Private ruling: Fuel tax credits - agriculture
Published: November 2012
Ruling period: Year ending 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you entitled to fuel tax credits at the full rate for that portion of taxable fuel you acquire and use in vehicles, plant and equipment which are used off-road in managing properties associated with the training of working horses? | A1: Yes. | Q2: Is your fuel tax credit entitlement in respect of taxable fuel you acquire and use in your show horse training activities, subject to the carbon reduction amount? | A2: Yes.

Relevant facts and circumstances: You are registered for goods and services tax (GST) and fuel tax credits. Your business is training show and working horses. The business is conducted on your agricultural property. You advise that stock horses are horses which will be used on agricultural properties. You are aware that fuel used in light vehicles for travel on public roads is not eligible for fuel tax credits and are therefore seeking advice on your off-road use of fuel only. You acquire diesel fuel for use on your agricultural property in undertaking the training activities.

Relevant legislative provisions: Fuel Tax Act 2006 section 41-5 | Fuel Tax Act 2006 section 41-20 | Fuel Tax Act 2006 subdivision 41-B | 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 subsection 43-10(1) | Fuel Tax Act 2006 subsection 43-10(3) | Fuel Tax Act 2006 paragraph 43-15(1)(c) | Fuel Tax Act 2006 section 43-15 | Fuel Tax Act 2006 subsection 43-20(2) | Fuel Tax Act 2006 s ection 60-5

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. The disentitlement provisions for fuel tax credits are contained in subdivision 41-B of the FTA and section 41-20 relevantly states that you are not entitled to fuel tax credits for taxable fuel used in a vehicle with a gross vehicle mass (GVM) of 4.5 tonnes or less travelling on a public road. | Detailed Reasoning - Calculating fuel tax credits: 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 the carbon reduction (section 43-8 of the FTA); or · the amount of any applicable grant or subsidy (subsection 43-10(1) of the FTA); or · the amount of the road user charge (RUC) (subsection 43-10(3)) in relation to use of taxable fuel in heavy vehicles for travelling on public roads. | Detailed Reasoning - Carbon reduction: Section 43-8 of the FTA sets out the rules for working out the amount of the carbon reduction in fuel tax credit calculations. For petrol and diesel fuels, the carbon reduction is equal to the quantity of fuel multiplied by the carbon emission rate multiplied by the carbon price. The carbon emission rate for petrol is 0.0024 and the rate for diesel is 0.0027. The carbon price for the financial year starting 1 July 2012 is 2,300 cents and this price rises each year. Consequently, the carbon reduction which applies to petrol is 5.52 cents per litre (cpl) and 6.21 cpl for diesel fuel acquired during the year ended 30 June 2013. However, subsection 43-8(4) of the FTA sets out the limited circumstances where the amount of carbon reduction is nil. No carbon reduction is applied to your fuel tax credit calculations if you acquire fuel for use in: 1. specified activities within: (a) agriculture; or (b) fishing operations; or (c) forestry; or 2. vehicles with a gross vehicle mass (GMV) of more than 4.5 tonnes travelling on a public road; or 3. if the fuel is not used for combustion. | Detailed Reasoning - Agriculture: Agriculture is relevantly defined in section 43-15 of the FTA. If you carry on an enterprise in agriculture and you acquire taxable fuel for use in an activity that is within the meaning of agriculture, as defined, and is not excluded, you are entitled to a fuel tax credit under section 41-5 of the FTA. The amount of your fuel tax credit entitlement for taxable fuel acquired from 1 July 2012 for use in agriculture, will have a nil carbon reduction amount. Paragraph 43-15(1)(c) of the FTA provides that agriculture includes the rearing of livestock. However, in subsection 43-20(2) of the FTA, livestock is defined as an animal reared for the production of food, fibres, skins, fur or feathers, or for its use in the farming of land. In Fuel Tax Ruling FTR 2012/1, Fuel tax: fuel tax credits for taxable fuel acquired or manufactured in, or imported into, Australia for use in carrying on an enterprise involving 'agriculture' as defined in section 43-15 of the Fuel Tax Act 2006, the Commissioner explains the meaning of agriculture for the purposes of fuel tax credits. In paragraph 207 of FTR 2012/1 the Commissioner states that animals that are not reared for the production of food, fibres, skins, fur or feathers, or for their use in the farming of land are not live-stock for the purposes of the fuel tax credit scheme. The Commissioner goes on to state that the rearing of racehorses or show horses, or animals bred as pets are not live-stock as defined in subsection 43-20(2). In addition, at paragraph 208 for FTR 2012/1 the Commissioner advises that livestock will also include animals bred on agricultural stud farms, for example, merino sheep stud farms and cattle stud farms. This is because such animals are reared for the ultimate production (through their progeny) of food, fibres, skins, fur or feathers. In paragraph 208 of FTR 2012/1 the Commissioner advises that rearing of live-stock includes all activities required to breed, raise and care for the animals in accordance with accepted commercial animal husbandry and management practices. It is accepted that the training of work horses would be a customary part of raising and managing work horses. Consequently, that portion of the fuel you use in training work horses would be for a use in agriculture whereas that portion of the fuel you use in training show horses would not be for use in agriculture. We therefore consider that a portion of the fuel you have acquired and used in your business has been used in agriculture. In accordance with subsection 43-8(4) of the FTA, fuel used in agriculture is not subject to the carbon reduction amount and consequently the fuel tax credit calculated in respect to fuel acquired for this purpose will not be reduced by the carbon charge amount. The full rate of fuel tax credits therefore applies to this portion of your fuel. The full rate of fuel tax credits is 38.143 cents per litre. The fuel tax credit in respect to the fuel you acquire and use in your business to train show horses will be reduced by the carbon charge. The applicable rate of fuel tax credit for the year ending 30 June 2013 for this use of fuel is 32.623 cpl for petrol and 31.933 cpl for diesel. | Detailed Reasoning - Apportionment: Of the fuel you acquire and use in your business: · a portion is used in agriculture and is not affected by the carbon charge · a portion is not used in agriculture and will be affected by the carbon charge Section 60-5 of the FTA provides that in working out your net fuel amount your total fuel tax credits is the sum of all fuel tax credits to which you are entitled in a tax period. In Fuel Tax Determination FTD 2010/1 Fuel tax: is apportionment used when determining total fuel tax credits in calculating the net fuel amount under section 60-5 of the Fuel Tax Act 2006? the Commissioner advises that in calculating your fuel tax credit entitlements, you will need to calculate your entitlement for each different use of fuel and the different rates which may apply. The Commissioner goes on to discuss the various ways this apportionment can be accomplished in FTD 2010/1. You can use any fair and reasonable basis for working out the amount of taxable fuel in respect of which you are entitled to a fuel tax credit.

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