Today I announce an overhaul of the fuel excise system. These reforms will result in a more consistent and neutral tax regime for fuels used in vehicles.
The government announced in the 2003-04 Budget that excise rates will be set for all fuels capable of being used in an internal combustion engine. It has been decided that no excise will apply to new fuels until 1 July 2008. Excise will then be introduced in five equal annual steps to a final rate on 1 July 2012.
For administrative simplicity, a banded excise system will be adopted, with differing rates for high, medium and low energy fuels. Excise on diesel and petrol remains unchanged under the banded system.
Alternative fuels entering the excise net will receive a discount of 50% on the full energy content rate. Excise on petrol and diesel will remain at 38.143 cents per litre (cpl). Excise on LPG and ethanol will be 12.5 cpl - half their energy content value.
Excise will not be levied on domestic (eg heating and cooking) uses of gaseous fuels such as LPG. Business use of gaseous fuels (LPG, CNG, LNG) in non-transport applications (eg power generation) will also be effectively excise free.
The 50% discount applying to alternative fuels entering the excise net was set having regard to a range of industry, regional and other factors.
The government has also announced additional assistance for the LPG sector to assist its transition into the excise net. A $1000 subsidy will be made available from 1 July 2008 - the point at which excise first applies to LPG at 2.5 cpl - to consumers who purchase a dedicated or dual fuel LPG vehicle that is delivered new. This subsidy will be available for three years.
The excise reforms announced today represent a first tranche in the development of a comprehensive package of transport-related measures, including broad-based reform of the business excise credit system and future road funding. Details of further reforms are being developed and will be announced in 2004.
Final rates for fuels (including discounts) are shown in Table 1 below. The transition path for fuels entering the excise net is shown at Table 2 below.
TABLE 1: NEW EXCISE RATES
Fuel Type
Energy Content
(megajoules per litre)
EXCISE RATE
(cents per litre)
ALTERNATIVE FUELS
(cents per litre)
High-energy content fuels
Petrol, diesel, biodiesel, GTL diesel
Above 30
38.143
19.1(biodiesel)
Mid-energy content fuels
Eg. LPG, LNG, ethanol, dimethyl ether
Between 20 - 30
25
12.5(LPG, ethanol, LNG)
Low-energy content fuels
Eg. Methanol
Below 20
17
8.5(methanol)
Other:
Eg. CNG
Between 38 - 41{megajoules per cubic metre}
38{cents per cubic metre}
19{cents per cubic metre}
TABLE 2: TRANSITION PATH FOR FUELS ENTERING THE EXCISE NET
Fuel Type
1 July 2003
1 July 2004
1 July 2005
1 July 2006
1 July 2007
1 July 2008
1 July 2009
1 July 2010
1 July 2011
1 July 2012
High-energy contentBiodiesel
0
0
0
0
0
3.8
7.6
11.4
15.3
19.1
Mid-energy contentLPG, LNG, ethanol
0
0
0
0
0
2.5
5.0
7.5
10.0
12.5
Low-energy contentMethanol
0
0
0
0
0
1.7
3.4
5.1
6.8
8.5
OtherCNG (cents per m3)
0
0
0
0
0
3.8
7.6
11.4
15.2
19.0