Excise status of biodiesel for use as a fuel

Whether biodiesel, produced by the transesterification of vegetable oils or animal fats, for use as a fuel is a good on which excise duty is imposed under section 5 of the Excise Tariff Act 1921 (the Act).

Biodiesel produced by the transesterification of vegetable oils or animal fats for use as a fuel, is not an excisable good that is listed in the Schedule to the Act, and therefore no excise duty is payable provided the biodiesel is not blended with a petroleum product.

Biodiesel is a product manufactured by the transesterification of vegetable oils or animal fats. It is a clean burning, non-toxic, biodegradable replacement or alternative for petroleum diesel. It is not currently listed as an alternative fuel under the Diesel and Alternative Fuels Grants Scheme.

This form of Biodiesel belongs to a family of fatty acids called methyl esters defined by the medium length C16-18 fatty acid linked chains.

Goods which are produced or manufactured in Australia and on which excise duty is imposed are called "excisable goods". Section 5 of the Act imposes the duties of excise on the goods, which are described in the Schedule to the Act (the Excise Tariff Schedule).

The rates of duty set out in the Excise Tariff Schedule are set by Parliament.

All products subject to excise duty are listed in the Excise Tariff Schedule. Particular products otherwise covered by a general listing are specifically mentioned where they are non-excisable.

The goods described in the Excise Tariff Schedule fall into three broad categories, being petroleum, alcohol and tobacco.

The Excise Tariff Schedule currently imposes excise only on those fuels derived from petroleum (Items 11 and 12) and also on denatured ethanol for use as a fuel in an internal combustion engine (Item 2R).

Unblended biodiesel, produced by the transesterification of vegetable oils or animal fats is not a fuel derived from petroleum nor is it denatured ethanol. As such, it does not fall into any classification in the Excise Tariff Schedule and is therefore not an excisable good.