Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2004-2005-2006
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
FUEL TAX (CONSEQUENTIAL AND TRANSITIONAL PROVISIONS) BILL 2006
ADDITIONAL SUPPLEMENTARY EXPLANATORY MEMORANDUM
Amendments to be moved on behalf of the Government
(Circulated by authority of the Treasurer, the
Hon Peter Costello MP)
Table of contents
Glossary ....................................................................................... 1
General outline and financial impact ....................................................... 3
Chapter 1 Early payment of fuel tax credits.................................... 5
Glossary
The following abbreviations and acronyms are used throughout this
additional supplementary explanatory memorandum.
Abbreviation Definition
ATO Australian Taxation Office
BAS business activity statement
Commissioner Commissioner of Taxation
EGCS Energy Grants (Credits) Scheme
GST goods and services tax
1
General outline and financial impact
Early payment of fuel tax credits
Amendments 1 to 6 provide for the early payment of fuel tax credits to
certain entities for a two year transitional period.
Under the arrangement, eligible taxpayers may elect to make claims for
the early payment of fuel tax credit entitlements. These amendments will
ameliorate negative cash flow effects that may be associated with
claiming credits via the business activity statement.
These amendments are transitional in nature and apply only in respect of
fuel acquired, manufactured or imported between 1 July 2006
and 30 June 2008 (inclusive).
Date of effect: These amendments will take effect from 1 July 2006.
Proposal announced: These amendments were announced in the
Minister for Revenue and Assistant Treasurer's Press Release No. 034 of
1 June 2006.
Financial impact: These amendments do not impact on the accrual
estimates for the fuel tax credit system. The amendments will result in an
increase in cash expenditure of around $50 million in 2006-07 which will
be reversed in 2008-09 when this transitional arrangement ends.
Compliance cost impact: These amendments will involve additional
compliance costs for businesses as they will have additional interactions
with the Australian Taxation Office (ATO). However, these amendments
are designed to assist businesses in the transition to the new fuel tax credit
system. These amendments will result in some additional compliance
costs for the ATO.
3
Chapter 1
Early payment of fuel tax credits
Explanation of amendments 1 to 6
1.1 Under the Fuel Tax Bill 2006, a taxpayer's entitlement to be
paid a fuel tax credit arises when it lodges a business activity statement
(BAS) for the tax period to which the credit is attributable.
[Subsection 61-5(2) of the Fuel Tax Bill 2006]
1.2 These amendments to Schedule 3 to the Fuel Tax (Consequential
and Transitional Provisions) Bill 2006 enable eligible taxpayers to make a
claim for the payment of a credit without having to wait until they lodge a
BAS.
1.3 This arrangement is transitional in nature and applies only in
respect of fuel acquired, manufactured or imported between 1 July 2006
and 30 June 2008 (inclusive). [Amendments 1 and 4, paragraph 12A(1)(b)]
Eligibility for the arrangement
1.4 These amendments aim to ensure a smooth transition to the new
claiming arrangements for taxpayers that currently claim energy grants or
receive fuel excise-free or at a concessional rate. Eligibility for the
arrangement is restricted to entities that:
· were entitled to an energy grant under the Energy Grants
(Credits) Scheme Act 2003;
· acquire, manufacture or import fuel for use other than as a
fuel;
· use burner fuels for business use;
· supply burner fuels to private consumers for domestic
heating; or
· package and sell fuel, such as kerosene, in small containers
for use other than in an internal combustion engine.
[Amendment 4, paragraph 12A(1)(c)]
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Fuel Tax (Consequential and Transitional Provisions) Bill 2006
1.5 A special rule applies to goods and services tax (GST) groups
and GST joint ventures, in view of the fact that they, in their capacity as
single entities, could not have been entitled to an energy grant under the
Energy Grants (Credits) Scheme (EGCS) but their members may have
been.
1.6 Under this special rule, the representative member of a GST
group will be entitled to receive early payments on behalf of the group if
it or another member of the group was entitled to an energy grant under
the EGCS [amendment 4, subparagraph 12A(1)(c)(i)]. Similarly, the joint
venture operator of a GST joint venture will be entitled to receive early
payments on behalf of the joint venture if it or another participant in the
joint venture was entitled to an energy grant [amendment 4,
subparagraph 12A(1)(c)(i)].
Example 1.1
ABC Pty Ltd is the representative member of a GST group which
includes DEF Pty Ltd and XYZ Pty Ltd.
Prior to 1 July 2006, XYZ Pty Ltd was entitled to receive energy
grants under the Energy Grants (Credits) Scheme Act 2003.
ABC Pty Ltd and DEF Pty Ltd were not entitled to receive energy
grants.
As one member of the group was entitled to an energy grant,
ABC Pty Ltd may, on behalf of the group, make an election to
receive early payments of fuel tax credits.
Requirement to elect
1.7 Taxpayers that wish to participate in the arrangement must elect
to do so, in a form approved by the Commissioner of Taxation
(Commissioner), before 31 December 2006. [Amendment 4,
paragraph 12A(1)(a)]
1.8 An election will allow a taxpayer to make claims for the early
payment of fuel tax credits that are attributable to the tax period in which
the election is made or any period thereafter. However, claims cannot be
made in respect of fuel that is acquired, manufactured or imported after 30
June 2008. [Amendment 4, paragraph 12A(1)(b)]
Example 1.2
Rose makes an election on 1 November 2006. Rose receives
quarterly BASs. Rose's election will enable her to make claims for
early payments of fuel tax credits that are attributable to the
quarterly tax period spanning 1 October 2006 to 31 December 2006
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Early payment of fuel tax credits
or any period thereafter. However, she may not make a claim in
respect of fuel that she acquired, manufactured or imported after 30
June 2008.
Credits that can be claimed early
1.9 An eligible taxpayer that has elected to receive early payments
may only make a claim for an early payment of a fuel tax credit if:
· they are entitled to the credit;
· the credit, or part of the credit, is attributable to:
- if the credit relates to fuel acquired by a taxpayer that
accounts for GST on a cash basis -- the tax period in
which the claim for the early payment is made or a later
tax period [amendment 4, subparagraph 12A(1)(e)(i)]; or
- in all other cases -- the tax period in which the claim for
the early payment is made [amendment 4,
subparagraph 12A(1)(e)(ii)];
· the taxpayer has not previously received an early payment of
the credit for the fuel [amendment 4, paragraph 12A(1)(f)]; and
· the credit relates to fuel that the taxpayer acquired,
manufactured or imported between 1 July 2006 and
30 June 2008 (inclusive) [amendment 4, paragraph 12A(1)(b)].
1.10 In order to be entitled to a fuel tax credit, a taxpayer must have
acquired, manufactured, or imported taxable fuel. A taxpayer that merely
intends or expects to acquire, manufacture or import fuel at a later date
will not be entitled to a fuel tax credit and thus will not be entitled to an
early payment.
1.11 Taxpayers that account for GST on a cash basis may make a
claim for the early payment of a credit that is attributable to a later tax
period, providing that an entitlement to the credit exists at the time the
claim is made. This ensures that taxpayers that are entitled to a fuel tax
credit for fuel they acquire need not wait until they pay for the fuel before
being able to make a claim for an early payment. [Amendment 4,
subparagraph 12A(1)(e)(i)]
Example 1.3
Phil accounts for GST on a cash basis. He acquires fuel on
15 August 2006 and pays in full on 14 October 2006. Phil is
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Fuel Tax (Consequential and Transitional Provisions) Bill 2006
entitled to a fuel tax credit for the fuel. The credit is attributable
to Phil's quarterly tax period which spans 1 October 2006 to
31 December 2006. Phil has not previously received an early payment
in respect of the particular credit. Prior to 1 July 2006, Phil was
entitled to energy grants. Phil has elected to receive early payments of
fuel tax credits.
Phil may make a claim for an early payment of the credit during his
quarterly tax period ending on September 2006. However, Phil may
not make a claim prior to 15 August 2006 as an entitlement to the
credit would not have existed at the time.
Claims must be made in the approved form
1.12 All claims for the early payment of fuel tax credits must be
in the approved form [amendment 4, paragraph 12A(1)(g)]. The rules
governing approved forms are contained in Division 388 in Schedule 1 to
the TAA 1953.
No obligation to make claims
1.13 A taxpayer that has elected to receive early payments is not
obliged to claim all fuel tax credits early. Fuel tax credits that are not
claimed early can simply be claimed on the BAS for the relevant tax
period.
Amount of an early payment
1.14 The amount of an early payment is equivalent to the amount of
the fuel tax credit to which the taxpayer is entitled. [Amendment 4,
subitem 12A(2)]
1.15 Taxpayers are expressly prevented from receiving more than one
early payment in respect of a particular credit. [Amendment 4,
paragraph 12A(1)(f)]
Offsetting increasing fuel tax adjustment
1.16 A fuel tax credit a taxpayer receives via an early payment will
still form part of the taxpayer's net fuel amount for a tax period or tax
periods. To ensure the early payment is offset against a subsequent claim
or claims in the taxpayer's BAS, an increasing fuel tax adjustment arises.
[Amendment 4, subitem 12A(3)]
1.17 Generally, the amount of that increasing fuel tax adjustment will
be equivalent to the amount of the early payment. The fuel tax adjustment
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Early payment of fuel tax credits
will be attributable to the earliest tax period to which the fuel tax credit
can be attributed. [Amendment 4, paragraph 12A(3)(b)]
1.18 A special rule applies in instances where fuel is acquired by a
taxpayer that accounts for GST on a cash basis. In these instances, the
credit to which the taxpayer is entitled may be attributable to more than
one tax period. To ensure that each part of the credit is offset, an
increasing fuel tax adjustment will arise in each period in which the
taxpayer pays for the fuel. The amount of the increasing fuel tax
adjustment will be equivalent to the amount of the early payment the
taxpayer receives, but only to the extent that the taxpayer pays for the fuel
in the tax period. Together, the increasing fuel tax adjustments will add
up to the amount of the early payment. [Amendment 4, paragraph 12A(3)(a)]
Example 1.4
Robyn accounts for GST on a cash basis. In March 2007, she makes a
claim for an early fuel tax credit payment of $1,000. The
Commissioner provides Robyn with this payment. Robyn acquired the
fuel and paid in two equal instalments. She paid one of these
instalments on 31 March 2007 and the other on 30 April 2007.
Robyn reports part of the fuel tax credit ($500) in her BAS for her
quarterly tax period ending 31 March 2007. In this BAS she must also
report an increasing fuel tax adjustment of $500. The two amounts
reported in the BAS effectively cancel one another out.
Robyn reports the other part of her fuel tax credit ($500) in her BAS
for the tax period ending 30 June 2007. She must also report an
increasing fuel tax adjustment of $500 in this BAS.
Together, the two increasing fuel tax adjustments add up to the amount
of the early payment ($1,000).
Review rights
1.19 The Commissioner must not make a payment that is greater than
the amount of the credit to which a taxpayer is entitled. Therefore, if the
Commissioner has reason to believe that a taxpayer has notified an
amount that is greater than the amount to which they are actually entitled,
the Commissioner will only make a payment of the lesser of these two
amounts. No express objections rights exist in relation to this payment.
However a taxpayer may, once the relevant tax period has ended, request
the Commissioner to make an assessment of their net fuel amount for the
tax period. In making this assessment, the Commissioner will have to
take into account the amount of the fuel tax credit to which the early
payment relates. A taxpayer may object to this assessment if they are of
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Fuel Tax (Consequential and Transitional Provisions) Bill 2006
the view that the early payment they received was less than the amount
they were entitled to.
Example 1.5
On 1 August 2006, Andrew notifies the Commissioner that he is
entitled to a payment of $2,000 in respect of taxable fuel he acquired.
The fuel tax credit for the fuel is attributable to Andrew's quarterly tax
period which ends on 30 September 2006. The Commissioner,
however, has reason to believe that the amount of the credit to which
Andrew is entitled is only $1,500. On this basis, the Commissioner
makes a payment of $1,500 to Andrew.
In his BAS for the period ending 30 September 2006, Andrew claims a
fuel tax credit of $2,000. He also reports an increasing fuel tax
adjustment of $1,500. His BAS therefore indicates that he is entitled
to a $500 refund ($2,000 - $1,500).
The Commissioner makes an assessment of Andrew's net fuel amount
for the relevant tax period. The assessment states that Andrew's net
fuel amount for the period is $0, on the basis that the amount of the
credit is $1,500 and the amount of the increasing fuel tax adjustment is
also $1,500. Andrew may object to this assessment.
Consequential amendments
1.20 These amendments ensure that, from 1 July 2006, the definition
of the term `increasing fuel tax adjustment', contained in section 110-5 of
the Fuel Tax Bill 2006, and the note to section 65-10 of the Fuel Tax
Bill 2006 take into account increasing fuel tax adjustments that arise to
offset early payments. [Amendments 2 and 5]
1.21 From 1 July 2008, following the end of the transitional
arrangement, the reference to the offsetting increasing fuel tax adjustment
will be removed from both the definition in section 110-5 of the Fuel Tax
Bill 2006 and the note to section 65-10 of that Bill. [Amendments 3 and 6]
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