Dutton said that in addition to providing some assistance to businesses by reducing the incidence of fuel tax on business inputs, the Fuel Tax Bill also put some of the Howard Government's policies on biofuels into effect.
The fuel legislation will not interfere with existing arrangements for the phasing-in of effective fuel tax on the importation and manufacture of biodiesel, he said, and biodiesel would still enjoy a near-term tax advantage over fossil-based fuels.
"Biodiesel has enjoyed an effective tax rate of zero," Dutton said.
"While fuel tax has been imposed on biodiesel at the same rate as diesel since September 2003, it has been fully offset by a cleaner fuels grant."
The assistant treasurer said the effective tax-free treatment of biodiesel would be protected until July 2011, and on-road users of biodiesel will continue to receive an on-road alternative fuel grant until June 2010.
After this point, the maximum rate of fuel tax imposed on biodiesel will be at a 50% discount to that imposed on fuels with "similar energy content", such as diesel.
Eligible biodiesel users will qualify for a fuel tax credit equal to the effective fuel tax paid on biodiesel blends.
Dutton said the new legislation also corrected a loophole that had given an unintended competitive advantage to certain blends of biodiesel over other fuels in the off-road market, including pure biodiesel.
"The Government's policy is to establish a fairer, more transparent system with improved competitive neutrality between fuels," he said.
"The Government remains committed to the biofuels sector and has provided assistance through the Biofuels Capital Grants program, grants for on-road use of biodiesel, and favourable treatment through the tax system."
Dutton said the Howard Government intended to encourage the development of a viable biofuels industry that could compete on its commercial merits in the longer term.
