ATO ID 2014/35: Excise PSO: entitlement for a PSO benefit under category 1 where re-refined base oil is not used or sold for use as a lubricant or a hydraulic or transformer oil
Date of decision: 11 November 2014
Business line: Indirect Tax

Issue
Is an entity entitled to a PSO benefit under item 1 of the table in regulation 4 of the Product Stewardship (Oil) Regulations 2000 (Regulations), for re-refined base oil that satisfies the requirements of subregulation 3(2)(a) of the Regulations and the requirements prescribed in Schedule 1 of the Regulations, even if it is neither used as, nor sold for use as, a lubricant or a hydraulic or transformer oil?

Decision
Yes, an entity is entitled to a PSO benefit under item 1 of the table in regulation 4 of the Regulations, for re-refined base oil that satisfies the requirements of subregulation 3(2)(a) of the Regulations and the requirements prescribed in Schedule 1 of the Regulations, even if it is neither used as, nor sold for use as, a lubricant or a hydraulic or transformer oil.

Facts
An oil recycler is registered for entitlement to product stewardship (oil) benefits. The oil recycler collects waste oil and re-refines it through thin film evaporation (or vacuum distillation) followed by solvent extraction (or hydrofinishing) to produce base oil. The re-refined base oil satisfies the requirements prescribed in Schedule 1 of the Regulations. The oil recycler sells the re-refined base oil to customers for a variety of uses. Some customers use the oil as a lubricant, hydraulic or transformer oil. Other customers may use the re-refined base oil for incorporation into a rock drilling composition or as an input into the manufacture of carpet underlay.

Reasons for decision
Summary: Subsection 9(1) of the Product Stewardship (Oil) Act 2000 (PSO Act) provides that an entity is entitled to a benefit for the sale or consumption of recycled oil that the entity has recycled in Australia. Subsection 10(1) of the PSO Act explains that the amount of benefit for a claim period is worked out in accordance with the PSO Regulations. Subregulation 4(1) of the Regulations includes a table which itemises the different categories of recycled oil and the benefit that is payable. Item 1 in that table refers to 're-refined base oil (for use as a lubricant or a hydraulic or transformer oil) that meets the criteria mentioned in Schedule 1'. Subregulation 3(2) of the Regulations stipulates that to be 're-refined', a used oil must be restored to the condition of a base oil by either thin film evaporation or vacuum distillation, followed by either solvent extraction or hydrofinishing (or by another approved process). The entity has re-refined the base oil in accordance with the requirements of subregulation 3(2). There is no provision in the Regulations which stipulates that, to qualify under item 1, the re-refined base oil must be used or sold for use as a lubricant or hydraulic or transformer oil. The Commissioner considers that the phrase 'for use as a lubricant or a hydraulic or transformer oil' merely serves to describe the qualities a recycled oil will possess if it has been re-refined in accordance with the Regulations to a base oil that satisfies the requirements of Schedule 1 of the Regulations. The Explanatory Statement that accompanied the Regulations provides the following in relation to Item 1 recycled oil: Item 1 prescribes a category for oil subject to the highest level of processing. It provides the maximum reward for the highest quality product - that is, a non-carcinogenic re-refined base-oil suitable to be made into engine lubricant, transformer and hydraulic oil. [ emphasis added ] In the Commissioner's view, by referring to re-refined base-oil 'suitable to be made' into engine lubricant etc. (rather than referring to re-refined base-oil that is actually made into engine lubricant etc.), the Explanatory Statement indicates that the meaning of the phrase 'for use as' in item 1 may relate to the objective qualities of the product, rather than its use, or any subjective intention of the recycler or end-user of the product as to its use. If the re-refined base oil has been re-refined in accordance with the Regulations and satisfies the requirements of Schedule 1 of the Regulations, then the actual or intended end use of the base oil has no bearing on whether it will qualify under item 1. Punctuation and syntax may also be taken into account in interpreting the meaning of a statutory provision (see, for example, Conigrave v. Tanner [1978] WAR 225 at 230 and Pearce and RS Geddes, Statutory Interpretation in Australia: 5th Edition at [4.44]). In the Commissioners view, the fact that the phrase 'for use as a lubricant [etc.]' appears in brackets in item 1 of the table in Regulation 4(1) indicates that the phrase is employed as an appositive in relation to the preceding and following phrases 're-refined base oil ...that meets the criteria in Schedule 1' (see Style Manual for Authors, Editors and Printers: Fifth Edition, 1994, at [6.51] and The New Fowler's Modern English Usage: Revised Edition, 1998, at p 115). In other words, the phrase 'for use as a lubricant [etc.]' explains (but does not define) the preceding and following phrases. The entity is entitled to a benefit calculated in accordance with item 1 of the table in regulation 4 of the Regulations for a quantity of used oil which has been re-refined to base oil that satisfies the requirements of Schedule 1 of the PSO Regulations irrespective of whether or not it is used, or sold for use as, a lubricant or a hydraulic or transformer oil.

Legislative references: Product Stewardship (Oil) Act 2000 subsection 9(1) subsection 10(1)
Case references: Conigrave v. Tanner [1978] WAR 225
Related public rulings and determinations: Product Grants and Benefits Ruling 2012/1
Related ATO interpretative decisions: ATO ID 2008/38
Other references: Pearce and RS Geddes, Statutory Interpretation in Australia: 5th Edition. Style Manual for Authors, Editors and Printers: Fifth Edition, 1994. The New Fowler's Modern English Usage: Revised Edition, 1998.
Subject references: Product Stewardship Oil PSO Re-refined base oil