Private ruling: Fuel tax credits - use of fuel in auxiliary equipment and off public roads
Published: August 2013
Ruling period: 2008-09 income year | 2009-10 income year | 2010-11 income year | 2011-12 income year | 2012-13 income year
Date scheme commenced: 1 July 2009

Ruling: Q1: Are you entitled to a fuel tax credit at the full rate for taxable fuel acquired for use in auxiliary equipment off public roads for the period until 30 June 2012? | A1: Yes. | Q2: Are you entitled to a fuel tax credit at the full rate for taxable fuel used in powering the vehicle from the public road network on properties for the period until 30 June 2012? | A2: Yes. | Q3: Are you entitled to a fuel tax credit at the full rate for taxable fuel acquired for use in auxiliary equipment off public roads for the period after 1 July 2012? | A3: Yes. | Q4: Are you entitled to a fuel tax credit at the full rate for taxable fuel used in powering the vehicle from the public road network on properties for the period after 1 July 2012? | A4: Yes. | Q5: Can you retrospectively claim fuel tax credits for the tax periods 1 July 2010 to 30 June 2012? | A5: Yes.

Relevant facts and circumstances: You are a transport company and one of your divisions involves picking up goods from properties and delivering the goods to factories. You acquire and use diesel fuel in your prime mover/tanker combination to undertake your business activities. A powered power take off (PTO) is required to power the pumping unit that loads and unloads the goods on properties and the factory. The PTO is also required on some tankers to complete the cleaning process after the delivery has taken place. The PTO is powered from the prime mover engine and uses the engine's main fuel source. You have confirmed that the gross vehicle mass (GVM) of your transport vehicles exceed 4.5 tonnes GVM. You provide that the distances travelled on public roads are up to several hundred kilometres and the portion off public roads is very minimal. You are registered for goods and services tax (GST).

Relevant legislative provisions: Energy Grants (Credits) Scheme Act 2003 section 8 | Energy Grants (Credits) Scheme Act 2003 paragraph 8(a) | Energy Grants (Credits) Scheme Act 2003 subparagraph 8(a)(i) | Energy Grants (Credits) Scheme Act 2003 subparagraph 8(a)(ii) | Energy Grants (Credits) Scheme Act 2003 subparagraph 8(a)(iii) | Energy Grants (Credits) Scheme Act 2003 paragraph 8(b) | Energy Grants (Credits) Scheme Act 2003 paragraph 8(c) | Energy Grants (Credits) Scheme Act 2003 paragraph 8(d) | Fuel Tax Act 2006 section 41-5 | Fuel Tax Act 2006 section 43-5 | 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 section 47-5 | Fuel Tax Act 2006 section 47-10 | 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) of Schedule 3 | Fuel Tax (Consequential and Transitional Provisions) Act 2006 subparagraph 11(1)(b)(ii) of Schedule 3 | Taxation Administration Act 1953 paragraph 105-55(1) of Schedule 1 | Taxation Administration Act 1953 subparagraph 105-55(1)(a) of Schedule 1

Reasons for decision: Detailed Reasoning - 1 July 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 in Australia to the extent that 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 Schedule 3 to the Fuel Tax (Consequential and Transitional Provisions) Act 2006 (FTCTPA) which operates to restrict this entitlement to specific activities for fuel purchased between 1 July 2008 and 30 June 2012, 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 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 'incidental use' within the meaning of section 8 of the EGCSA in relation to a vehicle travelling on a public road. You acquire diesel fuel for use in your transport vehicles that have a gross vehicle mass (GVM) exceeding 4.5 tonnes. | Detailed Reasoning - Travelling on a public road: The term 'travelling' is not defined in the FTA, therefore it takes on its ordinary meaning. The definition of 'travel' in The Macquarie Dictionary , 2001 rev 3 rd edn The Macquarie Library Pty Ltd, NSW includes: 1. to go from one place to another; make a journey: to travel for pleasure. 2. to move or go from one place or point to another. Therefore, the phrase 'travelling on a public road' means to make a journey on a public road. It includes all the ordinary incidents of a journey undertaken by a vehicle such as incidental stopping in the course of a journey and the use of auxiliary equipment on the vehicle. | Detailed Reasoning - Incidental use: Incidental use of taxable fuel in a vehicle travelling on a public road is a specific activity listed in subparagraph 11(1)(b)(ii) of Schedule 3 to the FTCTPA. Incidental use is defined in section 8 of the EGCSA as: … (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) powering the vehicle, or auxiliary equipment in or on the vehicle, in order to clean or otherwise maintain the vehicle or auxiliary equipment in or on the vehicle; (d) using the vehicle for training operators of vehicles. Your business activities involve the transport of goods from properties and delivering the goods to the factories. A diesel powered power take off (PTO) is required to power the pumping unit that loads and unloads the goods. The PTO is also required on some tankers to complete the cleaning process after the delivery has taken place. The PTO is powered from the prime mover engine and uses the engine's main fuel source. The diesel used in powering the pumping unit is used in activities of loading and unloading goods to be transported and is incidental use within the meaning of section 8 of the EGCSA along with fuel used in the cleaning process. These activities are an incidental use in relation to your vehicles that travel on public roads for several hundred kilometres and that travel on properties and the factory in order to load and unload the goods from the tankers. Furthermore, your vehicles travel on properties for minimal distances to collect the goods and, also to deliver the goods to the factory. Fuel used in powering the vehicle or auxiliary equipment where the vehicle is moved to a place where loading or unloading is to occur falls within incidental use in section 8 of the EGCSA. As such, fuel used to travel off the public road to load and unload the goods along with powering the auxiliary equipment for loading and unloading is incidental use and entitlement to fuel tax credits falls within section 41- 5 of the FTA. | 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 any applicable grant or subsidy; or · the amount of the road user charge (RUC) in relation to use of taxable fuel in a vehicle for travelling on public roads. | Detailed Reasoning - 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 RUC for the fuel. In Linfox Australia Pty Ltd v. Commissioner of Taxation [2012] AATA 517 (Linfox decision), the Australian Administrative Tribunal (AAT) considered whether fuel used in operating a refrigeration unit in a refrigerated trailer travelling on a public road was subject to subsection 43-10(3) of the FTA and therefore, if the fuel tax credit for the fuel was 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 means that, in order for the provision to apply, 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 acquired and used for the "entirely different" purpose of refrigerating cargo inside the refrigerated trailer. It followed that the fuel did not satisfy the second condition of subsection 43-10(3) of the FTA and therefore was not subject to the road user charge. The ATO view in response to the Linfox decision 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. Fuel in a vehicle can be said to serve several purposes, such as powering mechanical propulsion and auxiliary equipment. Travelling, in the context of fuel use in subsection 43-10(3) of the FTA, encompasses all aspects of vehicle 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 whiles stationary in the course of a journey as well as the use of lights, brakes, power-steering and windscreen wipers. 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 location of the relevant machinery or source of the fuel associated with a vehicle's function or operation is not determinative of whether fuel is for use in travel. The design of the engine, or how the vehicle operates, is also not determinative of this. Provided fuel directly or indirectly powers machinery sufficiently connected with the travel the fuel is to use, in a vehicle, for travelling. As a result of the Linfox decision, fuel used in auxiliary equipment is not considered to be fuel used for travelling. Accordingly, the fuel is not subject to the road user charge. You acquire and use diesel fuel to power the pumping unit that pumps the goods for loading on properties. Fuel is also used to complete the process and cleaning after the delivery has taken place. Clearly, this is fuel used in auxiliary equipment that is not considered to be used for travelling and is not subject to the road user charge. Accordingly you would be entitled to a fuel tax credit at the full rate for taxable fuel used in auxiliary equipment for the purposes of loading and unloading and cleaning whilst off public roads for the period until 30 June 2012. | Detailed Reasoning - Fuel used to power the vehicle on properties: As you have stated above, your vehicles travel off the public road network a minimal distance to collect goods from properties. You also use fuel to travel off the public road to deliver at the factory which is also a minimal distance. This is not fuel used for travelling on public roads and therefore, subsection 43-10(3) of the FTA does not apply and the amount of your fuel tax credit is not reduced by the road user charge. You are entitled to claim a fuel tax credit at the full rate until 30 June 2012 for taxable fuel used in powering the vehicle from the public road network on properties and to the factory for loading and unloading of the goods. | Detailed Reasoning - 1 July 2012 to 30 June 2013: Section 41-5 of the FTA provides an entitlement to a fuel tax credit for taxable fuel acquired or manufactured in, or imported into, Australia by an entity for use in carrying on its enterprise. Section 43-5 of the FTA sets out the rules for working out an entity's fuel tax credit amount. Amongst other things, the entity's fuel tax credit amount is reduced by the amount of the carbon reduction. | Detailed Reasoning - Carbon reduction (carbon charge): Subsection 43-8(4) of the FTA specifies a number of situations where no carbon reduction applies. Paragraph 43-8(4)(c) relevantly states: (4) 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; … Based on the facts provided, the Commissioner considers that your vehicles fall into the category of "vehicles… travelling on a public road" in relation to their deliveries of goods (notwithstanding that a small portion of their travel may not be on a public road). It follows that the amount of the carbon reduction which applies to all fuel used in your vehicles in connection with the deliveries would be nil by virtue of paragraph 43-8(4)(c) of the FTA. | Detailed Reasoning - Road user charge: It is also necessary to consider whether the amount of your fuel tax credit should be reduced by the road user charge within subsection 43-10(3) of the FTA. As explained previously, fuel used in the auxiliary equipment at the properties and the factory and also in the cleaning process is not 'for travelling on a public road' and as such the amount of fuel tax credit should not be reduced by the road user charge. This is also applicable to the fuel used in propelling the vehicle off the public roads to the properties and the factory. Therefore, the amount of fuel tax credit is not reduced by the road user charge. In summary, diesel fuel acquired and used in powering the pumps for loading and unloading goods and the cleaning process along with fuel used in propelling your vehicles from the public roads to farms and the factory is not reduced by a carbon charge or the road user charge. You are entitled to claim a fuel tax credit at the full rate for taxable fuel acquired for the period after 1 July 2012. | Detailed Reasoning - Retrospective fuel tax credit claims: Section 47-5 of the FTA imposes a time limit on entitlement to a fuel tax credit. You will cease to be entitled to a fuel tax credit unless you claim within 4 years of when your business activity statement (BAS) was due. Section 47-10 of the FTA provides exceptions to the time limit and states that you do not cease to be entitled under section 47-5 where paragraph 105-55(1) in Schedule 1 to the Taxation Administration Act 1953 (TAA) applies. Relevantly, subparagraph 105-55(1)(a) of Schedule 1 to the TAA states: You are not entitled to a refund, other payment or credit to which this subsection applies in respect of a tax period or importation unless: (a) within 4 years after: (i) the end of the tax period; or (ii) the importation; as the case required, you notify the Commissioner (in a GST return or otherwise) that you are entitled to the refund, other payment or credit; or …. This may be done in a notice that is given to the Commissioner detailing the entitlement or by revising the return for the relevant tax period. You must advise the Commissioner of any additional amount of fuel tax credit entitlement within four years of the end of the relevant tax period. You notified the Commissioner of the entitlement to an additional amount of fuel tax credit entitlement in your request for this private ruling and this has been accepted as being received within 4 years of the relevant tax period (that is 1 July 2010 to 30 June 2012). Notifications of entitlement to refunds within the four year period only apply to tax periods commencing before 1 July 2012. From 1 July 2012 a new assessment system applies and any entitlement to fuel tax credits will cease if not claimed within four years. Therefore, you can retrospectively claim fuel tax credits for the period 1 July 2010 to 30 June 2012. | Detailed Reasoning - Conclusion: In conclusion, the full rate of fuel tax credits that you can currently claim is 38.143 cents per litre for fuel used in auxiliary equipment. You can also claim the full rate when powering the vehicle on properties and from the public road to the factory. You will need to apportion the fuel used in the vehicle for travelling on public roads and other fuel in auxiliary equipment and off public roads.