Biofuels Association of Australian Position:
All biodiesel blends that meet the Fuel Standard (diesel) Determination as of March 2008 should continue to be eligible for Fuel Tax Credits. Eligibility should not be contingent on the blend level but only on whether it meets the diesel standard.
Government Position:
The current legal position is that biodiesel blends that meet the diesel standard are eligible for a Fuel Tax Credit.
Informally, it is understood that Treasury is pushing its policy position that a Fuel Tax Credit should only be equal to any embedded tax which would be zero for biodiesel blends currently, rising to 3.8 cents per litre from 1 July 2011 (and increasing each year to 19.1 cents per litre on 1 July 2015).
It is likely that this would require a change to legislation although the Australian Taxation Office has yet to formally indicate whether it would allow a Fuel Tax Credit for diesel fuels that are given a waiver through the Fuel Standards Consultative Committee Section 13 Approval Process.
Background
Cleaner Fuels Grant Scheme
Biodiesel is liable for excise at a rate of 38.143 cents per litre when produced.
Biodiesel receives a grant of 38.143 cents per litre under the Cleaner Fuels Grant Scheme provided that it meets the B100 standard.
At this point there is no net tax embedded in biodiesel.
Under the Fuel Tax Credit legislation consumers of diesel that meet various business criteria such as farming and mining receive a credit of 38.143 cents per litre on the basis of not taxing inputs to business. On-road transport vehicles in excess of 4.5 tonnes also receive a credit of 38.143 cents per litre but then have to pay a road user charge so that a net tax is paid (approximately 18 cents per litre but this rate is changed from time to time).
The Australian Taxation Office uses an eligibility criteria of meeting the diesel standard for the payment of a Fuel Tax Credit. In determining this eligibility criteria, the Treasury (sets taxation policy) was of the view that this approach would exclude biodiesel blends above 5%. In practice this assumption has proven to be erroneous and some blends up to 30% have been proven to meet the diesel standard.
If the eligibility criteria were to be altered so that biodiesel blends above 5% were no longer eligible for a Fuel Tax Credit, then the practical impact on a B20 blend for instance, would be a rise in the price of 7.6 cents per litre.
Policy Argument:
The argument for, the Fuel Tax Credit to apply to biodiesel blends that meet the diesel standard, being a reasonable policy to maintain is:
· To continue to encourage the manufacture or importation of fuels that have a reduced impact on the environment. If you manufacture and import cleaner fuels that meet the relevant fuel standard (B100) under the Fuel Quality Standards Act 2000, you may be entitled to a cleaner fuel grant.
· However, the diesel market is different to the petrol market in the sense that agriculture and mining pay no excise and therefore the grant equivalent to the diesel excise rate provides no net advantage to biodiesel in 75-80% of the diesel market.
The rebate paid on biodiesel blends that meet the diesel standard through the Fuel Tax Credit legislation, ensures that the policy intention of having the equivalent position of having a lower tax rate on biodiesel is maintained.
Post 30 June 2011 Tax Situation:
From 1 July 2011 a net tax of 3.8 cents per litre will apply to biodiesel and this rate will increase by 3.8 cents per litre each year for 5 years until the maximum rate of 19.1 cents is reached on 1 July 2015.
