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Australia Reaches Deal On Fuel Excise Indexation

by Mary Swire,, Hong Kong

25 June 2015

The Australian Government has confirmed that fuel excise will increase twice a year and in line with the Consumer Price Index.

The Government has reached an agreement with the Opposition on the proposed re-introduction of the indexation of fuel excise to inflation. This policy, announced in the 2014 Budget, is currently implemented by a 12-month tariff proposal. The passage of new legislation will make the policy permanent, and the rates will increase in February and August.

In a joint release, Treasurer Joe Hockey, Deputy Prime Minister Warren Truss, and Finance Minister Mathias Cormann said: "For a typical household consuming 50 liters of fuel per week, the current impact is estimated at 40 cents per week. While the impact on individual households is modest, this measure will provide a predictable and growing source of revenue which will help the Government boost its investment in job creation and productivity enhancing road infrastructure."

"The measure is expected to raise AUD3.6bn (USD2.78bn) over five years to the end of 2018-19, and AUD23bn over the next decade. All excise increases will be dedicated to road infrastructure."

Last week, the Government announced that it had concluded a deal with Labor on a series of gradual increases to the excise duty rate on domestically produced ethanol from July 1, 2016. Originally proposed in the 2014 Budget, the increases were intended to take place over the course of five years, until the rate reached 12.5 cents per liter. The excise rate for biodiesel was to be increased over five years from July 1, 2016, until it reached 50 percent of the energy content equivalent tax rate.

Hockey explained that the Government will phase in the excise payment for biodiesel producers in equal increments over 16 years, from a zero rate in 2015-16 to a final rate of approximately 50 percent of the full petrol and diesel excise rate in 2030-31.

TAGS: tax | investment | energy | Australia | excise duty | ministry of finance | legislation | tax rates | tax reform | inflation

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