On the 7 April 2008 Assistant Treasurer and Minister for
Competition Policy and Consumer Affairs, Chris Bowen, released
exposure draft legislation and commentary for the Carbon Pollution
Reduction Scheme (CPRS) Fuel Tax Adjustment Arrangements (the
The purpose of the draft legislation is to institute a
cent-for–cent reduction in the current rate of fuel
excise (and customs) duty based on the price effect that Carbon
Pollution Reduction Scheme ("CPRS") will have on the
price of fuel. If the draft legislation is passed the duty
reduction will commence on 1 July 2010.
The broad mechanics of the draft legislation allow for a
reduction of the excise duty based on the average Australian
emissions unit auction charge ('average unit charge')
established in the first half of 2010 through emissions unit
auctions. In should be highlighted that the rate reduction is
specifically based on the impact that CPRS will have on diesel
price. Given diesel emits more carbon than petrol the fuel tax cut
will provide more than 'cent-for-cent' assistance for
Businesses that use fuels in the certain activities (e.g. marine
transport, fishing, rail transport agriculture and mining) are
currently shielded from the price impact of excise through the
operation of the fuel tax credit ("FTC") regime.
Furthermore, partial shielding is provided for other activities
such as for road transport (excluding vehicles with a GVM less than
4.5 tonne) As such, while private road users will have the price
effect of CPRS on fuel negated via the cent-for-cent reduction of
excise most business users will pay the cost of the average unit
The draft legislation provides shielding to certain industry
from the price impact of CPRS. It does this by allowing certain
industries and end users a special (and transitional) CPRS credit.
Essentially this CPRS credit will offset the price increase as a
result of CPRS and will be calculated in a similar way to the
cent-for-cent reduction in the duty. This shield is limited in its
protection as the CPRS credit (at this stage) will only be extended
to the following industries / users:
Heavy on-road vehicle users; and
Users of LPG, LNG and CNG
We also note that the explanatory memorandum to the draft
legislation explains that this CPRS credit may only be temporary
and will be reviewed after one year in respect of Heavy on-road
vehicles, CNG LNG users and after three years in relation to the
Agriculture and Fishing industry and LPG users.
The explanatory memorandum does not provide any reason for the
decision not to extend the protection afforded to the Agriculture
Fishing and Heavy on-road vehicle users to other industries such as
This means other business using fuel in activities that are
entitled to the full rate FTC (i.e. 38.143 cents), including those
performing transport and logistics services via sea (i.e. the bulk
of the shipping industry) will not be able to claim a CPRS credit
on fuel. Consequently, the shipping / marine transport industry
will be full exposed to the price effect of CPRS.
During the transitional phase businesses operating in the
shipping industry will be disadvantaged compared to operators of
road freight and transport.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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