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EXCISE REGULATIONS (AMENDMENT) 1995 NO. 425
EXPLANATORY STATEMENTSTATUTORY RULES 1995 No. 425
Issued by the Authority of the Minister for Small Business, Customs and Construction
Excise Act 1901
Excise Regulations (Amendment)
Section 164 of the Excise Act 1901 (the Act) provides in part that:
"(1) The Governor-General may make regulations not inconsistent with this Act prescribing all matters which by this Act are required or permitted to be prescribed ... for giving effect to this Act or for the conduct of business relating to the Excise, ..."
The purpose of the Regulations is to amend the Excise Regulations (the Regulations) to insert new circumstances for:
(i) the remission, rebate or refund of excise duty payable, or which has been paid, on "light fuel oil" or topped crude petroleum oil where those petroleum products are for use, or where they are used, as a fuel otherwise than in an internal combustion engine.,
(ii) the remission of excise duty payable on fuel oil for use in the calcination process for the refining of bauxite into alumina; and
(iii) the remission of excise duty payable on diesel fuel that has been manufactured from waste oils.
Section 78 of the Act provides that remissions, rebates and refunds of excise duty may be allowed in respect of excisable goods in such circumstances, and subject to such conditions and restrictions, as are prescribed. Regulation 50 prescribes the circumstances in which remissions, rebates or refunds of excise duty may be allowed for the purposes of section 78. Section 78 also provides that the amount, or the means of determining the amount, of the remission, rebate or refund may also be prescribed.
(i) "light fuel oil" and topped crude petroleum oil where these petroleum products are for use, or where they are used as a fuel otherwise than in an internal combustion engine
In the 1995-96 Federal Budget, the Government announced that amendments would be made to the excise treatment of so-called "light fuel oils". "Light fuel oils" attracted the concessional rate of excise duty applicable to fuel oil but were being used in the road transport arena as substitutes for diesel fuel, which attracts a much higher rate of duty. Fuel oil is excisable at the concessional rate of $0.06954 per litre whereas diesel is excisable at the rate of $0.33513 per litre.
Amendments were made to the Excise Tariff Act 1921 (the Tariff Act) by the Excise Tariff Amendment Act (No. 2) 1995 in the recently completed Spring sittings of the Parliament to eliminate this substitution problem and to stem the revenue loss resulting from it. This has involved an amendment to the physical characteristics of "fuel oil" set out in subsection 3(4) of the Tariff Act. "Light fuel oil" is now effectively excluded from these characteristics and, as a result, is now excisable at the higher rate of excise that applies to diesel fuel. This amendment took effect from 1 July 1995.
Since 1 July 1995, however, representations have been received from persons who use "light fuel oil" not as a transport fuel but, rather, in traditional fuel oil uses, for example as a burning fuel in a copper refining process and as a start-up burning fuel for coal powered electricity generation. The Government's Budget amendments with respect to "light fuel oil" were only intended to address the situation where "light fuel oil" was being used as a substitute for diesel. It was not, however, intended to penalise those persons who use "light fuel oil" in the traditional fuel oil uses.
The Regulations have, therefore, been amended to insert additional remission, refund or rebate circumstances to apply to "light fuel oil" that is for use, or is used, as a fuel otherwise than in an internal combustion engine. The new circumstances have effectively commenced on 1 July 1995, the day that the principal Tariff Act amendments to close the diesel substitution problem took effect.
An amendment similar to the changes to the excise treatment of "light fuel oil" has also been effected to the Tariff Act by the Excise Tariff Amendment Act (No. 2) 1995 in respect of the excise treatment of topped crude petroleum oil. There is a potential for topped crude to also be used as a substitute for diesel fuel in the road transport arena, and because of that, topped crude was also made excisable at the higher rate that applies to diesel, except in two specified circumstances (where it is for use as refinery feedstock or where it has the same physical characteristics of fuel oil). This amendment took effect from 11 October 1995.
As with "light fuel oil", this amendment was only proposed to address the potential for topped crude petroleum oil being used as a substitute for diesel fuel. There is also potential for topped crude to be applied to traditional fuel oil uses and it was also not intended to penalise those persons who apply topped crude to these traditional uses.
Therefore, as with the proposed "light fuel oil" circumstance, these Regulations have inserted additional remission, rebate or refund circumstances that apply to topped crude petroleum oil that is for use, or is used, as a fuel otherwise than in an internal combustion engine. The proposed new circumstances effectively commenced on 11 October 1995, the day the principal Tariff Act amendments to close the potential diesel substitution problem took effect.
(ii) The remission of excise duty on fuel oil for use in the calcination process for the refining of bauxite into alumina
The Regulations have been amended to provide an excise duty concession for fuel oil used in the refining of bauxite into alumina in circumstances where refineries are located in areas not presently supplied by natural gas. This amendment is intended to remove a commercial disincentive faced by some alumina producers who do not have access to the cheaper energy source of natural gas which is excise exempt.
The Regulations have been amended to insert a new remission circumstance that applies where fuel oil is for use in the calcination process for the refining of bauxite into alumina and the fuel oil is for use at a place that is either not supplied by natural gas or at which natural gas is not readily available.
This proposed new circumstance commenced on the date on which the amending regulations were gazetted.
(iii) the remission of excise duty on diesel fuel that has been manufactured from waste oils
The Regulations have been amended to provide an excise duty concession for diesel fuel that has been manufactured by a process of refining waste oils. The purpose of the concession is to improve environmental quality by encouraging the refining of waste oil to make diesel fuel.
The Regulations have been amended to insert a new remission circumstance that applies to diesel fuel manufactured by this process. The amount of the remission on such diesel fuel is equivalent to 20 percent of the excise duty that is payable on diesel fuel generally.
This proposed new circumstance will, in effect, commence on 1 January 1996 and Will continue for a period of ten years from this date.
The amendments to the Regulations are set out in greater detail in the Attachment.
The Regulations commenced on gazettal.
ATTACHMENT
Regulation 1 - Amendment
This regulation provides that the Excise Regulations are amended as set out in the Regulations.
Regulation 2 - Regulation 50 (Circumstances under which remissions, rebates and refunds are made)
Subregulation 2.1 amends subregulation 50(1) by inserting new paragraphs 50(1)(y), (z), (za), (zb), (zc) and (zd).
New paragraph 50(1)(y) inserts the new remission circumstance with respect to "light fuel oil" that is for use as a fuel otherwise than in an internal combustion engine. The petroleum product "light fuel oil" does not appear in the Tariff Act as an excisable product and this term has not been inserted into the Regulations. Therefore, for the purposes of the new paragraph 50(1)(y), "light fuel oil" is defined by reference to its characteristics.
New paragraph 50(1)(y) provides for the remission of excise duty in the circumstances where a petroleum product on which excise duty is payable:
(i) has the characteristics specified in subregulation 50(4A) (which is to be inserted by subregulation 2.2 below), and
(ii) is classified to paragraph 11(E)(2) of the Schedule to the Tariff Act (which means that this product is excisable at the higher rate of excise duty that applies to diesel fuel); and
(iii) is delivered for use as fuel otherwise than in an internal combustion engine in accordance with a permission given under section 61C of the Act; and
(iv) has been delivered .
The combination of these factors will limit the application of this remission circumstance to those situations where "light fuel oil" is being applied in "traditional" fuel oil uses and not as a transport fuel, where it effectively is used as a substitute for diesel fuel.
This remission circumstance is limited to a petroleum product that is delivered in accordance with a permission under section 61C. Section 61C allows a Collector to give permission for goods to be taken into home consumption without the normal requirements of an entry having to be made in respect of the goods. These permissions facilitate the more manageable reconciliation of one's excise duty liability by effectively permitting one's excise debt to be settled periodically rather than every time excisable goods are moved into home consumption. However, to ensure the concession does not result in an unacceptable risk to the public purse, such permissions are subject to requirements specified in the permission that are necessary for the protection of the revenue or for the purpose of ensuring compliance with the Act. Such requirements include record keeping obligations and audit powers to enable the verification of the movement of goods.
The amount of the remission that will be allowed under this paragraph is to worked out using the formula in new regulation 52G which has been inserted by subregulation 3.1 below.
New paragraph 50(1)(z) inserts the new rebate or refund circumstance with respect to "light fuel oil" that has been used as a fuel otherwise than in an internal combustion engine. As with new paragraph 50(1)(y) above, "light fuel oil" is defined by reference to its characteristics.
New paragraph 50(1)(z) provides for the refund or rebate of excise duty in the circumstances where a petroleum product:
(i) that has the characteristics specified in subregulation 50(4A) (which is to be inserted by subregulation 2.2 below);
(ii) on which excise duty has been paid under paragraph 11(E)(2) of the Schedule to the Tariff Act (which again means that this product is excisable at the higher rate of excise duty that applies to diesel fuel); and
(iii) has been used after 3 0 June 1995 as a fuel otherwise than in an internal combustion engine.
Similar to new paragraph 50(1)(y), this will limit the application of this rebate or refund circumstance to situations where "light fuel oil" has been applied to "traditional" fuel oil uses, and not as a transport fuel substitute for diesel fuel.
As "light fuel oil" became excisable at the higher rate of excise duty with effect from 1 July 1995, this rebate or refund circumstance also has a retrospective effect to this date. Therefore, a rebate or refund of excise duty will be allowed in respect of the use of "light fuel oil" as a fuel otherwise than in an internal combustion engine after 30 June 1995.
New paragraph 50(1)(za) inserts the new remission circumstance with respect to topped crude petroleum oil that is for use as a fuel otherwise than in an internal combustion engine.
New paragraph 50(1)(za) provides for the remission of excise duty in the circumstances where topped crude petroleum oil on which excise duty is payable:
(i) is classified to subparagraph 11(G)(2)(b) of the Schedule to the Tariff Act; and
(ii) is delivered for use as fuel otherwise that in an internal combustion engine in accordance with a permission given under section 61C of the Act.
The combination of these factors will limit the application of this remission circumstance to those situations where topped crude petroleum oil is being applied in "traditional" fuel oil uses and not as a transport fuel, where it had the potential to be used as a substitute for diesel fuel,
The amount of the remission that will be allowed under this paragraph is to worked out using the formula in new regulation 52H which has been inserted by subregulation 3.1 below.
New paragraph 50(1)(zb) inserts the new rebate or refund circumstance with respect to topped crude petroleum oil that has been used as a fuel otherwise than in an internal combustion engine.
New paragraph 50(1)(zb) provides for the refund or rebate of excise duty in the circumstances where topped crude petroleum on which excise duty has been paid under subparagraph 11 (G)(2)(b) of the Schedule to the Tariff Act has been used after 10 October 1995 as a fuel otherwise that in an internal combustion engine.
Similar to new paragraph 50(1)(za), this will limit the application of this rebate or refund circumstance to situations where topped crude petroleum oil has been applied to "traditional" fuel oil uses, and not as a transport fuel substitute for diesel fuel.
As topped crude petroleum oil became excisable at the higher rate of excise duty with effect from 11 October 1995, this rebate or refund circumstance also has a retrospective effect to this date. Therefore, a rebate or refund of excise duty will be allowed in respect of the use of topped crude petroleum oil as a fuel otherwise than in an internal combustion engine after 10 October 1995.
New paragraph 50(1)(zc) inserts the new remission circumstance in respect of fuel oil that is for use in the calcination process for the refining of bauxite into alumina.
New paragraph 50(1)(ze) provides for the remission of excise duty in the circumstance where fuel oil:
(i) is delivered for home consumption in accordance with a permission given under section 61C of the Act, and
(ii) is for use at a place that is either not supplied by natural gas or at which natural gas is not readily available; and
(iii) is for use as a chemical reactant in the calcination part of the Bayer process for the refining of bauxite into alumina.
The combination of these factors will limit the application of the remission circumstance to those areas of Australia in which alumina refineries are placed at a commercial disadvantage vis a vis their competitors because they do not have access to natural gas as their energy source, which is excise exempt. Under this circumstance, the amount of the remission will be 100 percent of the excise duty that is payable on the fuel oil.
New paragraph 50(1)(zd) inserts the new remission circumstance in respect of diesel fuel that is manufactured from waste oils.
Paragraph 50(1)(zd) provides for the remission of excise duty in the circumstance where diesel fuel:
(i) is manufactured by the process of refining waste oils after 31 December 1995; and
(ii) is entered for home consumption before 1 January 2006. Therefore, this remission circumstance will, in effect, be limited in its application to a 10 year period.
The amount of the remission that will be allowed under this paragraph (a concession equivalent to 20 percent of the excise duty payable on the diesel fuel) is to worked out using the formula in new regulation 52J which has been inserted by subregulation 3.1 below.
Subregulation 2.2 amends the Regulations by inserting new subregulation 50(4)(A).
New subregulation 50(4A) sets out the characteristics of the petroleum product referred to in new paragraphs 50(1)(y) and (z) for the purposes of these paragraphs. The characteristics referred to in this subregulation, in effect, isolate "light fuel oil" from other diesel fuels so that the remission, rebate and refund circumstances referred to in paragraphs 50(y) and (z) only apply in respect of "light fuel oil".
Subregulation 2.3 amends subregulation 50(5) by omitting "subregulation 4" and substituting "subregulations (4) and (4A)". This is a technical drafting amendment to extend the operation of subregulation 50(5) to subregulation 50(4A). Subregulation 50(5) is an interpretation provision only and sets out the meaning of the references to "ASTM" in subregulations 50(4) and (4A).
Regulation 3 - New regulations 52G, 52H and 52J
Regulation 3 amends the Regulations by inserting new regulations 52G, 52H and 52J
New regulation 52G contains a formula for calculating the amount of remission, rebate or refund of excise duty in the circumstances prescribed in new paragraphs 50(y) and (z), ie in respect of "light fuel oil".
Subregulation 52G(1) provides that the amount of remission, rebate or refund in these circumstances is to be worked out using the formula:
volume x (primary rate - secondary rate) where:
"volume" means the volume, in litres, of the petroleum product with the characteristics referred to new subregulation 50(4A), ie "light fuel oil";
"primary rate" means the rate of excise duty applicable to goods classified to paragraph 11(E)(2) of the Schedule to the Tariff Act. This is the higher rate of duty that is applicable to diesel fuel, currently 33.513 cents per litre; and
"secondary rate" means the rate of excise duty applicable to goods classified to paragraph 11(E)(3) of that Schedule. This is the concessional rate of duty that is applicable to fuel oils, currently 6.954 cents per litre.
The result of this formula is that where "light fuel oil" is for use, or is used, as a traditional fuel oil and not as a transport fuel (ie, in an internal combustion engine), the effective rate of excise duty that is payable is the concessional rate of duty applicable to fuel oils, ie 6.954 cents per litre. The amount which is remitted or refunded is 26.559 cents per hire.
New subregulation 52G(2) specifies the relevant date of the application of the primary and secondary rates for the purpose of calculating any rebate or refund in accordance with subregulations 52G(1). The calculation of the rebate or refund is to be based on these rates applicable on the date the "light fuel oil" is entered for home consumption.
In the rebate or refund circumstance, however, the date of entry for home consumption may not be known by the person who is applying for the rebate or refund. Therefore, paragraph 52G(2)(b) provides that if this date is not known, the primary and secondary rates are those applicable on the date on which the "fight fuel oil" was purchased by the applicant.
New_ regulation 52H contains a formula for calculating the amount of remission, rebate or refund of excise duty in the circumstances prescribed in new paragraphs 50(1)(z) and (za), ie in respect of topped crude petroleum oil.
Subregulation 52H(1) provides that the amount of remission, rebate or refund in these circumstances is to be worked out using the formula:
volume x (primary rate - secondary rate) where:
"volume" means the volume, in litres, of topped crude petroleum oil;
"primary rate" means the rate of excise duty applicable to goods classified to subparagraph 11(G)(2)(b) of the Schedule to the Tariff Act. This is the higher rate of duty, currently 33.513 cents per litre; and
"secondary rate" means the rate of excise duty applicable to goods classified to subparagraph 11(G)(2)(a) of that Schedule. This is the concessional rate of duty, currently 6.954 cents per litre.
The result of this formula is that where topped crude petroleum oil is for use, or is used, as a traditional fuel oil and not as a transport fuel (ie, in an internal combustion engine), the effective rate of excise duty that is payable is the concessional rate of duty, ie 6.954 cents per litre. The amount which is remitted or refunded is 26.559 cents per litre.
New subregulation 52H(2) specifies the relevant date of the application of the primary and secondary rates for the purpose of calculating any rebate or refund in accordance with subregulations 52H(1). The calculation of the rebate or refund is to be based on these rates applicable on the date the topped crude petroleum oil is entered for home consumption.
In the rebate or refund circumstance, however, the date of entry for home consumption may not be known by the person who is applying for the rebate or refund. Therefore, paragraph 52H(2)(b) provides that if this date is not known, the primary and secondary rates are those applicable on the date on which the topped crude petroleum oil was purchased by the applicant.
New regulation 52J contains the formula for determining the amount of remission of excise duty in the circumstances prescribed in new paragraph 50(1)(zd), ie in respect of diesel fuel manufactured from waste oils.
Regulation 52J provides that the amount of remission of excise duty on diesel fuel in the circumstances referred to in paragraph 50(1)(zd) is the amount worked out using the formula:
volume x rate x 0.20, where:
"volume" means the volume, in litres, of the diesel fuel;
"rate" means the rate of excise duty applicable to goods classified to paragraph 11(E)(2) in the Schedule to the Tariff Act. This is the paragraph of the Schedule to which diesel fuel is classified.
The result of this formula is that the amount of remission of excise duty that is allowed in respect of such diesel fuel is 20 percent of the excise duty payable on diesel fuel generally. Therefore, diesel fuel that is manufactured from waste oils is, in effect, only excisable at 80 percent of the excise rate applicable to diesel fuel.