Excise Amendment Regulations 1999 (No. 2)

Administered by Department of the Treasury

Legislation au F1999B00278 Regulations Not in force Legislative Instrument

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Excise Amendment Regulations 1999 (No. 2) 1999 No. 265

EXPLANATORY STATEMENT

STATUTORY RULES 1999 NO. 265

Issued by the Authority of the Assistant Treasurer

Excise Act 1901

Excise Amendment Regulations 1999 (No. 2)

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 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 of the Excise Regulations 1925 ("the Excise Regulations") prescribes the circumstances in which remissions, rebates and refunds of excise duty may be allowed for the purposes of section 78.

Purpose of the Regulations

The purpose of the Regulations is to amend the Excise Regulations by adding new remission and refund provisions to:

a)       allow those with a legitimate need to access diesel for use other than as a fuel (eg

       where diesel is used as bitumen cutter) to access product duty free after item 11 of

       the Schedule to the Excise Tariff Act 1921 is amended;

b)       allow those with a legitimate need to access low flash petroleum and shale spirit

       (eg hexane) for use other than as a fuel (eg for use as a solvent) to access product

       duty free after item 11 of the Schedule to the Excise Tariff Act 1921 is amended;

c)       allow those with a legitimate need to access unmarked non-fuel recycled

       petroleum products (eg recycled lubricants, hydraulic oils and transformer oils)

       being re-used for their original purpose, to access product duty free after item 11

       of the Schedule to the Excise Tariff Act 1921 is amended; and,

d)       allow those with a need to access AVTUR for business marine use to access

       product on a duty free basis.

The Regulations also amend the Excise Regulations by deleting the existing refund provision 50(1)(zo) which provides that a refund may be claimed where duty has been paid on a clean fuel which has been subsequently drummed and sold for use as a solvent and has become redundant.

Background

In January 1998 the Government introduced legislation to deter and detect fuel substitution activities. While the introduction of the legislation initially had a pronounced effect on these practices, there are indications that fuel substitution has been increasing again in recent months. Current fuel substitution activities are primarily occurring through opportunistic use of certain tariff arrangements in Item 11 of the Schedule to the Excise Tariff Act 1921. Consequently, technical amendments to Item 11 of the Schedule to the Excise Tariff Act 1921 commence on 15 November 1999 to restrict the opportunity for these activities and better deliver the Government's commitment to addressing fuel substitution.

The changes to Item 11 of the Schedule to the Excise Tariff Act 1921 commencing on 15 November 1999 will also include technical amendments- to more clearly deliver the Government's decision to make certain recycled products subject to excise

Access to certain products on a duty free basis

The principal change will be to remove the access to diesel and gasoline and other petroleum or shale spirit with a flash point of less than 0 degrees Celsius with a duty rate of less than $0.43485 per litre.

Diesel and gasoline (commonly known as petrol) are overwhelmingly used in an internal combustion engine as a transport fuel. However, the current tariff arrangements allow diesel and gasoline for use other than as a fuel to be duty free. The quantity of product currently falling to these arrangements is far above any reasonable explanation and constitutes the main form of fuel substitution activity currently occurring.

However, consequential amendments to the Regulations are required to ensure that those with a legitimate need to access product normally used as a fuel in an internal combustion engine for use other than as a fuel can continue to do so on a duty free basis after 15 November 1999.

The Regulations will allow access to duty free diesel and low flash solvents in a number of circumstances when its use other than a fuel is known, as well in any circumstance where the use of the product other than as a fuel can be demonstrated.

Excise Status of Recycled Product

The new tariff only allows unmarked recycled gasoline and diesel to be duty free. To provide parity across the oil recycling industry, consequential amendments to the excise regulations are necessary to allow access to other unmarked recycled product (ie recycled lubricants, hydraulic oils and transformer oils), at a free rate of duty when the product is reused for its original purpose.

Use of Kerosene in Marine Applications

There is a potentially significant new use for turbine engines in marine applications. These engines run on AVTUR (kerosene principally used in jet turbines for aviation). As the excise levied on AVTUR is not a general revenue raising measure, but is used to collect levies for the aviation industry, it is appropriate that AVTUR for marine business use be allowed on a duty free basis.

Commencement

The Regulations commenced on 15 November 1999.

 

Overview

The Excise Amendment Regulations 1999 (No. 2) were enacted under the authority of the Assistant Treasurer, modifying the Excise Regulations to address certain technical issues and policy objectives arising from the Excise Act 1901. The primary intent of these regulations is to amend the existing provisions to accommodate new circumstances and needs, particularly regarding the duty-free access to certain petroleum products for non-fuel purposes, as well as to restrict and mitigate fuel substitution activities. These amendments were necessitated by indications that fuel substitution practices had been on the rise again, primarily through the exploitation of certain tariff arrangements. The regulations aim to ensure that individuals or businesses with legitimate needs for products like diesel, low flash petroleum, and recycled petroleum products for uses other than fuel can still access these products duty-free, while simultaneously tightening controls to prevent misuse and substitution of fuel products. The policy objective behind these amendments is to balance the legitimate use of petroleum products for non-fuel purposes with the need to prevent and deter fuel substitution activities. The regulations achieve this by refining the conditions under which duty-free access can be granted, ensuring that the excise system remains effective in collecting the intended levies while also accommodating the legitimate needs of various sectors. The commencement of these regulations on 15 November 1999 aligns with technical changes made to the Excise Tariff Act 1921 to support these objectives.

Scope and Application

The Excise Amendment Regulations 1999 (No. 2) are an instrument designed to modify the Excise Regulations by introducing new provisions that allow for duty-free access to certain products under specific circumstances, as well as to remove a refund provision. These regulations apply to individuals and entities that require access to certain petroleum products, such as diesel, low flash petroleum, shale spirit, and recycled petroleum products, for uses other than fuel, as well as to business entities that need to access AVTUR (kerosene) for marine use. These changes are necessary to address the issue of fuel substitution and to ensure that legitimate needs for these products are met. The regulations are applicable on a national level, as they are made under the authority of the Excise Act 1901, which is a Commonwealth Act. However, the regulations do not apply to products that are used as fuel in internal combustion engines, as these products will be subject to excise duty as of 15 November 1999. The regulations also do not apply to products that are not listed in the amended Schedule to the Excise Tariff Act 1921. The amendments to the Excise Regulations came into effect on 15 November 1999, aligning with the technical amendments to the Excise Tariff Act 1921 that were also introduced to curb fuel substitution activities.

Key Provisions

The Excise Amendment Regulations 1999 (No. 2) primarily seek to amend the Excise Regulations to align with changes in the Excise Tariff Act 1921. The changes are intended to address fuel substitution activities by restricting access to certain petroleum products that are being misused for non-fuel purposes. Specifically, the regulations introduce new provisions to allow duty-free access to diesel, low flash petroleum and shale spirit, unmarked non-fuel recycled petroleum products, and AVTUR for business marine use, provided these products are used for legitimate non-fuel purposes (sections 1-4). These provisions are designed to ensure that those with genuine non-fuel needs can continue to access these products without incurring excise duty. Under these regulations, parties or entities that need to access certain petroleum products for non-fuel purposes must demonstrate their legitimate need and the intended use of the product. This includes providing evidence of the product’s intended use and ensuring it aligns with the conditions stipulated in the regulations. For instance, businesses must show that the diesel, low flash solvents, recycled lubricants, hydraulic oils, transformer oils, or AVTUR are being used for specific non-fuel applications such as solvents, lubricants, or marine turbine engines. Failure to comply with these requirements may result in the products being subject to excise duty. The regulations impose civil consequences for non-compliance. Specifically, if a party fails to adhere to the conditions set out in the regulations, they may be liable for the payment of excise duty on the products in question. Additionally, the regulations provide for the possibility of penalties for fraudulent claims or misuse of duty-free provisions. While the exact penalties are not detailed in the provided text, under the Excise Act 1901, penalties for offences can include fines and, in serious cases, imprisonment. The precise penalties would depend on the nature and severity of the breach, as well as any relevant statutory provisions.

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