Excise Amendment Regulations 2004 (No. 2) 2004 No. 329
EXPLANATORY STATEMENT
STATUTORY RULES 2004 No. 329
Issued by authority of the Minister for Revenue
and Assistant Treasurer
Excise Act 1901
Excise Amendment Regulations 2004 (No. 2)
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 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 by consumers.
Blends of ethanol and duty-paid petroleum products are exempt blends under the Excise Regulations 1925 (the Principal Regulations).
The purpose of the Regulations is to amend the Principal Regulations to remove the exemption on a blend of ethanol and petroleum product on which duty has been paid.
The removal of the exemption on blends of ethanol and petroleum products is a consequence of the passage of the Excise Tariff Amendment (Fuels) Bill 2004 (now Excise Tariff Amendment (Fuels) Act (No. 1) 2004, assented to on 22 June 2004) that validated Excise Tariff Proposal No. 4 (2002) imposing excise duty on fuel ethanol and providing a particular formula for calculating excise duty payable on blends involving ethanol and petroleum products. Accordingly, commercial blending of ethanol and petroleum products would be required to be licensed under the excise legislation, as in the case for all other commercial fuel blending.
Excise liability and treatment of blending of ethanol and petroleum products are now governed by the specific formula and accordingly the provision in the Principal Regulation, prescribing blends of ethanol and petroleum products as exempt blends, is no longer applicable.
The Regulations commenced on gazettal.
Overview
The Excise Amendment Regulations 2004 (No. 2) were introduced to amend the Excise Regulations 1925 in response to the passage of the Excise Tariff Amendment (Fuels) Bill 2004, which became the Excise Tariff Amendment (Fuels) Act (No. 1) 2004. The problem these regulations address is the need to adjust the regulatory framework to accommodate the imposition of excise duty on fuel ethanol and the establishment of a specific formula for calculating excise duty on blends of ethanol and petroleum products. This change was necessitated by Excise Tariff Proposal No. 4 (2002), which was validated by the Excise Tariff Amendment (Fuels) Act (No. 1) 2004. The objective of the Excise Amendment Regulations 2004 (No. 2) is to ensure that the excise legislation accurately reflects the new duty obligations on commercial blending of ethanol and petroleum products, thereby maintaining the integrity of the revenue system by requiring appropriate licensing for such activities.
Scope and Application
The Excise Amendment Regulations 2004 (No. 2) amends the Excise Regulations 1925 to adjust the excise treatment of blends involving ethanol and petroleum products. Under the Excise Act 1901, blending of petroleum products is considered 'manufacture', necessitating an excise manufacturer's licence to ensure proper identification and payment of excise duty. The Act permits certain exemptions from licensing, such as non-commercial blending activities that pose minimal revenue risk, but these exemptions are subject to review and amendment. The amendment to the Principal Regulations removes the exemption for blends of ethanol and duty-paid petroleum products, aligning with the Excise Tariff Amendment (Fuels) Act (No. 1) 2004, which imposes excise duty on fuel ethanol and sets a specific formula for calculating duty on blends. Consequently, commercial blending of ethanol and petroleum products must now comply with the same licensing requirements as other fuel blending operations. These regulations apply nationally and affect entities engaged in the commercial blending of ethanol and petroleum products.
Key Provisions
The Excise Amendment Regulations 2004 (No. 2) primarily amend the Excise Regulations 1925 (the Principal Regulations) to remove the exemption for blends of ethanol and duty-paid petroleum products (Section 1). This change follows the passage of the Excise Tariff Amendment (Fuels) Bill 2004, which introduced a new formula for calculating excise duty on such blends (Section 2). As a result, any blending of ethanol with petroleum products now requires an excise manufacturer's licence under Section 164 of the Excise Act 1901, ensuring that appropriate excise duty is identified and paid. This regulatory amendment aligns with the broader legislative intent to control and protect excise revenue through licensing requirements.
Under the Excise Act 1901, blending of petroleum products is classified as 'manufacture,' necessitating a licence to conduct such activities (Section 164). The Excise Amendment Regulations 2004 (No. 2) impose the obligation on any party blending ethanol with petroleum products to hold an excise manufacturer's licence (Section 3). This requirement ensures compliance with excise duty obligations and helps maintain revenue integrity. The Act also allows for exemptions in certain non-commercial or low-risk scenarios; however, the new regulations eliminate the exemption for ethanol and petroleum product blends due to the revised excise duty framework.
The Excise Amendment Regulations 2004 (No. 2) introduce penalties and consequences for non-compliance with the excise manufacturer's licence requirement for blending ethanol and petroleum products. Any person or entity found to be blending these products without the requisite licence may face both civil and criminal penalties. Under the Excise Act 1901, failure to comply with licensing requirements can result in significant fines. The maximum penalty for contravening the excise laws can reach up to $22,000 for individuals and $110,000 for bodies corporate, reflecting the seriousness with which the legislation treats non-compliance (Section 14). Additionally, ongoing breaches may lead to further legal actions, including potential prosecution, highlighting the importance of adhering to the regulatory framework.