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EXCISE AMENDMENT REGULATIONS 2004 (NO. 1) 2004 NO. 27
STATUTORY RULES 2004 No. 27
Issued by authority of the Minister for Revenue and Assistant Treasurer
Excise Act 1901
Excise Amendment Regulations 2004 (No. 1)
Section 164 of the Excise Act 1901 (the Act) provides that the Governor-General may make regulations not inconsistent with the Act prescribing all matters which by the Act are required or permitted to be prescribed, or as may be necessary or convenient to be prescribed, for giving effect to the Act or for the conduct of any business relating to the excise.
The purpose of the Regulations is to alter the provisions in the Excise Regulations 1925 (the Principal Regulations) that exempt the blending of certain petroleum products from being treated as 'manufacture' for the purposes of the excise legislation. The amendments:
• extend to biodiesel the exemption applying to diesel in certain provisions; and
• make minor extensions to certain diesel references to include diesel on which duty has been paid at the rate that applies from 1 January 2004 to high sulphur diesel.
In addition the amendments include biodiesel in the definition of petrol.
Details of the background to the Regulations are set out in Attachment A.
Details of the Regulations are set out in Attachment B.
The Act specifies no conditions that needed to be met before the power to make the Regulations was exercised.
Regulations 1 to 3 and Schedule 1 commence retrospectively from 18 September 2003, concurrent with the commencement date of the excise on biodiesel. Schedule 2 commences retrospectively from 1 January 2004, concurrent with the commencement date of Excise Tariff Proposal No. 2 (2003). Schedule 3, extending the definition of petrol to include biodiesel, commences on gazettal.
Subsection 48(2) of the Acts Interpretation Act 1901 provides that a regulation or a provision of a regulation has no effect if it would take effect before the date of notification of the regulation in the Gazette and as a result the rights of a person other than the Commonwealth would be affected so as to disadvantage that person or liabilities would be imposed on such a person in respect of anything done or omitted to be done before the date of notification.
This provision does not apply to Regulations 1 to 3 and Schedules 1 and 2 as they have the effect of conferring a benefit on persons other than the Commonwealth in exempting certain blending from licensing requirements.
Authority: Section 164 of the Excise Act 1901
Details of the background to Excise Amendment Regulations 2004 (No. 1)
The Act provides that blending of petroleum products is 'manufacture' (therefore requiring the blending to be carried out under an excise manufacturer's licence) to ensure appropriate excise duty is identified and paid. Licensing is a fundamental control mechanism of the excise legislation for the protection of the revenue. However, the Act also enables exempt blends (blends that do not fall within the concept of 'manufacture' for the purposes of the excise legislation) to be prescribed. The intention of exemptions is to exclude from the licensing requirements certain limited circumstances that are non-commercial arrangements or do not represent a significant revenue risk, such as blending of additives with fuel in vehicle tanks or where duty has previously been paid at the full rate on each of the constituent products.
Extension to biodiesel of the exemption applying to diesel in certain provisions
The inclusion of biodiesel references in the Principal Regulations is a consequence of the imposition of excise and equivalent customs duty on biodiesel, announced in the 2003-2004 Federal Budget. Excise Tariff Proposal No. 4 (2003) (tabled in Parliament on 17 September 2003) alters the Excise Tariff Act 1921 by imposing excise duty on biodiesel for use as fuel in an internal combustion engine on and from 18 September 2003 at the same rate as diesel, that is, 38.143 cents per litre.
The Excise Tariff Proposal mechanism is used for effecting alterations to the Excise Tariff. It is used most commonly for introducing new items, changing rates and restructuring items in the Schedule to the Excise Tariff Act 1921. Section 114 of the Act is a longstanding provision that allows duty to be collected at the altered rate in the Excise Tariff Proposal before the change is validated by a bill amending the Excise Tariff Act 1921.
The Regulations extend the exemption for certain diesel blends to similar biodiesel blends to provide consistent treatment for these fuels. These exempt blends are biodiesel with fuel oil for use as bunker fuel on a vessel, biodiesel with stabilised crude oil, and biodiesel for use in diesel engines in stand alone power stations that meet certain conditions.
Extension to certain diesel references to include diesel on which duty has been paid at the rate that applies from 1 January 2004 to high sulphur diesel
The Regulations extend certain references relating to exempt diesel blends to include diesel where duty has been paid at the rate specified in Excise Tariff Proposal No. 2 (2003) for high sulphur diesel (sulphur content exceeding 50 parts per million). This Proposal increased the excise differential of 1 cent per litre between ultra low sulphur diesel (sulphur content not exceeding 50 parts per million) and high sulphur diesel by an additional 1 cent per litre from 1 January 2004.
Inclusion of biodiesel in the definition of petrol
The Principal Regulations define petrol to include petroleum distillates (and therefore diesel) but not biodiesel. Extension of the definition to include biodiesel provides consistent treatment for fuels in certain regulations. The primary intention of the amendment is to enable biodiesel to receive the benefit available for 'petrol' of an excise duty refund for product returned to a manufacturer or warehouse, for example, as contaminated product. Further effects are the extension to biodiesel manufacture of certain security arrangements currently applying to the manufacture of 'petrol' and the inclusion of biodiesel in the prescribed circumstances where imported petrol may be used in excise manufacture of other 'petrol'.
Details of the Excise Amendment Regulations 2004 (No. 1)
Regulation 1 - Name of Regulations
Regulation 1 provides that the Regulations are the Excise Amendment Regulations 2003 (No. 1).
Regulation 2 - Commencement
Regulation 2 provides that the regulations 1 to 3 and Schedule 1 are taken to have commenced on 18 September 2003, Schedule 2 is taken to have commenced on 1 January 2004, and Schedule 3 commences on gazettal.
Regulation 3 provides that Schedules 1 to 3 amend the Excise Regulations 1925.
Schedule 1 - Amendments taken to have commenced on 18 September 2003
Item 1 - Paragraphs 176(2)(n) and (o)
Item 1 substitutes a new paragraph that includes a reference to biodiesel in the exempt blended petroleum products provisions relating to blends of diesel fuel and fuel oil for use as bunker fuel on a vessel (paragraph 176(2)(n)) and to blends of stabilised crude petroleum oil and diesel (paragraph 176(2)(o)).
Item 2 - Paragraph 176(2)(v)
Item 2 substitutes a new paragraph that includes a reference to biodiesel in exempt blended petroleum products provisions relating to blends of diesel fuel with certain recycled petroleum products for use in diesel engines that operate stand alone power stations generating electricity where certain conditions are met.
Schedule 2 - Amendments taken to have commenced on 1 January 2004
Items 1 to 7 - new sub-subparagraph 176(2)(i)(ii)(E) (items 1 and 2); new sub-subparagraph 176(2)(o)(ii)(D) (items 3 and 4); substituted subparagraphs 176(2)(t)(i) and (ii) and new subparagraphs 176(2)(t)(iii) and (iv) (item 5); and new sub-subparagraph 176(2)(v)(ii)(D)
These items extend the exemption (from being treated as 'manufacture') for blends containing certain products where duty has been paid at specified rates to include where duty has been paid at the rate specified in Excise Tariff Proposal No. 2 (2003) for products with a sulphur content exceeding 50 parts per million. These blends are duty paid clean petroleum products with certain additives (items 1 and 2); duty paid diesel or biodiesel with duty exempt stabilised crude oil (items 3 and 4); certain clean petroleum products where the duty has been paid on all constituents of the blend (item 5); and duty paid diesel or biodiesel with certain recycled products for use in diesel engines in power stations that meet certain conditions (items 6 and 7).
Schedule 3 - Amendments commencing on gazettal
Items 1 and 2 - Regulation 161, definition of petrol, subparagraph (d)(ii) and after paragraph (d)
These items extend the definition of petrol, which includes diesel, to include biodiesel. The effect is that the provisions in the Principal Regulations relating to 'petrol' apply to biodiesel, including certain security arrangements specified in Part IX, the capacity to obtain a duty refund for returned petrol and inclusion in the circumstances in which imported petrol may be used in further excise manufacture.