ATO_Back_331 by panniuniu



                TO THE

             FEBRUARY 2002

                          BACKGROUND DOCUMENT

The Australian Taxation Office

The Australian Taxation Office (ATO) is a statutory authority responsible for the
administration of Australia’s taxation system. With the recent addition of excise
collection to its role, the ATO is the Government’s principal revenue collection
agency. Current collections total approximately $140.6 billion a year, which is 96%
of revenue collected by the Commonwealth.

Since the introduction of the goods and services tax (GST) in 2000, the ATO is also
collecting a significant amount in GST revenue on behalf of the states and
territories, replacing many taxes formerly collected by state and territory revenue

The ATO collaborates extensively with other agencies, both at Commonwealth and
state levels, to ensure the protection of government revenue, the reduction of
benefit fraud, and the implementation of specific government policies.

Since 1999 the ATO has broadened its business responsibilities through the
administration of a number of payment schemes and the new benefit scheme for oil
recyclers (these are discussed further under part 3). These payments totalled
almost $2.7 billion last year.

The ATO not only collects taxes and makes business payments, but also seeks to
ensure that taxpayers have all the necessary information they need to comply with
tax laws in line with service standards contained within the Taxpayers’ Charter.

The ATO also utilises its expertise and community networks to support the delivery
of community benefit programs. In addition to our role in superannuation, we have
significant responsibilities in relation to other schemes, including:

•   Private Health Insurance;
•   Family Assistance Benefits;
•   Higher Education Contribution Scheme (HECS); and
•   Development Allowance Authority.

With the implementation of The New Tax System and Business Tax Reform, the
ATO is in a period of significant change. Our key priorities are:

•   Improving our approaches to compliance to ensure budgeted revenue is
•   Implementing tax reform efficiently with minimal disruption to clients;
•   Addressing revenue leakage through the cash economy and aggressive tax
•   Addressing the revenue challenges posed by globalisation and Internet business
    transactions; and
•   Managing constructive relationships with the community, assisting individuals
    and businesses to understand their tax obligations.

                ATO Background Document: Fuel Taxation Inquiry
                                   February 2002
The administrative structure of the ATO comprises eight business lines, each
managing specific areas of taxation law.         The GST, Large Business and
International, and Excise business lines are responsible for the collection of fuel
taxation revenue, while the Excise area also administers the payment schemes.

                ATO Background Document: Fuel Taxation Inquiry
                                   February 2002

1.1   GST

In July 2000, the Government implemented A New Tax System (ANTS). This reform
dramatically changed the Australian taxation system.

A major element of this system is a goods and services tax (GST) which is a broad-
based tax of 10 per cent on the supply of most goods and services.

GST is paid at each step in the supply chain, with businesses that are registered for
GST charging GST in the price of taxable goods or services they supply. The
business is entitled to claim input tax credits from the ATO for any GST they have
paid for the acquisition of goods or services that relate to the making of taxable or
GST free supplies. The GST liability flows along the supply chain and rests with the
supplier of the taxable goods or services, not the consumer.

All petroleum products attract 10 per cent GST.

1.2   Petroleum Resource Rent Tax

The Petroleum Resource Rent Tax (PRRT) took effect from 15 January 1988. PRRT
applies to all offshore petroleum production, with the exception of the North West
Shelf project area.

PRRT is levied at a rate of 40 per cent and is imposed on the taxable profits relating
to a petroleum project. Taxable profit is calculated from the project’s receipts after
all project and other exploration expenditures have been recovered, and a minimum
return made (as the minimum return allows for financing costs, actual financing
costs are not deductible).

PRRT is paid in quarterly instalments and is administered by the Large Business
and International business line of the ATO.

Through its key features, PRRT is designed to provide a fiscal regime that
encourages the exploration and production of petroleum, while ensuring an
adequate return to the community for the exploitation of its non-renewable
resources. In the 2000-2001 financial year, PRRT collections totalled over $2 billion
– the majority of which came from Bass Strait.

1.3   Excise

The most recent judicial authority on the nature of an excise in Australia is the
decision of the High Court in Ha and Lim v State of New South Wales & Ors; Walter
Hammond & Associates v State of New South Wales & Ors Defendants made on
5 August 1997:

“…duties of excises are taxes on the production, manufacture, sale or distribution
of goods, whether of foreign or domestic origin. Duties of excise are inland taxes in
contradistinction from duties of customs which are taxes on the importation of
goods. Both are taxes on goods, that is to say, they are taxes on some step taken in
dealing with goods.”

                ATO Background Document: Fuel Taxation Inquiry
                                    February 2002
Excise is currently imposed on domestic production of petroleum, oils and
lubricants, tobacco and alcoholic products (other than wine). It is levied on the
production of domestic goods and payment may be deferred until the products
‘enter into home consumption’ – which is usually when the product is available for
sale and removed from the manufacturer’s premises. There is an equivalent
customs duty levied on similar imported goods.

Excise has been levied on a number of commodities since 1901. Collection of excise
is an efficient way to collect taxes as it is applied at the point where the number of
taxpayers is limited, minimising administrative effort.

In the financial year ending 30 June 2001, the total excise collected by the
Commonwealth was $19.3 billion, constituting 13% of total Commonwealth

PART 2               FUEL EXCISE

Excise on petroleum products constituted $11.9 billion in the year ending
30 June 2001, which is 63% of the total revenue from excise.

In the March 2001 quarter, the four major petroleum companies paid 95.1% of
petroleum excise revenue, while 32 smaller clients paid the remaining 4.9%.

Figure 1 illustrates the segments of revenue.

FIGURE 1 – Excise Revenue (for financial year ending 30 June 2001)

                                         Excise revenue - $19 b                         Other Excise revenue - $7.1 b

     Other ATO revenue - $122 b                           Petroleum revenue - $11.9 b

Note: GST revenue is not included in this figure. Crude Oil revenue is included in
“other excisable products” for the purposes of the above illustration.

Crude petroleum oil from all onshore fields and from the North West Shelf fields in
Western Australia is excisable (all other off shore fields are subject to PRRT – see
section 1.2). Production excise duty is a rent on bountiful oil fields and is designed
to compensate the Australian community for natural resources being harvested by
private companies. Excise applies once a field has produced 30 million barrels.
The rates are based on the value of sales of crude oil made in a producing region.

                       ATO Background Document: Fuel Taxation Inquiry
                                        February 2002
Excise on petroleum products has historically been levied at different rates
depending on the intended “end use” of the product. The concessional rate of
excise system structure has three levels:

•   Products for use as fuel in an internal combustion engine (ICE) are taxed at the
    full rate of excise. The principal products used in such applications are petrol
    and diesel;
•   Products for use as fuel in other than an ICE are taxed at a concessional rate.
    The principal products used in such applications are heating oil and kerosene;
•   Products not for use as fuel are excisable at a zero rate. These products include
    solvents and mould release agents.

Certain alternative fuels, such as LPG (liquified petroleum gas) and CNG
(compressed natural gas) are not subject to excise as they are not covered by the
excise tariff. Other products such as biodiesel, when blended with excisable
petroleum products become subject to excise. Ethanol used as a fuel is not subject
to this arrangement and hence the ethanol component of ethanol/petrol blends is
free of excise.

Current excise rates are detailed at Appendix A.


Over time, rebates, subsidies and grants have been introduced to assist certain
industry, business sectors or specific geographic communities. These various
assistance programs are described in this paper as payment schemes. Successive
governments and changing policy priorities have shaped the payment schemes, in
particular the Diesel Fuel Rebate Scheme.

In the financial year ending 30 June 2001, payments made under all payment
schemes totalled almost $2.7 billion.  This amount comprised approximately
500,000 claims made by around 152,400 clients. Not all clients submitted a claim
in the 2000 – 2001 financial year.

These payments were made to clients registered for the Diesel Fuel Rebate Scheme
(DFRS), the Diesel and Alternative Fuels Grants Scheme (DAFGS), the Fuel Sales
Grants Scheme (FSGS) and the Product Stewardship (Oil) Scheme (PSO).

FIGURE 2 – Payment Scheme Profile (for financial year ending 30 June 2001)

Scheme                                   No of         No of     Average       Total
                                        clients       claims    payment/     payments
                                                                 claim ($)     ($m)
Diesel Fuel Rebate Scheme              135,702        216,223        8832      1909.6
Diesel and Alternative Fuels Grants     76,782        239,694        2329       558.3
Fuel Sales Grants Scheme                 4,336         43,081       5134        221.2
Product Stewardship (Oil) Scheme*           34             92     30,434          2.8
Total Excise Business Payments         216,854        499,090      5393        2691.9

                 ATO Background Document: Fuel Taxation Inquiry
                                      February 2002
NB: this table includes only active or operative clients, some of who may not have lodged a claim in the last financial
year. Some clients may also be registered under more than one scheme. The number of claims includes only claims paid.

*Product Stewardship Oil commenced January 2001, thus payments are for January-June 2001 period only.

The Product Grants and Benefits Administration Act 2000 (PGBAA) was developed to
provide a generic framework for the administration of payment schemes
administered by the ATO. Each of these schemes has its own separate entitlement
act, but shares the core administrative and compliance requirements under the
PGBAA. The PGBAA also links to the Taxation Administration Act 1953, thus
aligning specific administrative provisions with wider ATO standards.

Currently the Fuel Sales Grants Scheme (FSGS) and the Product Stewardship (Oil)
Scheme (PSO) are administered under the PGBAA.

The other payment schemes are administered under different legislation, have
different eligibility, guidelines, record keeping requirements and rates. All of the
payment schemes however operate on a self assessment basis. Any entity claiming
a grant or rebate is required to maintain records specific to each scheme to
substantiate their claim.

All payment schemes, except DFRS, are subject to penalties and a general interest
charge (GIC), although the nature of penalties differs across the payment schemes.

All grants and rebates made under payment schemes are considered “income” for
the purposes of other taxation treatments, but are not subject to GST.

The Government has indicated that the DFRS and the DAFGS will be replaced by
the Energy Grants (Credits) Scheme (EGCS). The purpose of the EGCS is to provide
active encouragement for the move to the use of cleaner fuels by measures
additional to those currently outlined in the Diesel and Alternative Fuels Grants
Act 1999.

The EGCS provides an opportunity to streamline the administration of the existing
payment schemes by decreasing the complexity and ambiguities that currently
exist. The streamlining of payment schemes would also reduce the cost of
compliance to the client and increase community confidence in the ATO. The
PGBAA and the work of the Business Redesign Project (see part 6.1.1) moves these
payment schemes closer to the Unified Grants Code and is complemented by the
generic payments system (part 6.1.3).

3.1      Remissions and Refunds

In conjunction with payment schemes there are remission and refund
circumstances relating to petroleum excise, which are prescribed in the Excise
Regulations 1925, most commonly regulation 50.

A remission circumstance is where duty that is payable is foregone or waived. A
refund circumstance means that duty that has been paid is returned to the owner.
Revenue foregone under remissions and refunds during the 2000-2001 financial
year for petroleum products totalled $269 million. Currently there are 46 different
and extremely specific circumstances under which an Excise refund or remission
may be made. The most common circumstances relate to solvent and burner fuel
applications, including “light fuel oil” for burner fuel use, kerosene for some specific
fuel uses, and diesel and petrol substitutes for non fuel uses.

                      ATO Background Document: Fuel Taxation Inquiry
                                                February 2002
There are considerable complexities surrounding this refund and remission system,
which impose administrative burdens on the ATO, suppliers of product and the
460 clients currently holding one or more remission certificates.

3.2   Diesel Fuel Rebate Scheme (DFRS)

The ATO has administered DFRS under the Excise Act 1901 and the
Customs Act 1901 since the transfer of functions from the Australian Customs
Service (this is discussed further in part 4). From July 2000 the scheme was
widened to include rebates for rail and marine transport as well as for the use of
‘like fuels’ such as heavy fuel oil and light fuel oil (primarily used in marine

The scheme effectively means that there is no economic incidence of excise on diesel
and like fuels used for certain off-road purposes by providing a full rebate of excise
and customs duty.

The DFRS commenced in 1982. It replaced a former scheme based on exemption
certificates which dated back to the 1950s. The original scheme provided for diesel
fuel to be purchased duty free for off road use. It appears to have been based on
the policy of not requiring off road users to pay the road user charge (which was the
basis of petroleum excise at that time).

More recently the purpose of this rebate has been to reduce business input costs in
industries such as mining, agriculture, forestry, fishing, rail transport, and marine
transport, consistent with the Government’s broader policy objectives.

The rebate rate per litre varies according to the amount of excise paid and the fuel
type (see attached excise duty rates at Appendix A). Current policy is for the rebate
rate to be set at the actual excise rate. However, the rate at which DFRS is actually
paid is the average of the declared rates applicable on the last day of each of the
preceding 6 months prior to the date of receipt of the claim. This system is
designed to smooth out rate changes and discourage clients from stockpiling claims
to take advantage of new rates. Since the cessation of indexation on petroleum
fuels, the excise duty is currently the same as the rebate paid.

The Deputy Prime Minister, John Anderson, announced on 30 October 2001 the
Government’s plan to extend the Diesel Fuel Rebate Scheme to retail and hospitality
businesses who have no access to the electricity grid. This extension will enable
small retail/hospitality businesses to claim rebates in relation to their commercial
operations. The details of this initiative are currently under consideration.

3.3   Diesel and Alternative Fuels Grants Scheme (DAFGS)

The ATO has administered DAFGS under the Diesel and Alternative Fuels Grants
Scheme Act 1999 since its introduction in July 2000. Generally, the grant is
available to businesses and other entities for the on road use of diesel and
alternative fuels in vehicles that have a gross vehicle mass (GVM) of 4.5 tonnes or
more and are registered for use on public roads. Eligibility is also subject to defined
metropolitan area boundaries.

A grant is payable for all on road business use of diesel and alternative fuels in
vehicles of 20 tonnes GVM or more.

                 ATO Background Document: Fuel Taxation Inquiry
                                    February 2002
For vehicles between 4.5 and 20 tonnes GVM a grant is only payable for diesel and
alternative fuels used in vehicles for transporting passengers and goods on eligible
journeys. Eligible journeys are those undertaken:

•   Between a point outside a metropolitan area and another point outside a
    metropolitan area; and
•   Between a point outside a metropolitan area and a point inside a metropolitan
    area (and vice versa).

The metropolitan areas have been defined by regulation and cover the following:

•   The   Newcastle-Sydney-Wollongong metropolitan area;
•   The   Melbourne-Geelong metropolitan area;
•   The   Sunshine Coast-Brisbane-Gold Coast metropolitan area;
•   The   Perth metropolitan area;
•   The   Adelaide metropolitan area; and
•   The   Canberra metropolitan area.

Vehicles operated by a primary production business, including contractors or sub-
contractors transporting goods solely on behalf of primary production businesses,
are not subject to the metropolitan area limitations applying to vehicles under
20 tonnes.

Buses utilising alternative fuels and emergency vehicles are also not covered by the
metropolitan area limitations.

Fuels eligible for the grant are diesel (including diesel blended with other fuels),
CNG, LPG, recycled waste oil, ethanol and canola oil. A grant rate has not been set
for canola oil or recycled waste oil as these products are not sold in the market
place as fuel. Additional alternative fuels can be prescribed by regulation.

The rate was originally set to reduce the effective excise to a level equivalent to a
notional road user charge of 20 cents per litre. The rate of alternative fuels was
based on maintaining price relativity to diesel at pre GST levels.

A recent amendment to the Diesel and Alternative Fuels Grants Act 1999 allows for
simpler calculation of eligible fuel by replacing the statutory formula with a
regulation making provision that allows for different methods of calculating eligible
fuel to be prescribed.

3.4    Fuel Sales Grants Scheme (FSGS)

The ATO has administered FSGS under the Fuel Sales Grants Act 2000 and the
Product Grants and Benefits Administration Act 2000, since its introduction on
1 July 2000. The scheme was introduced to compensate for the relatively higher
GST component of the pump price of petrol in non-metropolitan and remote areas.

The scheme provides 1 cent and 2 cents per litre grants to non-metropolitan and
remote petrol retailers respectively, and an additional 1 cent per litre grant to
retailers in remote zones where petrol prices are continually over $1.21 per litre.
The scheme was intended to deliver the Government’s promise that the pump price
of petrol need not rise as a result of the introduction of the GST.

                  ATO Background Document: Fuel Taxation Inquiry
                                    February 2002
The grant is passed onto consumers, and its impact is monitored by the Australian
Competition and Consumer Commission (ACCC).

3.5        Product Stewardship (Oil) Scheme (PSO)

The ATO also administers the Product Stewardship (Oil) Scheme. This scheme was
introduced as part of the Measures for a Better Environment package and is
administered by the ATO under the Excise Act 1901, Product Stewardship (Oil)
Act 2000 and the Product Grants and Benefits Administration Act 2000. The
objective of the scheme is to encourage environmentally and economically
sustainable reuse of waste oils.       Environment Australia has the primary
responsibility for the development of policy direction, with the ATO administering
the scheme.

The scheme provides a levy-benefit arrangement. Producers of virgin oils and
lubricants pay a levy by way of an excise, which currently funds the benefit
payments made to recyclers.       This levy is approximately 5.3 cents per
litre/kilogram. The total levy collected for the 2000-2001 financial year was
$11.95 million.

There are six eligible product categories which attract different rates of benefit.
They are:

Item                                     Category                                       Benefit Rate
                                                                                      (cents per litre)
    1      Re-refined base oil (for use as a lubricant or a hydraulic or                    50
           transformer oil)
    2      Other re-refined base oils (for example, chain bar oil)                          10
    3      Diesel fuels (to which the Excise Tariff 1921 applies)                            7
    4      Diesel extenders (filtered, de-watered and de-mineralised)                        5
    5      High grade industrial burner oils (filtered, de-watered and de-                   5
    6      Low grade industrial burner oils (filtered and de-watered)                        3

There is obvious potential for similar levy-benefit arrangements to be introduced for
other waste products.


The collection of excise revenue was the responsibility of the Australian Customs
Service (Customs) until 1998, when the responsibility was transferred to the ATO.
This transfer of function was in accordance with the Taxation Laws Amendment
(Excise Arrangements) Act 2001.

There were a number of functions transferred from Customs to the ATO, including:

•       Administration of the Diesel Fuel Rebate Scheme (DFRS);
•       Responsibility for policy and compliance pertaining                  to   Excise   Revenue
        Collection, including Tobacco, Petroleum and Alcohol;
•       Licensing functions; and
•       Administration of concessional excise arrangements.

                     ATO Background Document: Fuel Taxation Inquiry
                                          February 2002
The transfer has divided responsibility for the Excise Act (administered by the ATO)
and the Customs Act (administered by Customs). Locally produced products
therefore pay duty under the excise arrangements, while equivalent products, if
imported, pay duty under the customs arrangements.

Imported petroleum products are liable for duty of around $1 billion per annum.
However, the vast majority of this product is transferred to the excise regime for use
in further manufacture and thus eventually pays excise duty. Actual customs duty
paid on petroleum products is around only $40 million per annum.

The collection of duty for imported goods is administered by Customs. Those goods
which would be liable for excise if locally produced are referred to by the ATO as
‘excise equivalent goods’ (EEG). While in certain instances equivalent imported
goods can be treated as excisable goods, for the most part the regime for these
goods continues to be separate to that for excisable product.

The division of administration of excise and customs duty for ‘like’ imported
petroleum products has established two administrative agencies with different
legislation, business systems and powers to enforce compliance.        This may
exacerbate inconsistencies in the system with the potential for excise evasion.
Clients have also stated that the requirement to operate under dual systems may
create higher compliance costs than would otherwise be the case.


There are two types of licences and three types of permissions that are relevant to
petroleum excise licensing arrangements.

Customs is responsible for the legislation and policy governing the issue of
Warehouse Licences for storage of imported goods and the ATO is responsible for
the legislation and policy relating to issuing of Excise Manufacture and Storage

Customs Warehouse Licence – allows the storage of all imported goods, including
excise equivalent goods. Customs charges an annual licence fee of $7,000 per
warehouse. This charge reflects the cost of issuing the licence, compliance
including record checks and annual audits.

Excise Manufacturer’s Licence – authorises the licence holder to manufacture
specific excisable products in the premises specified on the licence. All refineries,
as well as other businesses that produce or blend petroleum and oil products are
required to be licensed and pay duty at the appropriate rate. Until recently, an
excise manufacturer’s licence was required to be reviewed on an annual basis and
attracted an annual licence fee of $10.00. This fee was recently removed.

Excise Storage Licence – allows the licence holder to store specific excisable
products on which excise duty has not been paid (underbond goods) that are the
property of the licence holder or another person/company in the premises specified
on the licence. An excise storage licence does not require annual renewal and is
exempt from any fee.

Weekly Settlement Permission - provides for a 7 day cycle – from Monday to Monday
for excise due and payable on manufacture of an excisable product. This allows the

                ATO Background Document: Fuel Taxation Inquiry
                                    February 2002
delivery of certain goods into home consumption without having to lodge an entry
or pay the excise duty liable until the Monday following delivery. Currently, all
petroleum companies pay duty under this permission. Requests for permission are
made to the ATO in writing. The permissions are renewed on an annual basis.

Single Transaction Permission – allows the one off movement of underbond
excisable goods from one licensed premises to another licensed premises as
specified in the permission. Each time goods are moved an application form is
required to be lodged with the ATO and approval granted prior to the movement of
goods. While the goods are moved underbond they remain the responsibility of the
licensee. The duty liability for these goods transfers to the receiving bond once the
goods are received and written into the records of that bond.

Continuing Permission – allows the movement of goods underbond on a regular or
continuing basis between licensed premises as specified in the schedule of the
permission without the need to approach the ATO for individual authority in each
case. Continuing Permission does not require an annual renewal, however request
to amend the schedule must be made in writing.

Previously, licensing operations were centralised with the Excise Licensing Group
located in Sydney. A recent review recommended that the function be decentralised
and placed with the individual Industry Groups of petroleum, alcohol and tobacco.
This recommendation has been accepted and implemented and the Petroleum
Industry Group in Melbourne is responsible for all petroleum excise licensing.
Although responsibility for excise licensing is with the ATO, licences continue to be
produced using a Customs IT system until excise collections are transferred to ATO
business systems (discussed further in 6.1.2).


The transfer of excise functions from the Australian Customs Service to the
Australian Taxation Office, along with increasing demands for reform of what was
widely acknowledged to be an outdated legislative and administrative system, has
resulted in the development of a modernised business plan for excise. Current and
future reforms reflect the principles of the Taypayers’ Charter, the ATO Compliance
Model and A New Tax Office for A New Tax System, with the aim of integrating with
generic ATO systems and procedures wherever possible.

The reforms are also cognisant of industry developments and the need to minimise
excise clients’ compliance costs. The aim is to reflect modern administrative
practices and commercial reality wherever possible.

The modernisation of excise business will be incremental. Some reforms, such as
those described below, will be implemented in the short term, while more complex
changes will require longer term planning and design.

                ATO Background Document: Fuel Taxation Inquiry
                                   February 2002
6.1    Current reforms

6.1.1 Business Redesign Project

This project was developed to guide the transition of current and new excise
activities to a new excise business model that encompasses the Excise Business
Principles. The new Excise business model is based on the ATO’s assurance model
which takes a risk based, self assessment approach to taxation.

The new approach is based upon the use of systematic client profiling to achieve a
breakthrough in managing risk. Together with a new, differentiated automated
treatment regime, the approach is aimed at reducing compliance costs for taxpayers
and also achieving cost reductions in ATO processing. A further objective of the
approach is to support a flexible and quick response to government in
implementing new payment and revenue schemes.

The new model is aimed at developing the capability to deal with ATO clients as
individuals differentiated on the basis of their behaviour, risk assessment and
preferred methods of interaction with the ATO. The approach also involves a more
rigorous application of the Taxpayers' Charter and the ATO Compliance Model in
providing an alternative model for client interaction with the ATO. Promoting
community confidence is also a key aspect of the proposed approach.

The main focus at this time is on the development of designs for client profiles and
risk processes which are capable of providing the level of compliance assurance
required to support implementation of differentiated service to Excise clients.

The project is in the early phases of a proof of concept and if these concepts bear
fruit they will:

•   decrease the effort and cost of compliance for both clients and the ATO;
•   provide a more tailored and choice based interaction between the client and the
    ATO; and
•   provide an increased service focus.

6.1.2 Excise Collections Project

Although responsibility for excise business was transferred to the ATO in 1999,
Customs continues to process the excise revenue on Customs IT systems under an
administrative arrangement with the ATO. The ATO has initiated the Excise
Collections System Project to develop the ATO’s IT system and business process
capability for excise collections. This new business processes and information
technology system will provide a range of benefits to clients, the ATO and to

As part of the change process, excise business processes and policies will be
adapted to the ATO environment. This includes alignment with the Taxpayers’
Charter, the ATO Compliance Model and the Excise Business Principles. These
principles actively promote self assessment, minimising transactions, and ease of
client interactions.

The new system will simplify and streamline the excise collection function. It will
facilitate the analysis of data and improve the risk assessment processes. The

                ATO Background Document: Fuel Taxation Inquiry
                                   February 2002
system will automate processes which are currently largely manual and will allow
for the provision of an electronic service to clients.

There will be a number of different business processes which will facilitate ease of
interaction with the ATO for clients. The options that will be available include
electronic options, particularly web based and the business to government
approach, for submitting returns and claims.

New forms are being developed with the same look and feel of other ATO forms. To
accompany the new forms, a comprehensive guide will be available to assist clients
to complete the forms step by step if needed.

A comprehensive client education program covering the new excise collection
system will be launched in May 2002. Phase one of the Excise Collection Project is
scheduled for implementation in July 2002.

6.1.3 Generic Payments System

Excise has developed a Unified Grants Code legislative framework for the payment
of grants. This is complemented by the Generic Payments System (GPS) IT system
built for processing claims and which provides for the ongoing administration of
three existing Excise Grant/Rebate schemes – DFRS, FSGS and PSO.

The benefits of GPS for clients are:

•   Standardised processes, including forms, offering consistency to clients; and
•   Access to the Electronic Lodgement Service and Electronic Commerce Interface
    for claims.

The benefits of GPS for administration of payment schemes are:

•   A ‘whole of client’ approach for management of Excise clients;
•   Ability for Industry Groups to reduce compliance costs through more
    sophisticated reporting mechanisms;
•   A single Excise workforce for administration of the schemes – allows multi
    skilling and mobility to cater for peaks and troughs;
•   Maximising the use of the ATO registry workforce to process all scheme
    registration; and
•   Ability to implement system changes and adopt new schemes rapidly.

6.1.4 eGrant

eGrant is a new way of claiming grants and rebates. It is being developed initially
for DAFGS clients. eGrant reflects the technology developments and trends that
exist in modern business.

The purpose of eGrant is to simplify the claims process for clients, by providing an
opportunity to move from preparing paper claims to using an automatic ‘Point of
Sale’ based process.       The major objective of eGrant is to capture ‘natural
transactions’ thereby removing the need for clients to prepare and lodge claim
forms. The initial mechanism for capturing ‘Point of Sale’ information will be a fuel
card, however, any mechanism that can capture information on the fuel transaction
at the point of sale could be used.

                 ATO Background Document: Fuel Taxation Inquiry
                                       February 2002
Clients can then authorise their fuel card provider(s) to pass the details of their
eligible fuel transactions to the ATO.

The fuel transaction information will be forwarded to the ATO by the fuel card
provider as part of the fuel card provider’s regular invoicing cycle. The ATO will use
this information to construct claims and make subsequent payments to clients.

The majority of fuel card holders are on monthly invoicing cycles. Clients who use
eGrant will see improved cash flow as their payments will generally be received
before they pay for their fuel.

Fuel card providers have been invited to participate in eGrant and have been
provided with detailed specifications.

The first release of eGrant (a pilot for DAFGS clients) will commence in April 2002.

6.2   Future reforms

There has been widespread support over the past decade for simplification and
transparency in regard to tax legislation (Taxation Law Improvement Project, A New
Tax System and the Review of Business Taxation or “Ralph Report”). The excise
legislation is 100 years old. It is complex and does not reflect contemporary
administrative practices. The modernisation of this legislation, in line with the
principles articulated in the above reports, is considered necessary to promote
simplicity, certainty and lower compliance costs for both government and industry.

Work is underway on designing a simple, overarching legislative framework,
comprising both revenue collection and business payments regimes, which applies
a consistent administrative philosophy, and provides the flexibility necessary to
accommodate new policy initiatives and changing industry practices.

Currently the ATO is identifying the features of an improved administrative model,
and will be consulting with clients in the near future about possible models.

It is expected that implementation will be undertaken in an incremental manner
over the next 2-3 years.

                ATO Background Document: Fuel Taxation Inquiry
                                    February 2002

Excise Duty Rates effective on and from 1 February 2002
    Duty rates applying to Excise Items following the December 2001 CPI
    Effective on and from 1 February 2002
                                                                     June 2001 index             133.8
                                                                     December 2001               135.4
                                                                            index no.
                                                                              Factor             1.012

    Item            Commodity                                           Unit*           Old Rate         New Rate

    Beer and other Excisable Beverages < or = 10% alc/vol
    1C1a            Beer, in individual containers not exceeding          La                $    44.92   $       45.46
                    48 litres, not exceeding 3% by volume of
    1C1b            Beer, in individual containers not exceeding          La                $    38.13   $       38.59
                    48 litres, exceeding 3% but not exceeding
                    3.5% by volume of alcohol
    1C1c            Beer, in individual containers not exceeding          La            $        32.83   $       33.22
                    48 litres, exceeding 3.5% by volume of alcohol
    1C2a            Beer, in individual containers exceeding 48           La            $       16.26    $       16.46
                    litres, not exceeding 3% by volume of alcohol
    1C2b            Beer, in individual containers exceeding 48           La                $    17.66       $    17.87
                    litres , exceeding 3% but not exceeding 3.5%
                    by volume of alcohol
    1C2c            Beer, in individual containers exceeding 48           La                $    23.11       $    23.39
                    litres, exceeding 3.5% by volume of alcohol
    1D              Other excisable beverages, of an alcoholic            La                $    32.83       $    33.22
                    strength not exceeding 10%

    Spirits and other Excisable Beverages > 10% alc/vol
    2A              Brandy                                                La            $       51.92    $       52.54
    2C              Fruit Brandy                                          La             $       55.60   $       56.27
    2D              Whisky                                                La            $       55.60    $       56.27
    2F              Rum                                                   La             $       55.60   $       56.27
    2G              Liqueurs                                              La            $       55.60    $       56.27
    2H              Other excisable beverages, of an alcoholic            La            $       55.60    $       56.27
                    strength exceeding 10%
    2O              Spirits, not elsewhere included                       La            $       55.60    $       56.27

    Tobacco Products
    6A              Tobacco, in stick form not exceeding 0.8              no            $ 0.20645        $ 0.20893
                    grams per stick tobacco content
    6B              Tobacco, other                                        kg            $ 258.06         $ 261.16
    7A              Cigars, in stick form not exceeding 0.8 grams         no            $ 0.20645        $ 0.20893
                    per stick tobacco content
    7B              Cigars, other                                         kg            $ 258.06         $ 261.16
    8A              Cigarettes, not exceeding 0.8 grams per stick         no             $ 0.20645       $ 0.20893
                    tobacco content
    8B              Cigarettes, other                                     kg            $ 258.06         $ 261.16
    9               Snuff                                                 kg            $   2.10         $   2.13

    Heating Oil and Kerosenes
    11A             Kerosene, for use as aircraft fuel                    Li            $ 0.02845        $ 0.02845
    11B1a           Kerosene, for use as fuel in an internal              Li            $ 0.38143        $ 0.38143
                    combustion engine ("ICE")
    11B1b           Kerosene, for use as fuel other than in an ICE        Li            $ 0.07557        $ 0.07557

                   ATO Background Document: Fuel Taxation Inquiry
                                                February 2002
11B2a           Heating oil and kerosene for use as fuel in an    Li   $ 0.38143   $ 0.38143
11B2b           Heating oil and kerosene containing marker        Li   $ 0.07557   $ 0.07557
                for use as fuel other than in an ICE

11B2d           Heating oil and kerosene, other                   Li   $ 0.38143   $ 0.38143

Diesel and Fuel Oil
11C1a           Diesel                                            Li   $ 0.38143   $ 0.38143
11C2a           Diesel, in packages exceeding 210 Li              Li   $ 0.38143   $ 0.38143
11D             Fuel Oil                                          Li   $ 0.07557   $ 0.07557

Condensate, Stabilised Crude and Topped Crude
11E1            Condensate, for use as fuel in an ICE             Li   $ 0.38143   $ 0.38143
11E2            Condensate, containing marker for use as fuel     Li   $ 0.07557   $ 0.07557
                other than in an ICE
11E4            Condensate, other                                 Li   $ 0.38143   $ 0.38143
11F1            Stabilised crude petroleum oil, for use as fuel   Li   $ 0.38143   $ 0.38143
                in an ICE
11F2            Stabilised crude petroleum oil, containing        Li   $ 0.07557   $ 0.07557
                marker for use as fuel other than in an ICE

11F4            Stabilised crude petroleum oil, other             Li   $ 0.38143   $ 0.38143
11G2            Topped crude petroleum oil, for use as fuel in    Li   $ 0.38143   $ 0.38143
                an ICE
11G3            Topped crude petroleum oil, containing            Li   $ 0.07557   $ 0.07557
                marker for use as fuel other than in an ICE

11G5            Topped crude petroleum oil, other                 Li   $ 0.38143   $ 0.38143

Gasoline/Other Petroleum or Shale Spirit
11H1a           For use as fuel in aircraft                       Li   $ 0.02808   $ 0.02808
11H1b           Lead content exceeding 13 m/Li, for use as        Li   $ 0.40516   $ 0.40516
                fuel other than in an aircraft
11H1c           Lead content not exceeding 13 m/Li, for use       Li   $ 0.38143   $ 0.38143
                as fuel other than in an aircraft
11H1d           For other use                                     Li   $ 0.38143   $ 0.38143
11H2a           For use as fuel in aircraft                       Li   $ 0.02808   $ 0.02808
11H2b           Lead content exceeding 13 m/Li, for use as        Li   $ 0.40516   $ 0.40516
                fuel other than in an aircraft
11H2c           Lead content not exceeding 13 m/Li, for use       Li   $ 0.38143   $ 0.38143
                as fuel other than in an aircraft
11H2e           Other, lead content exceeding 13m/Li              Li   $ 0.40516   $ 0.40516
11H2f           Other, lead content not exceeding 13m/Li          Li   $ 0.38143   $ 0.38143

Other refined or partly refined petroleum products, etc.
11I1b(ii)       Recycled, nei, for use as fuel in an ICE          Li   $ 0.38143   $ 0.38143
11I2a           Other petroleum products, for use as fuel in      Li   $ 0.38143   $ 0.38143
                an ICE
11I2b           Other petroleum products, for use as fuel         Li   $ 0.07557   $ 0.07557
                other than in an ICE
11I3a           Other petroleum products, for use as fuel in      Li   $ 0.38143   $ 0.38143
                an ICE
11I3b           Other petroleum products, containing marker,      Li   $ 0.07557   $ 0.07557
                for use as fuel other than in an ICE

11I3d           Other petroleum products                          Li   $ 0.38143   $ 0.38143

                ATO Background Document: Fuel Taxation Inquiry
                                             February 2002
Coal tar and coke oven distillates, etc
11J1a            Lead content exceeding 13 m/Li             Li   $ 0.40516   $ 0.40516
11J1b            Lead content not exceeding 13 m/Li         Li   $ 0.38143   $ 0.38143
11J2a            Lead content exceeding 13 m/Li             Li   $ 0.40516   $ 0.40516
11J2b            Lead content not exceeding 13m/Li          Li   $ 0.38143   $ 0.38143

Petroleum based oils and lubricants, not for use as fuel
15A              Oils, excluding greases                    Li   $ 0.05299    $0.05363
15B              Recycled oils, excluding greases           Li   $ 0.05299    $0.05363
15C              Greases                                    Kg   $ 0.05299    $0.05363
15D              Recycled greases                           Kg   $ 0.05299    $0.05363

                ATO Background Document: Fuel Taxation Inquiry
                                            February 2002


!   Excise Act 1901 (and regulations)
!   Excise Tariff Act 1921
!   Fuel (Penalty Surcharge) Administration Act 1997
!   Fuel Sales (Penalty Surcharge) Act 1997
!   Fuel Misuse (Penalty Surcharge) Act 1997
!   Fuel Blending (Penalty Surcharge) Act 1997
!   Product Stewardship (Oil) Act 2000
!   Product Grants and Benefits Administration Act 2000
!   Diesel and Alternative Fuels Grants Act 1999 (and regulations)
!   Fuel Sales Grants Scheme Act 2000 (and regulations)
!   Coal Excise Act 1949

                 ATO Background Document: Fuel Taxation Inquiry
                                    February 2002


Excise is designing and implementing a self-assessment based payment and
collection system that:

!   Minimises our involvement in transactions;
!   Maximises the ease of client interaction; and
!   Provides assurance to clients, community and government that the system is
    working effectively and is sustainable.


Self-Assessment means:

!   We expect our clients to tell us what they think they should pay/get paid;
!   We will pay or collect from them subject to our assurance plan.

Minimise our involvement in transactions means:

!   We will leverage off existing information sources including client transactions
    with government, and have a seamless information gathering client interface;
!   We will minimise manual transactions.

Ease of client interaction means:

!   Clients will be provided with a choice of ways to interact with the ATO;
!   We will link with existing internal and external systems to avoid overt additional
    transactions for the client;
!   We will provide our clients with tools and resources to help them;
!   We will minimise the amount of material required from clients subject to our
    assurance plan.

Assurance means:

!   The ATO and others are confident that systems perform to defined standards.
    This broadly means:

    !   People receive the right money;
    !   People pay the right money.

This will be achieved by:

!   Relying on self-assessment data supported by testing;
!   Using a variety of information sources to ensure health of the system;
!   Embedding assurance processes, building them from start to finish;
!   Building a separate capability to provide confidence based on risk criteria.

                  ATO Background Document: Fuel Taxation Inquiry
                                     February 2002

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