Fuel Sales Grants Scheme: eligibility

Is it necessary for excise duty to have been paid on fuel, for that fuel to meet the definition of fuel in section 4 of the Fuel Sales Grants Act 2000 (FSGA)?

No. It is not necessary for duty to have been paid on fuel for the fuel to meet the definition of fuel in section 4 of the FSGA.

Entity A is a fuel distributor and retailer which routinely makes sales of petroleum products on which excise duty has been paid. Entity A receives the fuel sales grants for eligible sales of petroleum products.

Entity A also sells petroleum products on which duty has not been paid. In this case, Entity B purchased a quantity of a diesel product from Entity A. No duty was paid on the fuel. Entity B intends to pay the duty when it enters the fuel for home consumption at a future time.

Entity B is not a fuel retailer. However Entity B is licensed under the Excise Act 1901 . Therefore Entity B is entitled to obtain and store petroleum products on which no duty has been paid.

If Entity A had entered the fuel immediately before the sale to Entity B, it would have classified the fuel to Item 11(C)(1) of the Schedule to the Excise Tariff Act 1921 (ETA).

One of the criteria for eligibility for the fuel sales grant is that the relevant fuel must fall within the definition of 'fuel' in section 4 of the FSGA which states: fuel means goods covered by: (a) gasoline or diesel classified to item 11 or 12 of the Schedule to the Excise Tariff for use as fuel otherwise than in aircraft; or (b) gasoline or diesel that would be classified to item 11 or 12 of the Schedule to the Excise Tariff if it had been produced in Australia for use as fuel otherwise than in aircraft; or (c) any other goods prescribed for the purposes of this definition.

There are no goods prescribed for the purposes of the definition so the test is whether the relevant fuel product is 'classified' to item 11 or 12 of the Schedule to the ETA at the time of the sale to Entity B.

For the purposes of the ETA duty is imposed by section 5 of that Act on goods, manufactured in Australia, dutiable under the Schedule to that Act. Thus it is necessary to 'classify' goods to the Schedule before it can be determined that duty is payable on the goods. Whether or not the duty has been paid is not a consideration in determining whether the goods are classified to an item of the Schedule to the ETA.

The FSGA does not mention whether duty must be paid on particular fuel for that fuel to meet the definition of fuel in subsection 4(1) of the FSGA. In the Explanatory Memorandum to the Fuel Sales Grant Bill 2000 under the heading 'Context of the Reform' the following is stated: 1.2 As announced in the ANTS tax reform document, the Government will be reducing excise on petrol and diesel on 1 July 2000, to ensure that prices to consumers need not arise on the introduction of the GST. 1.3 By this Bill, the Government proposes a fuel sales grants scheme targeted at consumers in non-metropolitan and remote areas. Grants will be paid at a higher rate for sales to consumers in remote areas. The grant scheme will address the divergence in fuel prices between metropolitan and regional areas.

In relation to the definition of fuel the Explanatory Memorandum to the Fuel Sales Grant Bill 2000 says: 'The term "fuel" is defined by reference to products classified in the Excise Tariff.'

The policy objective of the fuels sales grant is also explained in the Explanatory Statement to the Fuel Sales Grant Regulations 2000. It says: 1. Policy Objective The Government announced in Tax Reform: Not a New Tax - A New Tax System that excise on petrol and diesel will be reduced so that the pump price of these commodities need not rise with the introduction of the GST. Petrol and diesel prices in non-metropolitan and remote areas are generally higher than those in metropolitan areas. Under the Fuel Sales Grants Scheme a grant rate of one cent per litre will be paid for sales of petrol and diesel to consumers in non-metropolitan areas, with a two cents per litre grant provided for sales in remote areas. For isolated cases where fuel prices are beyond $1.20 per litre in remote areas, fuel retailers may apply to the ATO for an additional grant. The grants scheme will help address the fuel price divergence between city and regional areas and will apply to eligible sales made after 30 June 2000. Taken with the excise reduction, these measures will ensure that the Government's price commitment is met.

Thus the fuel sales grant is intended to address the price difference for petrol and diesel between city and regional areas. The price difference is not as a result of the excise paid as the excise paid is the same. Therefore whether excise duty has been paid on petrol or diesel before it is sold in an eligible location is not a factor in determining eligibility for fuel sales grant.

It is therefore not necessary for excise duty to have been paid on petrol or diesel before it is sold in an eligible location for the petrol or diesel to meet the definition of fuel in section 4 of the FSGA.