Private ruling: Fuel tax credits - electricity generation
Published: January 2012
Ruling period: 1 July 2009 to 30 June 2012
Date scheme commenced: 1 July 2009

Ruling: Q1: Are you entitled to a fuel tax credit at the full rate for the portion of diesel you acquired and used to generate electricity during the construction of a mining project? | A1: Yes.

Relevant facts and circumstances: You are the nominated operator of a joint venture: The joint venture was established to construct and operate a facility to process a mineral in Australia. The construction phase commenced during the year ended 30 June 2010 after the final investment decision for the project was previously taken. In the construction phase there are a number of design and construct contracts that relate to various construction activities on your mine site. These construction activities include construction accommodation, general utilities, other infrastructure and buildings and concrete supply and site development. As the operator of the join venture, you have contracts with major fuel suppliers to supply fuel for the site. You advise that the property and title to the diesel fuel remains with you and the contractors use the diesel fuel at your direction under the scope of their relevant contracts. You have supplied a summary of the various design and construction contracts. You have supplied an outline of the scope of works for all these contracts and have included an estimate of the volume of fuel to be used in each of those contracts along with the expected commencement and completion dates for each. You record the diesel fuel used in power generation across these contracts for National Greenhouse Emissions Reporting (NGER) purposes which is required to be reported separately from other diesel fuel usage. You are looking to having the diesel fuel used in power generation ruled as 100% eligible for Fuel Tax Credits and the balance of the diesel fuel used by the contractors to be determined by separate rulings under their scope of work. You are registered for goods and services tax (GST).

Relevant legislative provisions: Fuel Tax Act 2006 section 41-5 | 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)(iii) of Schedule 3

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 you do so for use in carrying on your enterprise, if you are registered for GST. However, this entitlement is affected by Division 2 of Part 3 of Schedule 3 to the Fuel Tax (Consequential and Transitional Provisions) Act 2006 (FTCTPA) which operates to restrict this entitlement to specific activities and continues the previous entitlement provisions of the Energy Grants (Credits) Scheme Act 2003 (EGCSA) for the period 1 July 2008 to 30 June 2012. Subparagraph 11(1)(b)(iii) of the Fuel Tax (Consequential and Transitional Provisions) Act 2006 (FTCTPA) provides that an entitlement to a fuel tax credit arises under section 41-5 of the Fuel Tax Act 2006 (FTA) if you acquire taxable fuel for use by you in generating electricity. Fuel is used for the purpose of generating electricity where the electricity is an end in itself and can in turn be used for any purpose for which electricity is required. For example, fuel is used in generating electricity when it is used in a generator so as to make power available to business premises. Similarly, the use of fuel in a generator to provide power to a range of external equipment (such as electrically powered machinery in a factory) would constitute use in generating electricity. The above uses of fuel can be contrasted with the use of fuel within the actual equipment that is to be powered by the fuel. For example, fuel acquired for use in the internal combustion engine of a vehicle/vessel is for the purpose of driving or propelling the vehicle/vessel. Similarly the use of fuel in the internal combustion engine of a machine where the power generated by the machine is for use by that machine is for the purpose of operating the machine and is not considered to be for the generation of electricity. A portion of the fuel you acquire for use in the mining project is used specifically for the generation of electricity for the various aspects of activity being conducted. You are required to record the diesel fuel used for electricity generation for National Greenhouse Emissions Reporting (NGER) purposes which is required to be reported separately from other diesel fuel usage. The balance of the fuel you acquire for use in the mining project is used by various contractors in their scope of works for the various activities set out in their contracts. As you acquire and use a portion of the fuel in the mining project solely for the purpose of electricity generation, that is an eligible use of fuel within subparagraph 11(1)(b)(iii) of Schedule 3 to the FTCTPA. Accordingly, you are entitled to a fuel tax credit at the full rate for the portion of diesel you acquired and used to generate electricity during the construction of the mining project. .

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.