Private ruling: Fuel Tax Credits
Date of advice: 6 April 2016
Published: May 2016
Ruling period: 1 January 2012 to 31 December 2015
Date scheme commenced: 1 January 2012

Ruling: Q1: Are you entitled to claim fuel tax credits for fuel consumed to power generators whilst travelling on public roads? | A1: No. | Q2: Are you entitled to claim fuel tax credits for fuel consumed whilst travelling on roads which are not public roads? | A2: Yes. | Q3: Are you entitled to claim fuel tax credits for fuel consumed in your generators whilst operating your enterprise from a parked vehicle on a public road? | A3: Yes. | Q4: Are your proposed rates for fuel tax credits correct for each relevant period? | A4: No.

Relevant facts and circumstances: You are registered for goods and services tax (GST). You operate a series of mobile cafés providing food and beverages to workers at various sites. Vehicles utilised in the enterprise are specially fitted vans manufactured after 1 January 1996. The vans have a gross vehicle mass (GVM) less than 4.5 tonnes. Typically the vans are fitted out with the following: • Espresso machine • Pie oven • Coffee grinder • Refrigerator to store perishable items • Water pump which draws water from custom made tanks installed in the vehicles. • Computer/printer • Special lighting and • A generator to power appliances when the vehicle is travelling and stationery. The generator has its own diesel engine contained within the unit. The fuel is drawn from the vehicle's diesel fuel tank. The vans typically operate from 6am to 1pm Monday to Saturday visiting between twenty and thirty sites per day on a typical route involving more than twenty sites. Routes are predetermined and involve the vans travelling on public roads to the first site where it opens for business to serve customers and then moves onto the next site. Sites are almost always on the land of the particular building or industrial estate. You have permission from the various property owners. The generator runs to power the various equipment whilst the van is travelling to commence its route, driving between sites and when stationary serving customers. The generator runs at all times to ensure the equipment is functional for immediate customer servicing. Whilst the vehicle is stationary, the vehicles engine is off and the generator engine remains on to power the equipment.

Relevant legislative provisions: Section 41-5 of the Fuel Tax Act 2006 | Section 41-20 of the Fuel Tax Act 2006 | Subsection 43-10(3) of the Fuel Tax Act 2006 | Section 43-5 of the Fuel Tax Act 2006 | Section 43-8 of the Fuel Tax Act 2006 | Subsection 11(1) of Schedule 3 of the Fuel Tax (Consequential and Transitional Provisions) Act 2006

Reasons for decision: Summary: You are not entitled to fuel tax credits for fuel consumed to power your generators whilst travelling on public roads. | Detailed Reasoning - Detailed reasoning: 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. Section 41-20 of the FTA states that an entity is not entitled to a fuel tax credit (FTC) to the extent that they acquire the fuel for use in a vehicle with a gross vehicle mass of 4.5 tonnes or less travelling on a public road. As your fleet of vans are less than 4.5 tonnes GVM section 41-20 of the FTA operates to deny any entitlement to FTC for taxable fuel used whilst travelling on public roads. Although a portion of the fuel is used to power the generator, we consider this use is captured by section 41-20 of the FTA as the generator is used within the confines of the vehicle. | Summary: You are entitled to fuel tax credits for fuel consumed whilst travelling on roads which are not public roads. | Detailed Reasoning - Detailed reasoning: Section 41-5 of the FTA provides that you are entitled to a fuel tax credit (FTC) for taxable fuel that you acquire for use in carrying on your enterprise if you are registered for GST. Section 41-20 of the FTA states that an entity is not entitled to a FTC to the extent that they acquire the fuel for use in a vehicle with a gross vehicle mass of 4.5 tonnes or less travelling on a public road. Fuel Tax Ruling FTR 2008/1 1 provides guidance in respect of the meaning of roads and public roads. Specifically, at paragraph 44 of FTR 2008/1 it is stated that the Commissioner's view is that a road is a public road if: • it is opened, declared or dedicated as a public road under statue; • it is vested in a government authority having statutory responsibility for the control and management of public road infrastructure; or • dedicated as a public road at common law. Whilst you carrying on your enterprise, you consume fuel to power custom fitted generators which are required to power necessary equipment in its mobile cafes. In the Commissioner's view these private premises are not considered public roads as highlighted in paragraph 44 of FTR 2008/1. Section 41-20 of the FTA does not apply because the fuel is not used in light vehicles travelling on a public road. | Summary: You are entitled to claim fuel tax credits for fuel consumed in your generators whilst stationery and operating your enterprise parked on a public road. | Detailed Reasoning - Detailed reasoning: Section 41-20 of the FTA states that an entity is not entitled to a FTC to the extent that you acquire the fuel for use in a vehicle with a gross vehicle mass of 4.5 tonnes or less travelling on a public road. On occasion you operate your mobile café whilst your van is stationery and parked on a public road. The engine in the van is immobilised and the mobile café operates using electricity from the generator. Whilst the vehicle's engine is not running, fuel is still consumed by the generator but it is not consumed to assist in travelling. On this basis the disentitlement provision section 41-20 of the FTA does not deny you claiming FTCs for the fuel consumed by the generator whilst in use when the vehicle's engine is turned off and the vehicle is parked stationery on a public road. | Detailed Reasoning - Detailed reasoning: The FTC rates that you have proposed to use when calculating your entitlements are not correct for each relevant period. The following reasoning explains the correct rates for each relevant period. 1 July 2011 to 30 June 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. However this entitlement is affected by Part 3 of Schedule 3 to the Fuel Tax (Consequential and Transitional Provisions) Act 2006 (FTCTPA) which operates to: 1) restrict this entitlement to specific activities for fuel purchased between 1 July 2008 and 30 June 2012 and 2) continue the previous entitlement provisions of the Energy Grants (Credits) Scheme Act 2003 (EGCSA). | Detailed Reasoning - Full rate - taxable fuel used to power the generator while the vehicle is not travelling on a public road: Item 11 of Schedule 3 to the FTCTPA applies to limit the entitlement to FTCs for taxable fuel acquired between 1 July 2008 and 30 June 2012. However, paragraph 11(1)(b) provides that item 11 does not apply to taxable fuel acquired for specified uses and includes at subparagraph 11(1)(b)(iii) taxable fuel acquired for use in generating electricity. As such the taxable fuel used for generating electricity is not affected by the transitional rules. Under section 41-5 of the FTA an entity is entitled to an FTC for taxable fuel acquired for use in their enterprise. Where the taxable fuel is used in generating electricity the fuel tax credit for the fuel is paid at the full rate unless the fuel is used while the vehicle is travelling on a public road. | Detailed Reasoning - Half rate - taxable fuel used to power the vehicle in travelling and stationary on non-public road areas: Item 11 applies to limit the entitlement to FTCs for taxable fuel acquired between 1 July 2008 and 30 June 2012, and paragraph 11(1)(b) includes specified uses of taxable fuel to which item 11 does not apply. Taxable fuel acquired for use in a vehicle while on non-public roads areas is not included in paragraph 11(1)(b) and as such the transitional rules of the FTCTPA apply. Subitem 11(6) provides that an entitlement to an FTC under the FTA if you would not have been previously entitled to an energy grant credit under the Energy Grants (Credit) Scheme Act 2003 . That is, if you acquire taxable fuel for use in carrying on your enterprise, and were not entitled to a credit under the EGCSA, then you are nevertheless entitled to an FTC. However, subitem 11(6) provides that the FTC is at half of the amount of the entitlement that would have been determined under Division 43 of the FTA. The disentitlement provision of 41-20 of the FTA does not apply to fuel used in the vehicle when it is travelling and stationary on non-public road areas. As such, by application of subitem 11(6), the entitlement to the FTC under section 41-5 of the FTA is half of the amount that it would have been under Division 43 of the FTA. 1 July 2012 to 30 June 2014 From 1 July 2012 the transitional rules of the FTCTPA no longer applied. All activities previously eligible for a credit at the half rate became eligible for credits at the full rate from 1 July 2012. Coinciding with this date was the implementation of carbon reduction. Section 43-5 of the FTA explains that your fuel tax credit is worked out by reducing the amount of effective fuel tax by the amount of the carbon reduction. Section 43-8 of the FTA states the method for working out the amount of carbon reduction that applies. Specifically subsection 43-8(4) provides situations in which the carbon reduction does not apply and includes taxable fuel used in a heavy vehicle (that is with a GVM of greater than 4.5 tonnes) travelling on a public road. Your particular uses of the fuel do not fall within this exemption and therefore the carbon reduction applies to reduce your FTC entitlement. The carbon reduction applies for both of your uses for the fuel being electricity generation and in the vehicle whilst travelling on non-public road areas. 1 July 2014 to date Applicable from 1 July 2014 the carbon reduction has been repealed (section 43-8 of the FTA), therefore no reduction is applicable to your fuel tax credits entitlements from this date onwards. The following table summarises the applicable rates for each period: Period Business use Applicable rate Cents per litre of diesel 1 July 2011 to 30 June 2012 Electricity generation by a portable generator (off road and while stationary on a public road) 38.143 In the vehicle (excluding the fuel used to power the generator) travelling on non-public road areas. 19.0715* In the vehicle (including the fuel used to power the generator) travelling on a public road) Nil 1 July 2012 to 30 June 2013 Other off-road activities - electricity generation by a portable generator ( excluding fuel used to power the generator when the vehicle is travelling on a public road) 31.933** 1 July 2013 to 30 June 2014 Other off-road activities - electricity generation by a portable generator ( excluding fuel used to power the generator when the vehicle is travelling on a public road). 31.622** 1 July 2014 to 9 November 2014 Off-road use only All other business uses - such as on private roads, off public roads and non-fuel uses •electricity generation by a portable generator 38.143 10 November 2014 to 1 February 2015 Off-road use only All other business uses - such as on private roads, off public roads and non-fuel uses •electricity generation by a portable generator 38.6 2 February 2015 to 31 July 2015 Off-road use only All other business uses - such as on private roads, off public roads and non-fuel uses electricity generation by a portable generator 38.9 1 August 2015 to 31 January 2016 Off road use only All other business uses - such as on private roads, off public roads and non-fuel uses 39.2 1 February 2016 to date Off road use only All other business uses - such as on private roads, off public roads and non-fuel uses 39.5 * The rate of 19.0715 cents per litre is 50% of the full rate of 38.143 cents per litre. **The rate accounts for the carbon charge 1 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