Private ruling: Fuel tax credits - blending
Published: June 2012
Ruling period: 2011-12 income year | 2012-13 income year | 2013-14 income year
Date scheme commenced: 1 July 2011

Ruling: Q1: Are diesel and B20, taxable fuels for the purposes of Fuel Tax (Fuel Blends) Determination 2006 (No.3)? | A1: No. | Q2: Are you entitled to fuel tax credits for fuels used in your blended products for use as mould release agents as per section 95-5 of the FTA? | A2: No.

Relevant facts and circumstances: You state the following facts: You manufacture mould release agents which are used by your customers in the manufacture of bricks, roof tiles and precast concrete products. You use diesel and B20 as raw material in the production of your products. The B20 is 80% diesel and 20% ester (biodiesel). You state the products are not marketed and cannot be sold for use as a fuel in an internal combustion engine. You provided a list of seven products that you state contain 96% diesel and 4% Additive. You have stated the Additive contains approximately 72% Oleic Acid (Olin) and approximately 28% other Fatty Acid Esters and therefore, in your view, these contain >2% Oleic Acid. You also provided specifications for three other products: · one that contains 97% Diesel B20 and 3% Addititve. · In your view, this product thus has >10% Ester, as well as >2% Oleic Acid. · another that contains 100% Diesel B20. You state your supplier confirms this meets the diesel standard and in your view, this product has >10% Ester. · another that contains 10% diesel or 10% Diesel B20, 87% Ester (B100) and 3% Additive. You state this product contains 87-97% Esters and 2% Oleic Acid. You also confirmed the following: · You do not physically own any assets i.e. tanks but that you contract blenders that do, to do the blending for you. These blenders blend at your direction, however there are no written agreements or contracts in place. · You purchase fuel from suppliers using an online ordering system for so many litres of fuel but also from specialist distributors. You order and pay for the fuel and the additives used in the production/blending activities by the third party blender. · The fuel (diesel, B20 and also the additives required for the blends) are delivered directly to the third party blenders. To ensure the specifics for the mould release agents are met, the blenders blend each of the products at your direction and an audit trail is kept in progress by the blenders. This involves keeping a job sheet per blend which lists amount of additive and fuel used and blended on particular dates and is signed off and provided from the blenders themselves to you. The final blended product is then distributed to your brick manufacturer customers by mobile tankers who are third party haulage operators. You invoice your customers for the products. You seek confirmation that you are eligible to claim fuel tax credits in respect of the diesel and Diesel B20 purchases when acquired to produce the above mentioned 10 products.

Relevant legislative provisions: Fuel Tax Act 2006 - section 41-5 | Fuel Tax Act 2006 - section 95-5 | Fuel Tax Act 2006 - subsection 95-5(1) | Fuel Tax Act 2006 - subsection 95-5(2) | Fuel Tax Act 2006 - section 110-5 | Excise Tariff Act 1921 - The Schedule Fuel Tax (Fuel blends) Determination 2006 (No.3) section 8 | Fuel Tax (Fuel blends) Determination 2006 (No.3) section 9

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 in Australia to the extent that you do so for use in carrying on your enterprise if you are registered for GST. Note 2 of this section states that fuel is taken to have been used if it is blended as specified in a determination made under section 95-5 of the FTA. Section 95-5 of the FTA provides for a determination of blends that no longer constitute fuels. Specifically it states: For the purposes of the *fuel tax law, the Commissioner may, by legislative instrument, determine that a blend of a fuel and another product does not constitute a fuel. An entity that blends that fuel and that other product to produce that blend is taken to have used that fuel. Fuel Tax (Fuel blends) Determination 2006 (No.3) (Determination) is a determination made under section 95-5 of the FTA. | Detailed Reasoning - In this Determination:: Taxable fuel means taxable fuel as defined in section 110-5 of the Fuel Tax Act but only if they are classified to subitem 10.25, 10.26, 10.27 or 10.28 of the Schedule to the Excise Tariff Act 1921. Further, section 9 of the Determination provides for when a blend of taxable fuel and another product or other products is not a fuel for the purposes of the fuel tax law where: (a) the blend is not marketed or sold for use as fuel in an internal combustion engine and (b) it can be demonstrated that the blend contains either: (i) a product listed in the Schedule at a concentration equal to or greater than the specified minimum; or (ii) more than one product listed in the Schedule and the total concentration of those products is equal to or exceeds 10% by volume, whether or not the blend contains other substances. Therefore, the Determination only applies to blends of: · liquid aromatic hydrocarbons consisting principally of benzene, toluene or xylene or mixtures of them as per subitem 10.25 of the Schedule to the Excise Tariff Act 1921 (the Schedule). · mineral turpentine as per subitem 10.26 of the Schedule; or · white spirit as per subitem 10.27 of the Schedule; or · petroleum products (other than blends) not elsewhere included as per subitem 10.28 of the Schedule . With: · a product listed in the Schedule to the Determination at a concentration equal to or greater than the specified minimum; or · more than one product listed in the Schedule to the Determination and the total concentration of those products is equal to or exceeds 10% by volume, Diesel is listed at subitem 10.10 of the Schedule of the Excise Tariff Act and blends of diesel and biodiesel are listed at subitem 10.12 of the Schedule. Therefore the fuels used in your blends are neither liquid aromatic hydrocarbons consisting principally of benzene, toluene, xylene, mineral turpentine or white spirit nor are they petroleum products (other than blends) not elsewhere included in the Schedule. As such, whilst these fuels are considered to be taxable fuels within the meaning of the term within section 110-5 of the FTA, they are not considered to be 'taxable fuel' for the purposes of the Determination, which is restricted to those fuels classified to subitems 10.25, 10.26, 10.27 or 10.28 of the Schedule to the Excise Tariff Act. Accordingly, diesel and B20, are not taxable fuels for the purposes of Fuel Tax (Fuel blends) Determination 2006 (No.3). As your fuels are not fuels for the purposes of Fuel Tax (Fuel blends) Determination 2006 (No.3) your products are not considered blends for the purposes of section 95-5 of the FTA. Accordingly, as section 95-5 of the FTA is not satisfied, an entitlement to a fuel tax credit does not arise under section 41-5 of the FTA and it is not necessary to consider other eligibility requirements.

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