Biodiesel Excise Requirements - Preliminary Information

BAA, along with other industry representatives, met with representatives of the Australian Taxation Office in Sydney on 1 October 2003 to be briefed on biodiesel excise licensing and the cleaner fuels grants scheme.

It must be stressed that this information is based on bills introduced to Parliament on 11 September 2003. This information is subject to change based on the actual legislation passed by the Parliament

What is an excise licence for biodiesel?

An excise licence allows you to conduct certain activities in relation to excisable products - such as manufacture or storage.

There are two types of licences relevant for biodiesel:

• an excise manufacturer's licence - this allows you to manufacture and store biodiesel
• a licence to store excisable goods - this allows you to store biodiesel

What is the rate of excise?

$0.38143 per litre

Who needs an excise licence?

You need to hold the relevant excise licence if you intend to conduct, or are conducting any of the following:

• manufacturing biodiesel for personal or commercial use in diesel (internal combustion) engines
• blending or storing biodiesel (blending is considered to be manufacture) for use in diesel engines
• blending duty paid biodiesel with any other fuel for use in biodiesel engines

In July 2003, BAA argued that there should be a personal use exemption, similar to the situation with home brew beer), or at least a minimum quantity consideration before the imposition of an excise on biodiesel. We further argued that there should be no excise applicable to biodiesel in commercial quantities and that the 2008 end of full excise offset would be far too early for the industry to remain commercially viable. The no excise argument was met with a point blank "NO" as government policy in relation to all fuels for use in internal combustion engines is well established and this brings biodiesel into line with other fuels.

The personal use manufacture arguments were met with response that home brew beer is the only "excisable" product that is exempt from the excise net. Home manufactured wine and spirits, or home grown tobacco, no matter how small the quantity involved. Treasury held this line with biodiesel and there are no personal use or small manufacture excise exemptions.

What does this mean to me as a personal use producer?

The legislation, as it stands, will require you to have a licence to make even one litre of biodiesel for use in a diesel engine. This applies even when you make it for your own use or you make it and give it away to your friends. And you will have to send $0.38143 excise duty per litre produced to the ATO, at intervals agreed with the ATO.

But the Cleaner Grants Fuel Scheme provides for an offsetting grant of $0.38143 excise duty per litre. Can I offset the grant against the excise duty payable?

The ATO (responsible for collecting the excise duty) has devised arrangements with Environment Australia (responsible for providing the cleaner fuels grant) to enable transfer of grant credits to pay excise liability.

But here is the catch. The ATO, for the purpose of the Excise Tariff Act 1921, defines biodiesel as:

• fuel for use in an internal combustion engine and
• manufactured by chemically altering vegetable oils or animal fats (including recycled oils from these sources) to form mono-alkyl esters.

The ATO is NOT CONCERNED with the quality of the biodiesel you produce. Whatever you produce is excisable when you transfer it to home consumption. ie use it or sell it to a retailer or final user.

However, eligibility for the offsetting cleaner fuels grant carries the following conditions.

• you hold a biodiesel excise licence
• you enter the biodiesel for home consumption
• the biodiesel meets the standard (introduced 18 September 2003) defined by the Department of Environment and Heritage incorporated in the Fuel Quality Standards Act 2000
• you use it in a diesel engine or sell it for use in a diesel engine by a non licensed entity.

At this stage, we have been unable to determine what documentation will be require by either the ATO or the Department of Environment and Heritage to satisfy them that the biodiesel in question meets the stipulated fuel quality standard.

If you have any doubts as to your excise obligations or your grant eligibility, we suggest that you contact the Australian Taxation Office on 1300 657 162 and discuss with them. You should also obtain copies of the two guides

•  "Meeting Your BIODIESEL Obligations - A Guide" (Reference NAT 9885-9.2003) and
• "The Cleaner Fuels Grants Scheme - A Guide" (NAT 9886-9.2003)

ATO advise that these guides will be available for download from their website http://www.ato.gov.au in the very near future.

For the latest information, go to the ATO website http://www.ato.gov.au and search for biodiesel in the site search at the top of the ATO page