Private ruling: Fuel tax credits - road maintenance vehicle - road user charge (RUC) and carbon reduction
Published: April 2013
Ruling period: 1 July 2008 to 30 June 2009 | 1 July 2009 to 30 June 2010 | 1 July 2010 to 30 June 2011 | 1 July 2011 to 30 June 2012 | 1 July 2012 to 30 June 2013
Date scheme commenced: 1 July 2008

Ruling: Q1: Are you entitled to fuel tax credits at the full rate (38.143 cents per litre) for the portion of taxable fuel acquired for use in operating your line marking vehicle with a gross vehicle mass (GVM) exceeding 4.5 tonnes whilst it is moving along the road spraying paint during the period 1 January 2009 to 30 June 2012? | A1: No. | Q2: Are you entitled to fuel tax credits at the full rate less road user charge for the portion of taxable fuel acquired for use in operating your line marking vehicle with a GVM exceeding 4.5 tonnes whilst it is moving along the road spraying paint during the period 1 January 2009 to 30 June 2012? | A2: No. | Q3: Are you entitled to a fuel tax credits at the half rate (19.0715 cents per litre) for the portion of taxable fuel acquired for use in operating your line marking vehicle with a GVM exceeding 4.5 tonnes whilst it is moving along the road spraying paint, during the period 1 January 2009 to 30 June 2012? | A3: Yes. | Q4: Is the amount of your fuel tax credit for the portion of taxable fuel acquired for use in operating your line marking vehicle with a GVM exceeding 4.5 tonnes whilst it is moving along the road spraying paint, subject to the carbon reduction for the period 1 July 2012 to 30 November 2012? | A4: Yes. As such, the rate you can claim is 31.933 cents per litre for diesel you acquire for use in operating your line marking vehicle with a GVM exceeding 4.5 tonnes whilst it is moving along the road spraying paint for the period above. | Q5: Are you entitled to fuel tax credits for taxable fuel you acquired and used in safety vehicles with a GVM of less than 4.5 tonnes that move along a public road providing safety support services to a separate vehicle that is maintaining a public road? | A5: No.

Relevant facts and circumstances: You are an Australian company registered for goods and services tax (GST) and fuel tax credits. You undertake road maintenance services for businesses. You use trucks with a gross vehicle mass (GVM) exceeding 4.5 tonnes that move slowly along roads spraying paint onto the road as a divider for lanes and/or verge strips. You are required to provide safety vehicles, which can be positioned either before or after the maintenance vehicles undertaking the actual spraying. These vehicles travel at the same speed as the trucks and carry large flashing lights warning vehicles approaching in both directions to slow down and change lanes or overtake when safe to do so and have a GVM of less than 4.5 tonnes. You acquire diesel fuel for use in both vehicles. You accept that whilst the vehicles are travelling to and from their depot to the place where maintaining the road commences, this is travel on a public road in relation to your vehicles that exceed 4.5 tonnes GVM, and your fuel tax credit for the fuel used in those vehicles is subject to the RUC. However, it is your opinion that the portion of the road on which the vehicles are moving is closed to the public for the provision of the maintenance and should be considered to be 'off-road' and your fuel tax credit for the fuel not be reduced by the RUC. Furthermore, you reference FTR 2008/1 at paragraph's 117 and 119 which state in reference to movement by a vehicle engaged in road construction, repair or maintenance: … 117. However, not every movement of a vehicle on a road is travel. Where a vehicle is engaged in road construction, repair or maintenance and moves on the road or portion of the road that is under construction, repair or maintenance in the course of carrying out this work, the vehicle does not 'travel' on the road in the sense contemplated by subsections 43-10(3) and (4). The purpose of this movement is to benefit the road, not to use the road to relocate the vehicle. … 119. The Commissioner considers that, having regard to the policy context of subsection 43-10(3), it would be inconsistent with that policy intent to impose the road user charge on a vehicle in the course of undertaking road construction, repair or maintenance, as the vehicle is not contributing to wear and tear on the road. … Furthermore, you reference ATO Interpretative Decision ATO ID 2009/114 - Excise: street sweeper with a GVM of less than 4.5 tonnes carrying our public road maintenance and in your view state this would indicate that in this instance not only the truck exceeding 4.5 tonnes but also the light safety vehicles would be entitled to fuel tax credits when involved in maintenance of the road by line marking.

Relevant legislative provisions: Fuel Tax Act 2006 section 41-5 | Fuel Tax Act 2006 subdivision 41-B | Fuel Tax Act 2006 section 41-20 | Fuel Tax Act 2006 section 43-5 | Fuel Tax Act 2006 section 43-8 | Fuel Tax Act 2006 subsection 43-8(4) | Fuel Tax Act 2006 paragraph 43-8(4)(c) | Fuel Tax Act 2006 subsection 43-10(3) | Fuel Tax Act 2006 subsection 43-10(4) | Fuel Tax (Consequential and Transitional Provisions) Act 2006 Division 2 of Schedule 3 | Fuel Tax (Consequential and Transitional Provisions) Act 2006 subitem 11(1) of Schedule 3 | Fuel Tax (Consequential and Transitional Provisions) Act 2006 subitem 11(3) of Schedule 3 | Fuel Tax (Consequential and Transitional Provisions) Act 2006 subitem 11(6) of Schedule 3 | Energy Grants (Credits) Scheme Act 2003 section 43 Detailed reasoning | 1 January 2009 to 30 June 2012 | 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. | For the period 1 July 2008 to 30 June 2012, 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). Having regard to the FTCTPA and EGCSA, entitlement to a fuel tax credit for a vehicle undertaking road construction, repair or maintenance is intended to be phased in up until 30 June 2012. | Subitem 11(1) of the FTCTPA provides that an entitlement to a fuel tax credit under section 41-5 of the FTA will arise for taxable fuel you acquire for use in a vehicle travelling on a public road. | Subdivision 41-B of the FTA provides a number of disentitlement rules for fuel tax credits. Relevantly, section 41-20 of the FTA states that an entity is not entitled to a fuel tax credit for taxable fuel that you acquire for use in a vehicle with a gross vehicle mass (GVM) of less than 4.5 tonnes travelling on a public road. | Road user charge | 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 (RUC) for the fuel. | In Linfox Australia Pty Ltd v Commissioner of Taxation [2012] AATA 517 (Linfox), the Australian Administrative Tribunal (AAT) considered whether fuel used in operating a refrigeration unit in a refrigerated vehicle travelling on public roads was subject to the application of subsection 43-10(3) of the FTA and therefore if the fuel tax credit reduced by the RUC. | The AAT found that the punctuation in the phrase "fuel to use, in a vehicle, for travelling on a public road" in subsection 43-10(3) of the FTA meant that, in order for the provision to apply, the fuel must be acquired both: | · to use in a vehicle; and | · to use for travelling on a public road [our emphasis] | Based on the ordinary meaning of the word "for", the AAT concluded that the only circumstance in which the second of these two conditions would be met is where fuel is acquired to use for the purpose of travelling on a public road. | The AAT found that the fuel in question was not acquired for this purpose, but was instead acquired and used for the "entirely different" purpose of refrigerating cargo inside the refrigerated vehicle. It followed that the fuel did not satisfy the second condition of subsection 43-10(3) of the FTA and was not, therefore, subject to the road user charge. | The ATO response to Linfox can be found in the Decision Impact Statement published on 19 September 2012 and provides that the Commissioner considers that the phrase "fuel to use, in a vehicle, for travelling on a public road" in subsection 43-10(3) of the FTA only covers fuel that is used in a vehicle: | · for the purpose of propelling that vehicle on a public road; or | · for a purpose that can be properly regarded as incidental to propelling that vehicle on a public road i.e. air conditioning for the comfort of the driver. | Further, the Decision Impact Statement states that the AAT's reasoning differs from the view set out in Fuel Tax Ruling FTR 2008/1 Fuel Tax: vehicle's travel on a public road that is incidental to the vehicle's main use and the road user charge which stated that the phrase "fuel to use, in a vehicle, for travelling on a public road" in subsection 43-10(3) of the FTA covers both fuel to propel the vehicle and fuel used to power auxiliary equipment, such as a refrigeration unit, in, or affixed to the vehicle. The view has now been incorporated into FTR 2008/1 under FTR 2008/1DA4 - Draft Addendum. | FTR 2008/1DA4 - Draft Addendum provides fuel to use 'for travelling', in the context of 43-10(3) of the FTA, encompasses fuel for propulsion but also fuel for aspects of the vehicle's function and operation that are for the purpose of travelling on a public road. | Fuel for travelling would include fuel used for stopping and idling while stationary in the course of a journey as well as the use of lights, brakes, power steering etc. Determining whether an aspect of the vehicle's function or operation has this character requires a practical assessment of its connection with travelling, as distinct from some other function of the vehicle. The expression 'for travelling' does not include fuel used for a purpose unrelated to a vehicle's movement on a public road. | The draft addendum will amend FTR 2008/1, when finalised. The changes outlined in FTR 2008/1DA4 have been incorporated into the draft consolidation version of FTR 2008/1DAC1 (referenced henceforth). | Travel on a public road | You use diesel fuel in operating a vehicle with a GVM exceeding 4.5 tonnes which moves along public roads and verge strips spraying paint as a divider. | FTR 2008/1DAC1 provides that the Commissioner considers that the meaning of the terms 'travel' and 'travelling' in subsections 43-10(3) and (4) of the FTA mean to go from one place to another place or to move from one point to another point. | A vehicle's travel is considered to begin when it commences to move and ends when it arrives at a destination, regardless of the distance. You state that your line marking vehicles travel to and from the depot up to the point where they commence the activity of maintaining the roads. As such, subitem 11(1) of the FTCTPA would apply. | You accept that fuel tax credits for fuel used in this travel to and from the depot is reduced by the amount of the road user charge. | Fuel used in heavy vehicles - maintaining the roads | The Commissioner considers that the movement of a vehicle whilst engaged in road maintenance is not 'travelling' on a public road. | At paragraph 22 of FTR 2008/1DAC1, the Commissioner explains that certain movement along a public road does not constitute 'travel' for the purposes of subsection 43-10(3) of the FTA. Specifically, it states that: | … | However, 'travelling' in the sense contemplated by subsection 43-10(3) does not include the movement of a vehicle on a public road or portion of a public road where: | · the vehicle is engaged in the construction, repair or maintenance of the road; and | · that road or portion of that road is under construction, repair or maintenance. | The Commissioner further explains at paragraph 117 that where a vehicle is engaged in road construction, repair or maintenance and moves on the road or portion of the road that is under construction, repair or maintenance in the course of carrying out this work, the vehicle does not 'travel' on the road in the sense contemplated by subsections 43-10(3) and (4). The purpose of this movement is to benefit the road, not to use the road to relocate the vehicle. | As discussed above, FTR 2008/1 is currently under review as a result of the decision by the AAT in Linfox . On 9 January 2013 the Commissioner published draft addendum FTR 2008/1DA4 in response to the decision and these changes have been incorporated into the draft consolidated version FTR 2008/1DAC1, referenced above. | However, the changes made do not amend the Commissioner's view on the meaning of 'travel' and the treatment of vehicles engaged in road maintenance, repair or construction included in FTR 2008/1 as described above. | Public roads | Furthermore, in paragraphs 44 and 45 of FTR 2008/1DAC1 the Commissioner states: | For the purposes of subsections 43-10(3) and 43-10(4) a road is a public road if: | · it is opened, declared or dedicated as a public road under a statute; | · it is vested in a government authority having statutory responsibility for the control and management of public road infrastructure; or | · it is dedicated as a public road at common law. | For the purposes of subsections 43-10(3) and (4) a public road encompasses any shoulder of the road and auxiliary lanes, for example emergency lanes. | Therefore, whether or not a road is closed to the public from time to time has no bearing on its status as a public road. | Consequently, as movement of a vehicle on a public road or portion of a public road is not considered 'travel' on a public road when the vehicle is engaged in the construction, repair or maintenance of the road, subitem 11(1) of the FTCTPA would not apply. | On-road credit under EGCSA | However, subitem 11(3) of the FTCTPA provides that if you would have been entitled an on-road credit under the EGCSA then you will be entitled to a fuel tax credit under section 41-5 of the FTA. | Section 43 of the EGCSA provided that you were entitled to an on-road credit for fuel used in operating a vehicle on a road with a GVM of 4.5 tonnes or more, but less than 20 tonnes, if the vehicle was a vehicle for transporting passengers or goods, and is undertaking a journey across a metropolitan boundary or wholly outside a metropolitan boundary. | To determine if a vehicle is for transporting passengers or goods, consideration may be given to its design. The design of a vehicle may assist in determining whether it is a type of vehicle for carrying passengers or goods. Examples of vehicles for transporting passengers or goods include buses and tanker trucks. Examples of vehicles not for transporting passengers or goods include mobile cherry-pickers, mobile cranes and front-end loaders. | In the case of a line marking vehicle, whilst it carries paint for the purposes of spraying the roads, transport of the paint would not be considered an integral part of the design of the vehicle. As such, the vehicle is not designed to carry passengers or goods. | Consequently, an entitlement to an on-road credit under section 43 of the EGCSA would not arise and as such you would not satisfy subitem 11(3) of the FTCTPA during the period 1 January 2009 to 30 June 2012. | It follows that you are not entitled to fuel tax credits at the full rate less road user charge for the portion of taxable fuel acquired for use in operating your line marking vehicle with a gross vehicle mass (GVM) exceeding 4.5 tonnes whilst it is moving along the road spraying paint during the period 1 January 2009 to 30 June 2012. | However, where would not have been entitled to an on-road credit or off-road credit under the EGCSA, subitem 11(6) of the FTCTPA provides that from 1 July 2008, an entitlement to a fuel tax credit arises under section 41-5 of the FTA. The amount of credit under this provision is half the amount of the full rate for the period 1 January 2009 to 30 June 2012, that is 19.0715 cents per litre (cpl). | Accordingly, you are entitled to a fuel tax credits at the half rate (19.0715cpl) for the portion of taxable fuel acquired for use in operating your line marking vehicle with a GVM exceeding 4.5 tonnes whilst it is moving along the road spraying paint, during the period 1 January 2009 to 30 June 2012. | 1 July 2012 to 30 November 2012 | Section 41-5 of the 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. | Section 43-5 of the FTA provides that from 1 July 2012, the amount of the fuel tax credit to which you are entitled for taxable fuel is the amount of effective fuel tax that is payable on the fuel less amount of carbon reduction (if applicable). | Further, subsection 43-10(3) of the FTA provides that your fuel tax credit entitlement can also be affected by the amount of the RUC in relation to taxable fuel acquired to use, in a heavy vehicle, for travelling on a public road. | Road user charge | As highlighted above the changes incorporated into FTR 2008/1 per FTR 2008/1DA4 - Draft Addendum and incorporated into FTR 2008/1DAC1 do not amend the Commissioner's view on the treatment of street sweepers. However, from 1 July 2012, entitlement is no longer affected by Division 2 of Part 3 of Schedule 3 to the FTCTPA or the EGCSA. | That is, from 1 July 2012: | · the journey on a public road to and from the point of sweeping the road is considered 'travelling' and fuel used for travelling on a public road for the purposes of subsection 43-10(3) of the FTA. As such, fuel tax credits are reduced by the RUC, and | · movement along the road spraying paint by your line marking vehicle with a GVM exceeding 4.5 tonnes does not constitute 'travelling' or fuel used for travelling on a public road for the purpose of subsection 43-10(3) of the FTA and as such, fuel tax credits are not reduced by the RUC. | Carbon reduction from 1 July 2012 | As discussed above, from 1 July 2012 section 43-5 of the FTA now provides the amount of your fuel tax credit is worked out by the amount of effective fuel tax less amount of carbon reduction (if applicable). | Therefore, whilst the RUC does not apply to the portion of taxable fuel you acquired for use in operating line marking vehicle with a GVM exceeding 4.5 tonnes that moves along public roads and verges, we must determine if the amount of your fuel tax credit for the fuel is reduced by an amount of carbon reduction. | In certain circumstances, the amount of carbon reduction will be nil. Paragraph 43-8(4)(c) of the FTA provides that: | The *amount of carbon reduction that applies to the fuel is nil to the extent that: | … | (c) you acquire, manufacture or import the fuel for use in a vehicle with a gross vehicle mass of more than 4.5 tonnes travelling on a public road; or | … | The wording of paragraph 43-8(4)(c) of the FTA focuses on whether fuel is for use in a vehicle travelling on a public road. | The discussion of the meaning of the term 'travel' in FTR 2008/1DAC1 is focused on its significance in determining whether a road user charge is applicable under subsection 43-10(3) for the FTA, and the possible effect of subsection 43-10(4) of the FTA. | However, given the test in 43-8(4)(c) of the FTA also contains the phrase 'travelling on a public road', the discussion in FTR 2008/1DAC1 is equally applicable to the determination of whether the carbon reduction applicable to the use of fuel in a vehicle with a GVM greater than 4.5 tonnes is nil. | Consequently, while your line marking vehicles are engaged in constructing, maintaining or repairing a public road, they are not travelling on that road. It follows that the fuel tax credit otherwise available is reduced by the relevant carbon reduction for the fuel calculated in accordance with section 43-8 of the FTA. | As such, the rate you can claim is 31.933 cents per litre for diesel you acquire for use in operating your line marking vehicle with a GVM exceeding 4.5 tonnes whilst it is moving along the road spraying paint for the period 1 July 2012 to 30 November 2012. | Note: As discussed in FTR 2008/1DAC1 a vehicle is only considered not to be travelling while it is engaged in road maintenance. The movement on the public road to and from the point where road maintenance occurs is nevertheless 'travelling' for the purposes of 43-10(3) FTA and similarly for paragraph 43-8(4)(c) FTA. | Safety vehicle under 4.5 tonnes | You also acquire and use fuel in vehicles with a GVM of less than 4.5 tonnes which provide safety support services to your line marking vehicle while it is maintaining public roads. | These safety vehicles move along the road warning on-coming vehicles of a potential road hazard, namely a slow moving line marking vehicle positioned on the road such that it is likely to be an obstruction. | Whilst it is a requirement that a vehicle accompany the vehicle that is marking lines on a public road, the safety vehicle is not engaged in the construction, repair or maintenance of the road. The function of a safety vehicle is to warn on-coming vehicles of a potential road hazard. The activity of the vehicle to which the safety warning relates is irrelevant. | Hence, the discussion at paragraphs 22 and 117 of FTR 2008/1 is not relevant to a safety vehicle, irrespective of the activity that is undertaken on the public road that requires the provision of a safety vehicle. | It is considered that a safety vehicle moving along a public road providing safety support to a vehicle that is constructing, repairing or maintaining the road is travelling on a public road. As such, section 41-20 of the FTA applies to the taxable fuel acquired for use in a safety vehicle. | Accordingly, you are not entitled to fuel tax credits for taxable fuel you acquired and used in safety vehicles with a GVM of less than 4.5 tonnes that move along a public road providing safety support services to a separate vehicle that is maintaining a public road.