Chapter 3: Tax expenditures

Date

28 August 2012

3.7 Consumption tax benchmark

The Australian Government imposes taxes on consumption of particular goods, services or activities. The tax base for the consumption tax benchmark is made up of four components.

The commodity and other indirect taxes benchmark relates to the consumption of fuel (or energy), tobacco, types of alcoholic beverages, motor vehicles and other indirect taxes.
The customs duty benchmark relates to the importation of goods into Australia.
The natural resource tax benchmark relates to the extraction and production of Australia's natural resources.
The goods and services tax benchmark relates to the final consumption of goods and services by households.

Commodity and other indirect taxes

Commodity taxes include volumetric taxes on the consumption of tobacco, fuel, beer, spirits (and equivalent imports), and ad valorem taxes on the consumption of wine and luxury cars. These taxes are imposed at either the retail, manufacture or importation stage. Other indirect taxes covered by this benchmark include the Passenger Movement Charge and agricultural levies.

For these taxes, the benchmark comprises:

either the value or quantity of the commodity sold as the tax base;
the rate of tax that applies to the price or quantity of the commodity sold as the tax rate; and
the entity that has the legal obligation to pay the tax as the tax unit.

Commodity taxes also include customs duties on goods imported into Australia. The benchmark for customs duties comprises goods imported into Australia are free from customs duty, except to the extent that the customs duty imposed is equivalent to taxes imposed on domestically produced goods, such as excise equivalent customs duties.

Tax expenditures for agriculture, forestry and fishing

F1 Primary industry levies - exemptions for small and large producers

Agriculture, forestry and fishing ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
*	*	*	*	*	*		*		*
Tax expenditure type:		Exemption				2009 TES code:		New
Estimate Reliability:		Not Applicable				* Category		1+
Commencement date:		Introduced before 1985				Expiry date:
Legislative reference:		Primary Industries (Customs) Charges Act 1999 Primary Industries (Excise) Levies Act 1999

Certain producers are exempt from primary industry levies. While the specific exemptions differ on a commodity by commodity basis, they are all in some way related to the quantity or value of the particular commodity produced in a given year.

Tax expenditures for transport and communications

F2 Exemptions under the Passenger Movement Charge

Transport and communication ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
30	30	40	40	40	40		50		50
Tax expenditure type:		Exemption				2009 TES code:		New
Estimate Reliability:		Medium - High
Commencement date:		1978				Expiry date:
Legislative reference:		Passenger Movement Charge Act 1978

Certain passengers are exempt from the Passenger Movement Charge.

Fuel

F3 Concessional rate of excise levied on aviation gasoline and aviation turbine fuel

Fuel and energy ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
860	950	970	980	1,000	1,050		1,100		1,150
Tax expenditure type:		Concessional rate				2009 TES code:		F3
Estimate Reliability:		Low
Commencement date:		15 March 1956				Expiry date:
Legislative reference:		Item 10 of the Schedule to the Excise Tariff Act 1921

Aviation gasoline and aviation turbine fuel are subject to a lower rate of excise than the benchmark rate. Aviation gasoline and aviation turbine fuel are currently excised at 3.556 cents per litre. Excise on aviation fuel has been used to fund the provision of air services by the Australian Government. Excise on aviation fuel is currently directed to the funding of the Civil Aviation Safety Authority.

F4 Excise levied on fuel oil, heating oil and kerosene

Fuel and energy ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
-415	-435	-440	-455	-490	-530		-560		-585
Tax expenditure type:		Increased rate				2009 TES code:		F4
Estimate Reliability:		Medium
Commencement date:		1983				Expiry date:
Legislative reference:		Item 10 of the Schedule to the Excise Tariff Act 1921

The benchmark excise for fuels consumed for a purpose other than in an internal combustion engine is zero.

Since 1 July
2006, fuel oil, heating oil, and kerosene have been subject to an excise of 38.143 cents per litre. Users of these products are eligible for a fuel tax credit of 38.143 cents per litre that effectively removes the incidence of excise. The tax expenditure estimates do not include the impact of fuel tax credits which are reported as an expenditure program for budget purposes.

F5 Excise levied on fuel products used for purposes other than as fuel

Fuel and energy ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
-60	-65	-55	-55	-55	-55		-55		-55
Tax expenditure type:		Increased rate				2009 TES code:		F5
Estimate Reliability:		Medium - Low
Commencement date:		1 July 2006				Expiry date:
Legislative reference:		Item 10 of the Schedule to the Excise Tariff Act 1921

Since 1 July 2006, fuels consumed for a purpose other than in an internal combustion engine (such as toluene used as a solvent) are subject to excise of 38.143 cents per litre. Business users of these products are eligible for a fuel tax credit of 38.143 cents per litre that effectively removes the incidence of excise. The tax expenditure estimates do not include the impact of fuel tax credits which are reported as an expenditure program for budget purposes.

F6 Exemption from excise for 'alternative fuels'

Fuel and energy ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
660	590	580	530	550	320		350		370
Tax expenditure type:		Exemption, Increased rate				2009 TES code:		F6
Estimate Reliability:		Low
Commencement date:		1985				Expiry date:
Legislative reference:		Excise Tariff Act 1921

The benchmark rates for alternative fuels vary depending on energy content but currently the bio-fuels (ethanol and biodiesel) fuel tax rate is based upon the fossil fuel rate. This gives rise to a negative tax expenditure for ethanol which is taxed at a higher rate than its benchmark. The gaseous fuels (liquefied petroleum gas, liquefied natural gas and compressed natural gas) are exempt from fuel tax.

The estimates do not include the impact of the Energy Grants Cleaner Fuels Scheme (EGCFS) and the Ethanol Production Grants which are reported as expenditure programs for budget purposes.

Tobacco

F7 Higher rate of excise levied on cigarettes not exceeding 0.8 grams of tobacco

Health ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
-1,315	-1,375	-1,380	-1,385	-1,530	-1,570		-1,610		-1,680
Tax expenditure type:		Increased rate				2009 TES code:		F7
Estimate Reliability:		Medium
Commencement date:		1999				Expiry date:
Legislative reference:		Item 5 of the Schedule to the Excise Tariff Act 1921

Cigarettes and cigars with less than 0.8 grams of tobacco are subject to excise at a higher rate than the benchmark. The benchmark excise treatment for the consumption of tobacco products is applied per kilogram of tobacco and applies to loose tobacco and to cigarettes and cigars with more than 0.8 grams of tobacco. Cigarettes and cigars with less than 0.8 grams of tobacco are subject to excise on a per stick basis. The effect of per stick excise is to tax the tobacco in these cigarettes and cigars more heavily than the benchmark.