The Fuel Subsidy Scheme—A brief history

The Fuel Subsidy Scheme was introduced after a High Court decision prevented the states and territories from collecting business franchise fees on fuel, tobacco and alcohol. Because Queensland never had a fuel tax, the government reached an agreement with the Commonwealth and the fuel industry to provide a subsidy for retailers (to pass the benefit to consumers), bulk end users and licensed off-road diesel users.

The Fuel Subsidy Scheme started in November 1997, with the introduction of the Fuel Subsidy Act 1997. From 1 November 1997 to 30 June 2009, Queensland motorists automatically received the benefit of the subsidy as it was paid directly to fuel retailers (including local petrol stations) who passed it on by reducing the price of the fuel they sold by the amount of the subsidy.

The subsidy was also paid to bulk end users (BEUs), who purchased fuel in bulk from distributors at the unsubsidised rate. Licensed retailers and BEUs claimed the subsidy on some types of motorspirit and diesel.

Changes to the Commonwealth tax system affected the subsidy, especially for off-road diesel users. All off-road diesel licenses for the subsidy ceased in 2000.

Diesel-engined vehicles that were conditionally registered (or were of a kind that would be eligible for conditional registration in Queensland) were not eligible for the subsidy on the diesel they used.

Note: Vehicles such as tractors, skid steer loaders (bobcats), backhoes and earthmoving equipment were not eligible for the subsidy as they did not fit into the definition of a diesel engine road vehicle.

On 2 June 2009, the Queensland Government announced the abolition of the Fuel Subsidy Scheme from 1 July 2009. The Fuel Subsidy Repeal and Revenue and Other Legislation Amendment Bill 2009 was introduced into Parliament on 16 June 2009, passed on 20 June 2009 and received Royal Assent on 22 June 2009.

The abolition of the Fuel Subsidy Scheme meant fuel sold or used after 30 June 2009 was no longer subsidised.

The following are extracts from the Second Reading speech by the Deputy Premier, Treasurer and Minister for the Arts, Joan M Sheldon, who introduced the Fuel Subsidy Bill into the Legislative Assembly on 28 October 1997.

'For fuel, the Commonwealth increased the excise duty on fuel products by 8.1c per litre with effect from 6 August 1997, on the basis that this amount of surcharge was sufficient to provide other States and Territories with sufficient revenue to offset the loss of their fuel business franchise fees.

However, it was apparent that there were those who would seek to take advantage of Queensland's approach to subsidising fuel sales by purchasing subsidised fuel in Queensland, transporting it to the southern States and reselling at the excise surcharge inclusive price. This situation was clearly untenable, as Queensland taxpayers were subsidising interstate sales and the fuel industry was being disrupted.

The scheme has been fully endorsed by fuel industry representatives as a viable means of implementing an ongoing workable fuel safety net arrangement in Queensland. Members of the fuel industry also have indicated a commitment to support the implementation and operation of the scheme.

The simplicity of the scheme is typified by the arrangements that will apply for retail customers. Queensland motorists do not have to do anything to claim their subsidy, relieving them from any administrative burden associated with the scheme. The retail subsidy is facilitated by allowing fuel retailers—mainly service stations—to buy fuel at a price that excludes the 8.1c per litre Commonwealth excise.