Excise (Blending exemptions) Determination 2012 (No. 1)

Explanatory Statement

Excise Act 1901

Excise (Blending exemptions) Determination
2012 (No. 1)

Revocation and replacement of previous instrument

1.                Excise (Blending exemptions) Determination 2012 (No. 1) revokes and replaces Excise (Blending exemptions) Determination 2006 (No. 1) – F2006L02163.
2.                The original instrument did not include gaseous fuels in the definition of ‘eligible goods’. This determination amends the definition of ‘eligible goods’ but otherwise has the same effect as the original instrument.  

General outline

3.                  This Explanatory Statement is provided in accordance with section 26 of the Legislative Instruments Act 2003.

4.                  Excise (Blending exemptions) Determination 2012 (No. 1) is required due to amendments to the Excise legislation effected by the Taxation of Alternative Fuels Legislation Amendment Act 2011, Excise Tariff Amendment (Taxation of Alternative Fuels) Act 2011 and Excise Amendment Regulations 2006 (No. 3).

5.                  The changes are the result of the amendment of subsection 77H(5) of the Excise Act 1901 with the release of the Taxation of Alternative Fuels Legislation Amendment Act 2011 and the Excise Tariff Amendment (Taxation of Alternative Fuels)  Act 2011. The principal objects of the amendments were to include gaseous fuels, which are liquefied petroleum gas (LPG), liquefied natural gas (LNG) and compressed natural gas (CNG) in the excise system.

6.                  The instrument is made under section 77H of the Excise Act 1901 (Excise Act) and takes effect from 1 December 2011. The previous instrument commenced on 1 July 2006.

7.                  In addition to providing circumstances in which fuel blends are exempt, section 77H of the Excise Act gives power to the CEO (i.e. the Commissioner of Taxation) to specify by legislative instrument, other circumstances in which fuel blends are excluded from the Excise tariff and therefore not subject to duty.

Date of effect

8.                  The determination commences on 1 December 2011.

9.                  The instrument will apply retrospectively. 

10.              The instrument is replacing the existing legislative instrument so that it is consistent with amendments made to the Schedule to the Excise Tariff Act 1921 (the Schedule) effective from 1 December 2011.  In particular, the existing legislative instrument includes a reference to item 10 paragraph (g) of the Schedule which has now been amended.

11.              If the amendments to the existing legislative instrument were not applied retrospectively, then it is possible that some taxpayers may be adversely impacted in that they will not be able to apply the provisions to their circumstances. As such, the instrument applies retrospectively to ensure that taxpayers will not be disadvantaged by the amendments to the Schedule.  The effect of the legislative instrument is to the advantage of affected parties.  Under section 12(2) of the Legislative Instruments Act 2003, as this instrument does not adversely affect the rights or liabilities of any person other than the Commonwealth, it can be applied retrospectively.

Effect of the instrument

12.              The determination specifies circumstances in which blends of excisable fuels, with or without other substances, are taken not to be excisable goods. Excise duty is therefore payable on the components of these blends (where applicable), but not on the blends themselves.

13.              Compliance cost impact:  Low – minor or machinery in nature.  The instrument will affect only a small proportion of businesses and confirms existing practice.  There is no ongoing compliance cost impact and a low implementation impact reflecting the need for some taxpayers to be aware of the change and make some minor adjustments to their processes.

14.              Item 8(a) provides an exemption for two-stroke petrol.

15.              Item 8(b) exempts incidental blending within a storage tank or a vehicle’s fuel tank. This exemption applies where there is no intention to benefit from the blend as such and practical considerations prevent the complete emptying of a tank of a relatively small quantity of product before filling it with the same product or another product. It is a matter of fact and degree whether the contents of a tank should be regarded as ‘remnants’ and therefore whether the resulting blend should be regarded as an ‘incidental’ blend.

16.              Item 8(c) provides an exemption for stabilised crude petroleum oil. Stabilised crude petroleum oil used in an oil refinery in refining (not in an internal combustion engine) is excluded from the Excise tariff under item 10 paragraph (a) and is therefore not dutiable. A blend of such stabilised crude petroleum oil and diesel or biodiesel is appropriately excluded from item 10 paragraph (g) and duty is therefore payable only on the diesel or biodiesel component.

17.              Item 8(d) provides an exemption for eligible goods on which duty has been paid that are blended with a dye.

18.              Item 8(e) provides an exemption for eligible goods on which duty has been paid which are blended with prepared additives that:

i)        enhance the performance of an internal combustion engine or assist in its maintenance, and

ii)      are not methanol or eligible goods (or their imported equivalents),

and are packaged into packages of not more than 10 litres capacity;

19.              Item 8(f) provides an exemption for eligible goods on which duty has been paid which are blended with one or more specified additives, being additives that are packaged into packages of at least 10 litres capacity.

20.              Item 8(e) and item 8(f) relate to the addition of certain kinds of performance enhancing or engine maintenance additives to fuel.

Impact of the instrument

21.              Together with the provisions for blends already made in subsection 77H(1), the determination ensures that former exemptions are maintained as required and that provision is made in the law for the inclusion of LPG, LNG and CNG within the definition of ‘eligible goods’, providing greater certainty in relation to excise obligations around the blending of fuels.

Consultation

22.              Section 18 of the Legislative Instruments Act 2003 specifically provides for circumstances where consultation may not be necessary or appropriate. One of those circumstances is where the instrument is considered minor or machinery in nature, and does not substantially change the law. Extensive consultation in relation to the amendments to the Excise Acts was held prior to those amendments being introduced. As indicated above, this instrument is necessary to ensure that the existing legislative instrument is consistent with the Excise Acts. As such, external consultation was not undertaken in relation to the development of the instrument as it is considered minor or machinery in nature, and does not substantially change the law.

Statement of compatibility prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

23. The legislative instrument the subject of this explanatory statement does not engage any of the applicable rights or freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011. Accordingly, this legislative instrument is compatible with human rights.

Previous draft:

Related Rulings/Determinations:

Fuel Tax (Fuel Blends) Determination 2006 (No. 3)

Subject references:

Excise

Excise tariff

Fuel blending

Exempt blends

Legislative references:

Excise Act 1901 section 77H (as at 1July 2006)

Excise Act 1901 paragraph 77H(1)(a)

Excise Act 1901 paragraph 77H(1)(b)

Fuel Tax Act 2006 section 95-5

Other references:

ATO references