imports and manufacture of SGG and some products containing these gases were charged a cost recovery levy. The cost recovery component of the levy, referred to as the prescribed rate in the Ozone (Import Levy) Act and Ozone (Manufacture Levy) Act, will continue after the repeal of the equivalent carbon price.

6.10 The cost recovery component of the levy will be $165 per tonne of SGG imported or manufactured, or a lower rate if specified in the regulations. The rate currently set in regulations, and which also applied prior to 1 July 2012, is $165 per tonne. [Ozone Manufacture Amendment Bill, item 9, section 3A, Ozone (Manufacture Levy) Act] [Ozone Import Amendment Bill, items 9 and 13, sections 3A and 4A, Ozone (Import Levy) Act ]

Treatment of levy exemptions for medical equipment

6.11 The Ozone Management Act, Ozone (Import Levy) Act and Ozone (Manufacture Levy) Act contain exemptions from the equivalent carbon price and in some cases from the entire Ozone Management Act. These exemptions are available in circumstances where it is impractical to apply the tax, or where the SGGs are used for medical, veterinary, health or safety purposes. These exemptions are specifically available for the cost recovery component of the levy through other provisions in the Act.

6.12 The Ozone (Import Levy) Act and Ozone (Manufacture Levy) Act contain an exemption for SGGs used in medical equipment. The exemption for SGGs to be used in medical equipment will apply to the cost recovery levy from 1 July 2014. The amendment ensures a consistent treatment for all SGGs imported for use in medical equipment. [Ozone Manufacture Amendment Bill, items 10 to 12, section 3A, Ozone (Manufacture Levy) Act] [Ozone Import Amendment Bill, items 10 to 12, section 3A, Ozone (Import Levy) Act ]

Amounts to be credited to the Ozone Protection and SGG Account

6.13 The cost recovery levy, referred to as the prescribed rate component in the Ozone (Import Levy) Act and Ozone (Manufacture Levy) Act, is paid into the Ozone Protection and SGG Account. The equivalent carbon price is paid into the Consolidated Revenue Fund.

6.14 Once the equivalent carbon price is repealed and no longer collected, the cost recovery levy collected through the Ozone (Import Levy) Act and Ozone (Manufacture Levy) Act will continue to be paid into the Ozone Protection and SGG Account as it is necessary for the administration of the Ozone Protection and SGG Program. [Schedule 1, items 313 to 314, section 65D, Ozone Management Act] [Schedule 1, item 338(1), section 65C, Ozone Management Act]

Export refund scheme

6.15 Under the Ozone and SGG Management Act, Controlled Substance licensees and Synthetic Greenhouse Gas Equipment licensees are able to claim a refund of the equivalent carbon price paid on SGGs through the export refund scheme. Licensees can claim an export refund if they are able to demonstrate that an amount of SGG has been imported in the previous 12 months, the equivalent carbon price has been paid on this and that the gases have been exported within 12 months of import.

6.16 The export refund scheme will be repealed on 1 July 2014 as it is no longer required after the carbon tax ends. [Schedule 1, item 315, sections 69AA to 69AD, Ozone Management Act]

6.17 Transitional provisions are included to allow licensees to claim the export refund on gases imported prior to the repeal of the equivalent carbon price. Applications will be accepted and assessed by the Department administering the Ozone Management Act until 1 January 2016. At this time, the export refund scheme will cease. This time extension is to provide time for licensees to use the SGGs on-hand and export as either SGGs or products containing these gases. [Schedule 1, item 338(2), sections 69AA to 69AD, Ozone Management Act]