Private ruling: Fuel tax credits - apportionment
Date of advice: 4 December 2015
Published: February 2016
Ruling period: 1 July 2009 to 30 June 2018
Date scheme commenced: 1 July 2009

Ruling: Q1: Is your proposed apportionment method a fair and reasonable method of apportionment for the purposes of calculating the quantity of taxable fuel used in your heavy vehicles off public roads? | A1: Yes

Relevant facts and circumstances: You have been registered for goods and services tax (GST) fuel tax credits (FTC) since 200X. You carry on an enterprise, part of which involves providing bulk transport services. You operate a fleet of vehicles, each with a gross vehicle mass greater than 4.5 tonnes (heavy vehicles). Your heavy vehicles travel on public roads, and roads other than public roads. Your heavy vehicles also spend time stationary (i.e. with the engine switched off) or idling on roads other than public roads. You have previously submitted a back claim for the fuel used in the auxiliary equipment of your heavy vehicles. This back claim was prepared using an apportionment of 5% of your taxable fuel used in the auxiliary equipment of the vehicles, as outlined in item 5 of the Auxiliary Equipment Apportionment Table in Practice Statement Law Administration (General Administration) PS LA 2013/4 (GA): Apportioning taxable fuel in a vehicle for powering the auxiliary equipment of the vehicle. You wish to implement the following apportionment method for the purposes of calculating the quantity of taxable fuel used in your vehicles off public roads, relying on the data from your accounting systems. Your accounting system records the following data: • Fuel consumed by each heavy vehicle • Engine hours for each heavy vehicle • Time spent off public roads (which includes time whilst the heavy vehicles are travelling, idling, and stationary) You intend to use the fuel consumed data and engine hours data to calculate an average hourly fuel consumption rate for the fleet of heavy vehicles (calculated as total fuel consumed by the fleet for a 12 month period divided by total engine hours for the fleet for the same 12 month period). You will ensure that the 12 month period selected is representative of the general pattern of use of the vehicles. You have provided an example of the report that can be obtained from your accounting system for the time spent off public roads. This report includes the following details per journey: • Asset number • Entry date and time (time is recorded in hours, minutes and seconds) • Entry off-road address • Exit date and time (time is recorded in hours, minutes and seconds) • Exit off-road address • Time spent off public road (calculated in minutes and seconds) In this example report, the maximum time spent off public roads per journey is approximately 30 minutes. You intend to calculate the quantity of fuel used off public roads by dividing the average fuel consumption rate per hour by 60 (60 minutes in one hour) and multiplying the result by the time spent (in minutes) off public roads. When calculating any back claim for fuel used off public roads, you will reduce the quantity of fuel being claimed by 5% where a claim for that amount has previously been submitted for the auxiliary equipment of your heavy vehicles.

Relevant legislative provisions: Fuel Tax Act 2006 section 41-5 | Fuel Tax Act 2006 section 60-5

Reasons for decision: Summary: Section 41-5 of the Fuel Tax Act 2006 (FTA) states that you are entitled to an FTC for taxable fuel you acquire to the extent that you do so for use in carrying on your enterprise, provided you were registered or required to be registered for GST at the time you acquired the fuel. However, your entitlement to FTCs is also affected by other provisions of the FTA. Section 60-5 of the FTA outlines the process for working out your net fuel amount. 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 ?, sets out the Commissioner's view on determining FTC entitlements. The Commissioner considers that the use of the phrase 'to the extent that', in the context of determining FTC entitlements, contemplates apportionment, in the context of section 41-5 of the FTA between: • a use of taxable fuel that entitles you to an FTC and one that does not, and • uses of fuel that give rise to different rates of FTCs. In FTD 2010/1 the Commissioner considers that an entity can use any apportionment method that is fair and reasonable in its circumstances. Guidance on whether a method of apportionment is fair and reasonable in the circumstances is provided in Practice Statement Law Administration (PS LA) 2010/3 - Apportionment for the purposes of the Fuel Tax Act 2006 . Section 7 of PS LA 2010/3 discusses the estimate method, whereby an entity is required to estimate fairly and reasonably how much taxable fuel it acquires or actually uses in a tax period. Section 8 of PS LA 2010/3 provides examples of known reliable measures for calculating the amount of taxable fuel acquired for use in an eligible activity, and these include hours of operation of vehicles and average hourly fuel consumption of vehicles. Section 8 of PS LA 2010/3 notes that other measures may also be suitable. In your case, you intend to establish an average fuel consumption rate per hour for your fleet of heavy vehicles by dividing total fuel consumed by the fleet by the total engine hours for the fleet for a 12 month period. You then intend to multiply this average fuel consumption rate (per hour and/or per minute as appropriate) by the total time spent off public roads (in hours and/or minutes) to ascertain the quantity of fuel that is used on roads other than public roads. We consider this proposed apportionment method is fair and reasonable in your case, as you are using reliable measures for ascertaining the quantity of fuel that is used on roads other than public roads as outlined in section 7 and section 8 of PS LA 2010/3. However, you will need to consider the following points before implementing the proposed methodology: • The total time spent off public roads includes time spent idling and stationary (i.e. with the engine switched off). The heavy vehicles are not travelling the entire time. • The average fuel consumption rate per hour does not take into account that the fuel is used in the vehicles for different activities, that is, for travelling on public roads and for travelling off public roads at various speeds and under different road conditions, and for idling. • You have previously submitted a back claim for fuel used in auxiliary equipment. This was calculated using 5% of taxable fuel as outlined in PS LA 2013/4 (GA). Based on the sample data you have provided, the time spent off road is minimal when compared to the time spent travelling on public roads. It is therefore considered that the variation in fuel consumption during the different activities would not have a significant effect on the average hourly fuel consumption rate. In the event that your business changes and you spend more time off road, the consumption rate may no longer be appropriate as it does not take into account any variation in consumption rate for the different activities. As such the apportionment would need to be reviewed. As you have previously submitted a back claim for auxiliary equipment, you will need to ensure any subsequent claims for these periods are adjusted to recognise the back claim.