Private ruling: Fuel tax credits - road transport
Published: January 2014
Ruling period: 2009-10 income year | 2010-11 income year | 2011-12 income year | 2012-13 income year | 2013-14 income year
Date scheme commenced: 1 July 2009

Ruling: Q1: Is the fuel tax credit in relation to a quantity of taxable fuel you acquire and use in your vehicles with a gross vehicle mass (GVM) of more than 4.5 tonnes and which is not used for travelling on a public road, subject to the road user charge (RUC) for the period 1 December 2009 to 30 June 2014? | A1: No. | Q2: Is the fuel tax credit in relation to a quantity of taxable fuel you acquire and use in your vehicles with a GVM of more than 4.5 tonnes and which is not used for travelling on a public road, or undertaking agricultural activities specified within subsection 43-8(4) of the Fuel Tax Act 2006 (FTA) subject to the carbon reduction for the period 1 July 2012 to 30 June 2014? | A2: Yes. | Q3: Is the fuel tax credit in relation to a quantity of taxable fuel you acquire and use in your vehicles with a GVM of more than 4.5 tonnes and which is not used for travelling along a public road while undertaking agricultural activities specified within subsection 43-8(4) of the FTA, subject to the carbon reduction for the period 1 July 2012 to 30 June 2014? | A3: No.

Relevant facts and circumstances: You are an Australian company registered for goods and services tax (GST) and fuel tax credits. You lodge your business activity statements (BAS) on a monthly basis. As part of your business, you operate vehicles with a GVM greater than 4.5 tonnes to transport grain and livestock between farms and commercial properties. Some of these activities are considered to be specified agricultural activities as defined in subdivision 43-B of the FTA and also sections 22 and 23 of the Energy Grants (Credits) Scheme Act 2003 . Your vehicles are designed for on-road use and use public roads to travel to their job locations which are not on public roads. Your vehicles also travel on private roads and private property to reach their job locations. When your vehicles reach their job locations they are required to idle while loading and unloading. That is they are stationary and not being propelled on a public road. You acquire and use the taxable diesel fuel used in your vehicles.

Relevant legislative provisions: Fuel Tax Act 2006 section 41-5 | Fuel Tax Act 2006 section 43-8 | Fuel Tax Act 2006 subsection 43-8(4) | Fuel Tax Act 2006 section 43-15 | Fuel Tax Act 2006 section 43-20 | Fuel Tax Act 2006 paragraph 43-20(1)(b) | Fuel Tax Act 2006 subsection 43-10(3) | Fuel Tax Act 2006 section 47-5 | Fuel Tax (Consequential and Transitional Provisions) Act 2006 Division 2 of Schedule 3 | Fuel Tax (Consequential and Transitional Provisions) Act 2006 subparagraph 11(1)(b)(i) | Fuel Tax (Consequential and Transitional Provisions) Act 2006 subparagraph 11(1)(b)(ii) | Energy Grants (Credits) Scheme Act section 8 | Energy Grants (Credits) Scheme Act paragraph 8(a) | Energy Grants (Credits) Scheme Act subparagraph 8(a)(i) | Energy Grants (Credits) Scheme Act subparagraph 8(a)(ii) | Energy Grants (Credits) Scheme Act subparagraph 8(a)(iii) | Energy Grants (Credits) Scheme Act paragraph 8(b) | Energy Grants (Credits) Scheme Act paragraph 8(c) | Energy Grants (Credits) Scheme Act section 22 | Energy Grants (Credits) Scheme Act section 23

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. | Detailed Reasoning - Fuel acquired from 1 December 2009 to 30 June 2012: Your fuel tax credit entitlement for fuel acquired during the period 1 July 2008 to 30 June 2012 is affected by Division 2 of Schedule 3 to the Fuel Tax (Consequential and Transitional Provisions) Act 2006 (FTCTPA) which operates to restrict this entitlement to specific activities, whilst retaining entitlements under the Energy Grants (Credits) Scheme Act 2003 (EGCSA). Subparagraph 11(1)(b)(i) of Schedule 3 to the FTCTPA provides that an entitlement to a fuel tax credit arises under section 41-5 of the FTA for taxable fuel acquired between 1 July 2008 and 30 June 2012 'for use in a vehicle travelling on a public road'. Further, subparagraph 11(1)(b)(ii) of Schedule 3 to the FTCTPA provides an entitlement to a fuel tax credit under section 41-5 of the FTA for taxable fuel acquired for 'incidental use' of a vehicle travelling on a public road between 1 July 2008 and 30 June 2012. 'Incidental use' is defined in section 8 of the EGCSA. You operate heavy vehicles to transport grain and livestock between farms and commercial properties. You use public roads and private roads to travel to job locations which are not on public roads. When your vehicles reach their job locations they are required to idle while loading an unloading. You request advice on whether the fuel used in travelling on private roads and properties is subject to the road user charge. Having regard to the provisions outlined above, it is necessary to consider whether the fuel is for 'incidental use' in relation to the vehicles when they are travelling on a public road or also whether any fuel used in the transportation on properties would be considered 'agriculture' for the purposes of an off-road credit. | Detailed Reasoning - Incidental use: Incidental use is defined in section 8 of the EGCSA as: Each of the following , whether or not it takes place on a road, is an incidental use in relation to a vehicle: (a) powering the vehicle, or auxiliary equipment, while goods to be transported are loaded or while: (i) goods to be transported in or on the vehicle are loaded or goods that have been so transported are unloaded; or… (ii) … (iii) the vehicle is moved to a place where anything in subparagraph (i) or (ii) is to happen or from a place where any such thing has happened; (b) powering the vehicle, or auxiliary equipment, in order to maintain the quality of goods transported or to be transported in or on the vehicle; (c) … As such, subparagraph 8(a)(iii) provides that where the vehicle is moved to a place where loading or unloading is to happen or vice versa it is 'incidental use'. Your vehicles travel off the public road network onto private roads and private properties. As such, the fuel used to travel on the roads and the private properties to undertake loading and unloading activities is considered incidental use and entitlement to fuel tax credits falls within section 41-5 of the FTA. | Detailed Reasoning - Agriculture: Some of your activities include the transporting of grain and livestock. For the period 1 December 2009 to 30 June 2012 you may have an entitlement to an off-road credit under the energy grants credits scheme by virtue of subitem 11(5) of the FTCTPA. An off-road credit for the fuel used on private properties is available if the fuel has been used in activities that are considered 'agriculture' under the EGCSA. Agriculture is defined in sections 22 and 23 of the EGCSA to include cultivation or gathering in of crops, rearing of livestock and the transportation of livestock to an agricultural property for the purpose of rearing or agisting the livestock. If the livestock is moved from one vehicle to another whilst being transported for an eligible purpose, the transport undertaken by each vehicle qualifies. The off-road transport of livestock to a place other than an agricultural property (for example a saleyard or abattoir), or to an agricultural property for a reason other than that of rearing or agistment is not a livestock activity under section 23. Note, only the actual transport of livestock for an eligible purpose qualifies. Travel prior to the transport of livestock for the requisite purpose or the movement of a vehicle from a depot to a place at which livestock are loaded is not a livestock activity under section 23. You are also entitled to an off-road credit if the fuel is used in the transportation of grain as part the cultivation or gathering in of crops. In relation to crops that are capable of being stored, the gathering in of the crop ceases when it is physically collected together for the first time on the farm. If the crop is loaded directly from a harvester into a road vehicle, the gathering in ceases once the crop has been fully loaded onto the road vehicle for transport off the farm. In relation to crops that are required to be processed soon after harvesting (that is, crops that cannot be stored) the gathering in of the crop ceases when it is physically collected together for the first time on the farm. Therefore the subsequent transportation of crops that have already been 'gathered in' on the farm will not qualify as agriculture. Where your activities are specified agricultural activities under the EGCSA, you will be entitled to an off-road credit for the fuel used in the transportation on private properties and for the fuel used in the loading and unloading. Where this occurs you will not be subject to the road user charge (RUC). Where your transport activities do not fall within agriculture, as stated above, they will be considered to be 'incidental use' (including the travel on private roads and property) and your entitlement to fuel tax credits will fall within section 41-5 of the FTA. Note, if you are entitled to a fuel tax credit under more than one provision in relation to a particular use of fuel, you are only entitled to a credit under one of those provisions. | Detailed Reasoning - Road user charge (RUC): In accordance with section 43-5 of the FTA, the amount of the fuel tax credit for taxable fuel is the amount of effective fuel tax that is payable on the fuel. However, your fuel tax credit entitlement can also be affected by: · the amount of any applicable grant or subsidy; or · the amount of the RUC in relation to use of taxable fuel in heavy vehicles for travelling on public roads; or Subsection 43-10(3) of the FTA provides that to the extent that you acquire taxable fuel to use, in a vehicle, for travelling on a public road, the amount of your fuel tax credit for the fuel is reduced by the amount of the road user charge for the fuel. You use fuel to operate your vehicles on the private roads and properties along with the loading and unloading of the vehicle. Subsection 43-10(3) only applies to fuel used in propelling the vehicle on public roads. As such, the fuel that is not directly used for that purpose (the incidental use - private roads and private properties to load and unload) is not subject to the road user charge. | Detailed Reasoning - Fuel acquired from 1 July 2012 - road user charge: As explained above, section 41-5 of the FTA provides an entitlement to a fuel tax credit for taxable fuel acquired for use in carrying on an enterprise. The amount of fuel tax credit for taxable fuel is affected by any grant or subsidy or the amount of the road user charge in relation to use of taxable fuel in heavy vehicles on public roads. You use fuel in your vehicles to travel on public roads, private roads and properties to transport grain and livestock. You also use fuel when idling for the purposes of loading and unloading when on properties. As mentioned above, subsection 43-10(3) of the FTA provides that the amount of your fuel tax credit is reduced by the amount of the RUC for the taxable fuel you acquire to use, in a vehicle, for travelling on a public road. That is, fuel that is used in your vehicle for the purpose of propelling the vehicle on a public road. Therefore fuel being used in your vehicles for their travel off-road or not travelling on public roads, including idling is not fuel to use, in a vehicle, for travelling on a public road. As such, subsection 43-10(3) does not apply and your fuel tax credit for the quantity of fuel used in travel off-road or not travelling on public roads will not be reduced by the RUC during the period 1 December 2009 to 30 June 2014. | Detailed Reasoning - Carbon reduction: From 1 July 2012 a carbon charge applies to certain taxable fuels. The carbon charge is an amount equal to the price of carbon emissions from the use of liquid or gaseous fuels. Section 43-8 of the FTA sets out the rules for working out the amount of the carbon reduction to fuel tax credit calculations from 1 July 2012. Section 43-8 of the FTA provides that the amount of carbon reduction that applies to a particular quantity of taxable fuel is worked out by using the following formula: Quantity of fuel x carbon price x carbon emission rate Therefore the carbon reduction for diesel fuel for the periods: 1. 1 July 2012 to 30 June 2013 is 6.21 cents per litre 2. 1 July 2013 to 30 June 2014 is 6.521 cents per litre. However, subsection 43-8(4) of the FTA provides for those circumstances where no carbon reduction applies. Relevantly, the amount of carbon reduction that applies to fuel will be nil where the fuel is acquired for use in: 1. specified agricultural, fishing or forestry activities or 2. vehicles with a GVM of more than 4.5 tonnes travelling on a public road. | Detailed Reasoning - Fuel used in a vehicle off-road from 1 July 2012: As previously explained, from 1 July 2012 fuel tax credits are affected by the carbon reduction unless the fuel use in question meets any of the exclusions in subsection 43-8(4) of the FTA. These include fuel that is acquired for use in agriculture within subdivision 43-B of the FTA. Agriculture is defined in section 43-15 and 43-20 of the FTA to include the cultivation or gathering in of crops, rearing of livestock and the transportation of livestock to an agricultural property for the purpose of rearing or agisting the livestock. On occasion, your vehicles travel off-road to deliver livestock to farm properties for farmers. As explained previously, this was considered agriculture under the EGCSA. Similarly, it would be a specified agricultural activity within section 43-20 of the FTA and any quantities of fuel you use for this purpose would have no carbon reduction applied where they are used for travelling off roads. Furthermore, as explained previously where you acquire and use quantities of fuel off road in the cultivation or gathering in of crops where it is considered agriculture. For fuel acquired after 1 July 2012 for use in this specified agricultural activity within section 43-15 no carbon reduction would apply. However, you also use a quantity of diesel fuel in your heavy vehicles off-road or not on public roads for other activities which are not specified within subsection 43-8(4) of the FTA. As none of the provisions in subsection 43-8(4) of the FTA applies to this fuel, the fuel tax credit calculated for this quantity of fuel must be reduced by the applicable carbon reduction amount. Accordingly, you are entitled to a fuel tax credit at the full rate of 38.143 cents per litre for any quantities of fuel you use off-road and in specified agricultural activities. However, in respect to quantities of diesel fuel you acquire and use in travelling not on public roads and off-road for non-specified activities, you are entitled to a fuel tax credit at the rate of 38.143 cents per litre less the applicable carbon reduction amount, during the period 1 July 2012 to 30 June 2014. | Detailed Reasoning - Four year rule: Please note that section 47-5 of the FTA provides that your fuel tax credit entitlements cease four years from the due date of the relevant business activity statement or fuel tax return. The four year time limit is designed to provide certainty and finality in the tax affairs of taxpayers and the administration of the tax system.