Explanatory Statement
Excise Act 1901
Excise By-Law (Amendment) 2008 (No. 1)
General Outline
- This Explanatory Statement is provided in accordance with section 26 of the Legislative Instruments Act 2003.
- The Government announced in its May 2008 Budget to remove the exemption of condensate from crude oil excise, effective on and from midnight (by legal time in the Australian Capital Territory) on 13 May 2008. To give effect to the policy change, the Excise Legislation Amendment (Condensate) Act 2008 and the Excise Tariff Amendment (Condensate) Act 2008 amended the Excise Act 1901, Excise Tariff Act 1921, Petroleum Excise (Prices) Act 1987 and the Petroleum Revenue Act 1985.
- In particular, item 21 of the Schedule to the Excise Tariff Act 1921 was amended to impose duties of excise for the production of condensate which are equivalent to the duties of excise on new oil and to include exempt offshore condensate which is condensate included in exempt offshore oil and condensate produced from a prescribed exempt offshore field.
- Excise By-Law No. 114 (By-Law No.114) prescribes exempt offshore fields for the purposes of paragraph (a) of the definition of “exempt offshore field” in subsection 3(1) of the Excise Tariff Act 1921.
- The exempt offshore fields currently prescribed by By-Law No. 114 are crude oil fields. This by-law requires an amendment to prescribe a particular offshore gas field from which condensate is derived as an exempt offshore field.
- The amendment to By-Law No. 114 is made under section 165 of the Excise Act 1901 (under subsection 33(3) of the Acts Interpretation Act 1901 the power to make an instrument can be construed as a power to amend an instrument).
Date of effect
7. This instrument is to commence on and from 2 October 2008. This ensures that the exemption from excise provided by the by-law for the first 4767.3 megalitres of stabilised crude oil and/or condensate produced from the field commences on the same date as production.
Note: Subparagraph 168(b)(i) of the Excise Act 1901 provides that a By-Law will take effect, or be deemed to have taken affect from a date specified by the By-Law.
Effect of the instrument:
8. This instrument provides one of the mechanisms required to give effect to the Government’s Budget announcement to remove the exemption of condensate from crude oil excise by making the necessary amendment to the By-law No. 114 prescribing exempt offshore fields.
Impact of the instrument
9. This instrument provides for an exemption from a duty of excise for the first 4767.3 megalitres of exempt offshore condensate; that is condensate included in exempt offshore oil and condensate produced from a particular exempt offshore field. It follows that once production from a particular field has surpassed this threshold, the condensate from that field becomes subject to a duty of excise in accordance with the Excise Tariff Act 1921.
Consultation
10. 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 gives effect, in terms announced in the Budget, to a decision to repeal, impose or adjust a tax, fee or charge. This instrument falls into that category, and therefore consultation on the development of it has not been undertaken.
Timothy Dyce
Deputy Commissioner and Delegate of the Commissioner of Taxation
[26 November 2008]
Related Rulings/Determinations:
Subject references:
Condensate
Excise
Excise Tariff
Excise By-Law
Exempt offshore oil
Exempt offshore field
Exempt offshore oil and condensate
New oil
Legislative references:
Acts Interpretation Act 1901 subsection 33(3)
Excise Act 1901 section 165
Excise Tariff Act 1921 subsection 3(1)
Excise Tariff Act 1921, the Schedule, item 21
Legislative Instruments Act 2003 section 18
Legislative Instruments Act 2003 section 26
Excise By-law No. 114
Other references:
Budget Papers Treasury, May 2008
Overview
The Excise By-Law (Amendment) 2008 (No. 1) was enacted to implement changes arising from the Excise Legislation Amendment (Condensate) Act 2008 and the Excise Tariff Amendment (Condensate) Act 2008, both of which were passed to address the specific issue of the excise exemption on condensate from crude oil. The Excise Act 1901, administered by the Parliament of Australia, was the foundational legislation for this amendment. The primary policy objective was to ensure that the duties of excise on condensate are equivalent to those on new oil, thereby aligning the taxation of these substances and addressing potential fiscal leakages. This legislative amendment ensures that exempt offshore condensate is subject to excise duties once a specified production threshold is exceeded, effective from 2 October 2008.
Scope and Application
The Excise By-Law (Amendment) 2008 (No. 1) applies to the amendment of the Excise By-Law No. 114 under the Excise Act 1901 to modify the definition and prescription of exempt offshore fields, specifically for the purpose of including a particular offshore gas field from which condensate is derived. This amendment is made to ensure consistency with the changes brought about by the Excise Legislation Amendment (Condensate) Act 2008 and the Excise Tariff Amendment (Condensate) Act 2008, which aimed to impose excise duties on the production of condensate equivalent to those on new oil. The by-law affects entities involved in the production of condensate from the specified exempt offshore field, imposing an excise duty once the production of condensate surpasses a threshold of 4767.3 megalitres. The by-law operates within the Commonwealth jurisdiction, aligning with the broader excise legislation framework in Australia. This amendment does not require consultation as it falls under the circumstances specified in the Legislative Instruments Act 2003, where decisions to adjust tax or excise duties are concerned.
Key Provisions
The Excise By-Law (Amendment) 2008 (No. 1) is an amendment to the existing Excise By-Law No. 114, which prescribes exempt offshore fields for the purposes of the Excise Tariff Act 1921 (section 3(1)). This amendment is effective from 2 October 2008 and is a response to the Government's policy change to remove the exemption of condensate from crude oil excise, as announced in the May 2008 Budget. The amendment prescribes a particular offshore gas field from which condensate is derived as an exempt offshore field, ensuring that the excise duties apply once the specified production threshold is surpassed.
The Excise By-Law (Amendment) 2008 (No. 1) imposes specific obligations on entities involved in the production of exempt offshore condensate. These obligations include ensuring that the production of condensate from the specified offshore field is monitored and reported accurately. The legislation requires that the first 4767.3 megalitres of stabilised crude oil and/or condensate produced from the field are exempt from excise, but once production exceeds this threshold, the condensate becomes subject to excise duties. The entities must also comply with the prescribed reporting requirements and maintain records to substantiate their claims for exemption.
The Excise By-Law (Amendment) 2008 (No. 1) introduces potential civil and criminal consequences for non-compliance with the excise duties. The Excise Act 1901 (section 165) provides the legal framework for enforcing the provisions of the by-law. Offences under this Act can result in penalties that include fines, imprisonment, or both. The maximum penalties for contravening the excise duties can be significant, reflecting the seriousness of the offences. Additionally, failure to accurately report and pay the excise duties may lead to legal action and further penalties.
In summary, the Excise By-Law (Amendment) 2008 (No. 1) requires precise monitoring and reporting of condensate production to ensure compliance with the excise duties. The by-law imposes obligations on producers to track and report production accurately, and failure to comply can result in severe penalties. This legislative instrument is a crucial mechanism for enforcing the Government's policy change to include condensate in the excise duty regime.