House of Representatives

Explanatory Memorandum

(Circulated by authority of the Minister for the Environment, the Honourable Sussan Ley MP)

Product Stewardship (Oil) Amendment Bill 2020

Notes on Clauses

Clause 1 - Short title

1. This clause provides that the short title by which the Act may be cited is the Product Stewardship (Oil) Amendment Act 2020.

Clause 2 - Commencement

2. This clause provides that the Act will commence on the day after receiving the Royal Assent.

Clause 3 - Schedule

3. This clause provides that legislation specified in a Schedule is amended or repealed as set out in the Schedule and other items in the Schedule have effect according to their terms.

SCHEDULE 1

Item 1 - Subsection 6(1) - definition of oils

4. Under section 9 of the Product Stewardship (Oil) Act 2000 (the PSO Act), a person is entitled to a product stewardship (oil) benefit for the sale or consumption of recycled oil that the person has recycled in Australia or for the consumption in Australia of gazetted oil for a gazetted use (gazetted oils and gazetted uses are set out in the Product Stewardship (Oil) Declaration 2003).

5. The definition of the term oils in subsection 6(1) sets out the type of oils covered by the Product Stewardship for Oil Scheme (the PSO Scheme), including petroleum based oils and their synthetic equivalents. Therefore, in order to be eligible for a benefit under the PSO Act, the recycled oil must have been of a type that met the definition of oils, in its pre-recycled and pre-used state, as set out in subsection 6(1) of the PSO Act.

6. The PSO Scheme was originally intended to be self-funding by offsetting the benefit payments to recyclers using revenue collected through the Excise Tariff Act 1921 (the Excise Tariff Act) and the Customs Tariff Act 1995 (the Customs Tariff Act) from refineries and oil importers. To achieve this intention, items were added to the Schedules of those Acts to impose duties on the import and manufacture of petroleum-based oils and their synthetic equivalents, intended to be the same types of oils as those covered by the PSO Scheme.

7. In Caltex Petroleum Pty Ltd v Commissioner of Taxation [2019] FCA 1849 (the Caltex case), the Court gave a broad interpretation of the definition of oils in the PSO Act, the effect of which was to allow benefit payments for the recycling of oils that were not subject to duties for the purposes of the PSO Scheme under the Excise Tariff Act and the Customs Tariff Act.

8. Item 1 repeals the definition of oils in subsection 6(1) of the PSO Act and substitutes it with a new definition of oils. Paragraphs (a) and (b) provide for an exhaustive list of petroleum based oils and synthetic equivalents of petroleum based oils that are intended to be covered by the PSO Scheme. Paragraph (c) provides for the regulations to prescribe additional kinds of oils to be covered by the PSO Scheme. Paragraphs (d) to (f) specifically exclude diesel, blends of diesel with other goods, and goods ordinarily used as fuels from the definition of oils. Paragraph (g) provides the flexibility for the regulations to prescribe additional goods that are excluded from the definition of oils.

9. The note to the definition of oils clarifies the amendments made by item 1 are in response to the decision of the Federal Court of Australia in the Caltex case.

Item 2 - Application and saving provisions

10. Subitem 2(1) provides that the amendments made by the Schedule apply to claims for a product stewardship (oil) benefit in relation to the sale or consumption of recycled oil, or the consumption of gazetted oil, that occurs on or after the day of introduction of the Product Stewardship (Oil) Amendment Bill 2020 into the House of Representatives. This ensures that the proposed amendment to the PSO Act applies as soon as practical to clarify the operation of the PSO Scheme and ensure that the PSO Scheme operates consistently with the original policy intent that diesel is not considered to be an oil and hence was not intended to qualify for a benefit under the PSO Scheme. This application provision also aligns with the application provision in the Excise Tariff Amendment Bill 2020 (see subitem 2(1)). Because benefit payments under the PSO Scheme are funded by collected excise duties, the proposed amendments to both Bills should apply simultaneously to ensure the financial stability of the PSO Scheme.

11. Subitem 2(2) clarifies that subitem 2(1) does not apply to claims that were determined by the Commissioner of Taxation before the commencement date.

12. Under subsection 9(3) of the PSO Act, a person is entitled to a product stewardship (oil) benefit for the consumption of gazetted oil for a gazetted use in Australia. The definitions of gazetted oil and gazetted use in subsection 6(1) allows the Minister to declare certain oils to be a gazetted oil, and certain uses of gazetted oils as a gazetted use (as set out in the Product Stewardship (Oil) Declaration 2003). These uses are in manufacturing of a product or in a process that will not permit the oil to be recycled and constitute only a low risk to the environment.

13. Subitem 2(3) is a saving provision which ensures that the amendments made by the Schedule do not affect the validity of a declaration of gazetted oil or gazetted use under subsection 6(1) that was in force before the commencement date.