Private ruling: Fuel Tax Credits - use of diesel in aircraft
Published: August 2013
Ruling period: 2013-14 income year | 2014-15 income year | 2015-16 income year
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you entitled to a fuel tax credit for the use of diesel in your airplanes to conduct aerial spraying on agricultural properties? | A1: Yes.

Relevant facts and circumstances: You are registered for goods and services tax (GST). You are contracted by agricultural farmers to perform aerial crop spraying for disease and to apply fertiliser on farmland. The farmers carry on a business to obtain produce for sale. You also use airplanes to undertake the activities. The airplanes spread fertiliser, spray liquid fertiliser and spray herbicides and insecticides. The spraying of herbicides and insecticides occurs on agricultural property where a business is conducted to obtain produce for sale. You acquire diesel for use in the airplanes. The fuel was not entered for home consumption for use as fuel in an aircraft. This ruling does not cover the acquisition and use of diesel for travelling to and from the agricultural properties.

Relevant legislative provisions: Fuel Tax Act 2006 section 41-5 | Fuel Tax Act 2006 section 41-30 | Fuel Tax Act 2006 subdivision 43-A | Fuel Tax Act 2006 subparagraph 43-8(4)(b)(i) | Fuel Tax Act 2006 section 43-15 | Fuel Tax Act 2006 subsection 43-15(1) | Fuel Tax Act 2006 paragraph 43-15(1)(a) | Fuel Tax Act 2006 paragraph 43-15(1)(b) | Fuel Tax Act 2006 paragraph 43-15(1)(c) | Fuel Tax Act 2006 paragraph 43-15(1)(d) | Fuel Tax Act 2006 paragraph 43-15(1)(i) | Fuel Tax Act 2006 subsection 43-40(h) | Fuel Tax Act 2006 section 43-55

Reasons for decision: Summary: Section 41-5 of the Fuel Tax Act 2006 (FTA) provides that you are entitled to a fuel tax credit for taxable fuel that you acquire for use in carrying on your enterprise if you are registered for GST. You acquire diesel fuel for use in your airplanes. You are contracted by farmers to perform crop spraying and apply fertiliser on farming properties. | Detailed Reasoning - Use in an airplanes: Section 41-30 of the FTA provides that you are not entitled to a fuel tax credit for taxable fuel that you acquire, manufacture or import for use as fuel in aircraft if the fuel was entered for home consumption for that use (within the meaning of the Excise Act 1901 or the Customs Act 1901 , as the case requires). The Explanatory Memorandum to the Fuel Tax Bill 2006 states that section 41-30 of the FTA applies to aviation fuels such as aviation turbine fuel or Avtur and aviation gasoline or Avgas. It goes on to state: 2.61 If however, a taxpayer acquires, manufactures or imports other taxable fuels for use in an aircraft in carrying on their enterprise, for example diesel, they will be entitled to a fuel tax credit under section 41-5. You acquire and use diesel in your airplanes. The diesel you acquire has not been entered for home consumption for use as a fuel in aircraft within the meaning of the Excise Act 1901 or the Customs Act 1901 . Therefore, section 41-30 of the FTA does not apply to disentitle you to a fuel tax credit. However, you satisfy section 41-5 of the FTA. Hence, there is an entitlement to fuel tax credits in respect to the acquisition and use of diesel when spraying fertiliser, herbicides and insecticides on farming properties. | Detailed Reasoning - Amount of carbon reduction: Subdivision 43-A provides how to work out your fuel tax credit. The amount of fuel tax credit to which you are entitled is worked out by the amount of effective fuel tax credit reduced by the amount of carbon reduction. In addition, subparagraph 43-8(4)(b)(i) of the FTA provides, among other things, that the amount of carbon reduction is nil to the extent that you acquire the fuel for use in agriculture. 'Agriculture' is defined in subsection 43-15(1) of the FTA as: (a) the cultivation of the soil; or (b) the cultivation or gathering in of crops; or (c) the rearing of livestock; or (d) viticulture, horticulture, pasturage or apiculture; and includes: … (i) a sundry agricultural activity. | Detailed Reasoning - Spraying fertiliser: The expression 'cultivation of crops' does not have any particular trade or technical meaning and is not defined in the FTA. It therefore takes its ordinary meaning. In the context of subsection 43-15(1) of the FTA, the relevant meaning of the term 'cultivate' is to 'raise or produce crops.' The expression 'cultivation of crops' in subsection 43-15(1) of the FTA means all the activities necessary for the survival and nurturing of crops, including sowing of seeds or planting and fertilising. You are contracted by farmers to spread fertilisers on farms to improve crop production. That is, you acquire fuel for use in the cultivation of crops and therefore, agriculture. As such, the amount of carbon reduction that applies to the fuel acquired is nil. Therefore, you are entitled to a fuel tax credit under the FTA, for the use of diesel in your airplanes whilst spreading fertiliser on agricultural properties. In calculating your fuel tax credits, the amount of carbon reduction will be nil on fuel acquired and used in spraying fertilisers. | Detailed Reasoning - Spraying herbicides and insecticides: Paragraph 43-40(h) of the FTA provides that a 'sundry agricultural activity' includes weed, pest or disease control conducted: · by a person who conducts a core agricultural activity or by a person contracted by that person; and · on the agricultural property where the core agricultural activity is conducted. Each requirement will be considered in turn. | Detailed Reasoning - Weed, pest or disease control: You spray herbicides and insecticides on agricultural properties for disease. That is, you are undertaking weed, pest or disease control. | Detailed Reasoning - Contracted by a person who conducts a core agricultural activity: A core agricultural activity is defined in section 43-55 of the FTA as an activity referred to in paragraphs 43-15(1)(a) to (d) of the FTA, provided the activity is conducted for the purposes of, or for purposes that will directly benefit, a business conducted to obtain produce for sale. You are contracted by agricultural farmers to undertake aerial spraying of their crops. Therefore, you are contracted by a person who conducts a core agricultural activity. | Detailed Reasoning - On the agricultural property where the core agricultural activity is conducted: All of your spraying is undertaken on farmers' properties. Core agricultural activities are conducted on those properties. Therefore, the spraying occurs on agricultural properties where core agricultural activities are conducted. Since you satisfy all of the requirements of paragraph 43-40(h) of the FTA, you are undertaking a sundry agricultural activity and therefore, agriculture under section 43-15 of the FTA. Therefore, you acquire fuel for use in agriculture when the fuel is used in spraying herbicides and insecticides. As such, the amount of carbon reduction that applies to the fuel acquired is nil. Therefore, you are entitled to a fuel tax credit under the FTA, for the use of diesel in your airplanes whilst spraying herbicides and insecticides on agricultural properties. In calculating your fuel tax credits, the amount of carbon reduction will be nil on fuel acquired and used in spraying herbicides and insecticides.