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Government hikes tax on ethanol


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Tuesday 11 May 2010: The Government’s decision to increase excise and customs duty on ethanol is a complete reversal of the measures announced in the 2004-05 Budget, according to professional services firm, Deloitte.

The Government will increase the excise duty rate on domestically produced ethanol and the customs duty rate on imported ethanol. Additional revenue from the rate increases is estimated to be $276.5 million.

The excise and customs duty rates will be:

  • 25 cents per litre from 1 July 2011
  • Phasing of that rate down to 12.5 cents per litre from 1 July 2015.

At the same time, domestic ethanol producers will receive an offsetting grant of 22.5 cents per litre from 1 July 2011 which will phase to zero by 1 July 2015. There will be no equivalent offsetting grant for imported ethanol.

Mr Michael Roche, Deloitte Tax principal, said the new measure will provide the Australian ethanol producers with a high level of subsidisation over the next five years.

This means consumers will pay an additional 22.5 cents per litre in the first year of the new tax regime over and above that proposed by the previous Government in the 2004-05 Budget. “However, the effective tax rate (excise duty of 25 cents per litre minus the subsidy of 22.5 cents per litre) for the domestic ethanol producer will be just 2.5 cents per litre. This subsidy reduces to zero from 1 July 2015 but means Australian producers will have a five year buffer because the tax will make the price of imports uncompetitive” Mr Roche said.

Last Updated: 

Contacts

Name:
Petros Kosmopoulos
Company:
Deloitte Australia
Job Title:
Corporate Affairs & Communications
Phone:
Tel: +61 3 9671 6093, Mobile: +61 4 0700 0926
Email
pkosmopoulos@deloitte.com.au
Name:
Michael Roche
Company:
Deloitte Australia
Job Title:
Principal, Tax
Phone:
Tel: +61 2 9322 5341
Email
miroche@deloitte.com.au

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