Commonwealth Numbered Regulations - Explanatory Statements

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Issued by the Authority of the Assistant Treasurer

Excise Act 1901

Excise Amendment Regulations 2000 (No. 4)

Section 164 of the Excise Act 1901 (the Act) provides that the Governor-General may make regulations prescribing matters required to give effect to the Act or for the conduct of any business relating to the Excise.

Section 77J of the Act provides that regulations may specify an excisable blended petroleum product to be an exempt blended petroleum product. Regulation 176 of the Excise Regulations 1925 (the Regulations) prescribes the products that are exempt blended petroleum products for the purposes of section 77J.

The purpose of the Regulations is to amend the Excise Regulations to remove the excise exemption relating to blending excise free methanol with excise paid petroleum products.

Certain blends of petroleum products are exempted from the blending arrangements so that those producing such blends do not require licensing as excise manufacturers or payment of further excise upon production. A blend of methanol and petroleum products is prescribed in Regulation 176(2)(k) as an exempt blend, with ethanol and petroleum products similarly prescribed in Regulation 176(2)G). Such blends of petroleum products are only subject to excise that has already been paid on the petroleum product and not on the whole blend. The nature of the products is such that blends of methanol or ethanol are normally made with gasoline (petrol).

Although the excise system is not directly involved in assuring fuel quality, certain provisions that provide concessional excise treatment can have an effect on the quality of some products. A review of the existing provisions concludes that methanol blends are not appropriate. Methanol is a toxic and corrosive substance and has potentially detrimental effects on engines and air quality.

The amending Regulations:

*       exclude methanol (and ethanol) from the products that may be used as octane enhancers under Regulation 176(2)(h). This regulation prescribes that, with certain exceptions, a blend of any clean petroleum product and a product used to enhance its octane rating is an exempt blend;

*       impose a volume limit on the products that may be used for the purposes of Regulation 176(2)(h) in order that small scale practices by private parties are not constrained, but large scale excise avoidance cannot be carried out by blending products into fuel under the guise of octane enhancement; and

*       remove the excise exemption that was afforded to blends of methanol and any clean petroleum product under Regulation 176(2)(k) by deleting that regulation.

The amendments to Regulation 176(2)(h) will not affect existing ethanol blending in any way, as this practice will continue to be covered by existing Regulation 176(2)(j), which specifically allows ethanol blending.

Details of the Regulations are set out in the Attachment.

The amending Regulations commenced on gazettal.



Excise Amendment Regulations 2000 (No. 4)

Regulation 1 provides for these regulations to be named the Excise Amendment Regulations 2000 (No. 4).

Regulation 2 specifies that these regulations commenced on gazettal.

Regulation 3 provides that the Excise Regulations 1925 are amended as set out in Schedule 1 to these regulations.

Schedule 1 - Amendment of the Excise Regulations 1925

Proposed item 1 of Schedule 1 substitutes a new paragraph for existing 176(2)(h) that prescribes ethanol and methanol as products that are excluded from use as octane enhancers, and imposes a volume limit of not more than 10 litres capacity on the products that may be used as octane enhancers.

Proposed item 2 of Schedule 1 amends subregulation 176(2) by deleting paragraph 176(2)(k).

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