Whilst delivering a substantial temporary reduction in fuel excise to ease cost of living pressures, the Government has also announced a wide range of reforms as part of its wider deregulation agenda that impact importers and exporters more generally.
Temporary cut in fuel excise
To relieve the cost of living pressure faced by Australian households and small businesses, the Government is providing temporary relief through reductions in the excise and excise-equivalent customs duty rate on fuel. Over the forward estimates period, this action is expected to reduce the revenue by $5.6 billion and payments by $2.7 billion with the reduced excise rate being fully passed on to Australians. The relief measures include:
- Except for aviation fuels, all other fuels (petrol and diesel) will have their excise and excise-equivalent custom duty rates lowered by half for a period of six months starting from 30 March 2022.
- Existing policy parameters for fuel tax and excise-equivalent customs duty, including indexation in August, will be retained under the legislation, albeit at half the current rates from 44.2 cents per litre to to 22.1 cents per litre.
- The excise and excise-equivalent customs tax rates will revert to their previous levels at the end of the six-month period on 28 September 2022.
- Whilst there is reduction in excise and excise-equivalent duty rates of fuel, businesses eligible for fuel tax credits will remain eligible to a credit of the excise paid where the fuel is used for ‘off-road’ activities (albeit at the lower rate of 22.1 cents per litre). However, where fuel is used in heavy vehicles on-road an entitlement to fuel tax credits will cease to exist under the temporary measures as the road user charge (currently set at 26.4 cents per litre) will exceed the excise payable.
- Importantly, goods and services tax (GST) will be levied on the lower excise rate resulting in further reductions in fuel prices for consumers.
Excise - deregulation benefits to fuel and alcohol producers, importers and distributors
The Government will adopt a range of measures aimed to reduce the red-tape and complexity associated with those businesses that produce, import and distribute alcohol and fuel in Australia. Many of the measures have emerged from the Government’s Deregulation Taskforce which has been tasked with reviewing the excise administration in Australia with a view to streamlining current arrangements. The changes are estimated to cost $127.5 million in underlying cash terms over the forward estimates period and are proposed from 1 July 2023. The changes will:
- allow fuel and alcohol businesses with annual revenue of less than $50 million to file and settle excise and excise-equivalent customs duty quarterly rather than weekly or monthly as is currently the requirement
- enable businesses that import fuel or alcohol products for further manufacture or distribution to defer payment of excise or excise-equivalent customs duty to transfer the fuel or alcohol directly into an Australian Taxation Office (ATO) administered warehouse once the products have cleared Customs. This will negate the need for facilities to be licenced under both Customs and Excise laws
- streamline and align a number of licencing requirements under the excise system, including:
- simplifying and unifying licensing requirements throughout the excise system by removing all renewal requirements for excise and excise-equivalent customs good licences, eliminating licence fees, allowing the ATO and Australian Border Force to award entity-level licences in addition to site-level licences and providing blanket permission to move goods between licenced facilities
- extending the time limit to apply for a refund of excise overpayments from 12 months to four years to align with the provisions of the Customs Act as it relates to customs duty overpayments
- creating a public register of excise and excise-equivalent customs goods licences administered by the ATO across Australia.
- amend the excise and excise-equivalent customs duty regime for fuel by introducing refund provisions for excise equivalent customs duty on petroleum-based oils used in the manufacturer of lubricants, removing the requirement to pay and then claim fuel tax credits (FTCs) on excise and excise equivalent customs duty on domestic voyage bunker fuels and setting a single rate for businesses to calculate and claim vapour recovery unit refunds, and
- revise the excise law to include a targeted exemption from excise licensing requirements for licensed hospitality venues filing beer from kegs into sealed, non-pressurised containers of less than two litres capacity and not designed for medium to long term.
Other border measures
The Government is continuing to provide border taxation relief through making permanent a range of temporary import tariff concessions for certain medical and hygiene products to treat, diagnose or prevent the spread of COVID-19. The range of products will also be expanded and apply from 1 July 2022. The Government expects this measure to cost $6.9 million over four years.
As part of the Government’s Building Australia’s Circular Waste Economy initiative, a further $4.4 million will be invested over the next two years to support the delivery of waste export bans by improving licence assessment timeframes and supporting industry to comply with the regulatory requirements.
Export diversification
The Government is continuing its drive to support Australian export diversification with a range of investments, including continuing closer relations with India through a Comprehensive Strategic Partnership, and through the implementation of the United Kingdom (UK) Free Trade Agreement (FTA) along with further support for agribusinesses and export market development. Notably:
- The India Comprehensive Strategic Partnership has received $245.5 million over five years for a range of initiatives.
- The Australia-UK Free Trade Agreement is intended to increase market access opportunities through the elimination of 99 per cent of tariffs on Australian exports to the UK. The FTA is estimated to decrease receipts by $100 million, and increase payments by $71.7 million over the forward estimates.
- There is additional support totalling $80 million for small and medium export businesses to re-establish their presence in overseas markets through the Export Market Development Grants program.
- $12 million to support large agricultural trade events that promote Australian agribusiness.
Simplifying Australia’s trade systems
The Government is continuing its commitment to support the competitiveness of Australian businesses and reduce prices for consumers through investments in simplifying Australia’s current trade systems. These measures are aimed at promoting the productivity of Australia’s trading businesses. They total $267.1 million with a further $4.4 million committed per year ongoing from 2026-27. The key initiatives include:
- expanding the ‘Digital Services to Take Farmers to Market’ initiative with $127.4 million to transform the delivery of Government agricultural export systems - this builds on previous significant investments in excess of $300 million
- committing $48 million to modernising Australia’s trade system with a focus on identifying opportunities for future reforms and reducing regulatory burdens faced by exporters, and
- developing a Trade Information Service through investment of $11.7 million to provide exporters with a single source of accurate information to facilitate access to global markets.
Biosecurity and supply chain security
The Government has committed to invest in a number of measures aimed at strengthening national supply chain and bio-security. These measures are intended to support the fight against organised crime and plant and animal pests and diseases. The measures include:
- increased presence at Australia’s airports, seaports and warehouses, with a package to tackle serious and organised crime totalling $287.2 million over the next four years, and
- further investment in Australia’s biosecurity system to counter new and emerging threats to preserve our natural environment and way of life totalling in excess of $100 million which builds on more than $300 million in last year’s Budget and Mid-Year Economic and Fiscal Outlook.
Resilience: Investing in infrastructure, supply chains and critical industries
The Government is continuing its investment in key industries through a range of measures. These include Critical Minerals, Modern Manufacturing, Energy and further support for regional industries through a Regional Accelerator Program (RAP). Collectively, these measures total in excess of $12.5 billion over the next 11 years, representing a significant investment in Australia’s economic security and resilience in the face of a more disruptive geopolitical environment. Notably, the measures include:
- investment in an Energy Security and Regional Development Plan, providing $7.1 billion over the next 11 years to support existing programs and to boost economies of key regions. This includes investment in infrastructure projects in the Northern Territory to promote onshore processing of critical minerals along with projects in North and Central Queensland, New South Wales, Northern Territory and Victoria to improve supply chain efficiency and resilience
- road and rail infrastructure projects for Queensland totalling $3.3 billion
- a $2 billion Regional Accelerator Program to support regional industries and businesses
- a further $328.3 million to support Modern Manufacturing Strategy over the next five years
- accelerating critical minerals projects with in line with the Critical Minerals Strategy with $250.5 million over five years
- targeted investments totaling $60 million to improve national supply chain resilience in South Australia, and
- investing $8 million over two years for the Clean Energy Supply Chain Forum (Sydney Energy Forum) in July 2022.