Private ruling: Fuel tax credits - bunker fuel
Date of advice: 12 January 2016
Published: March 2016
Ruling period: 1 July 2015 to 30 June 2018.

Ruling: Q1: Can a fuel tax credit be claimed for imported bunker fuel used in carrying on your enterprise at a rate that is higher than the customs duty rate in force on the day the bunker fuel is imported? | A1: No

Relevant facts and circumstances: You import bunker fuel into Australia on board vessels undertaking domestic voyages and this is subject to import duty (customs duty) at the point of arrival into Australian waters. The Department of Immigration and Border Protection as a practice allows for the calculation and payment of customs duties for bunker fuels used when the vessel completes its domestic voyage. Bunker fuel is a taxable fuel for fuel tax credit purposes. You can therefore claim fuel tax credits for fuel imported into Australia and subject to customs duty with the applicable fuel tax credit rate that applies at the time that the bunker fuel is imported into Australia. There may be instances (due to bi-annual increases in indexation) when the customs duty rates for imported fuel are higher than the fuel tax credit rates applying to that fuel. This occurs if the customs duty is not paid at the point when the fuel is imported as required by the Customs Act 1901 (Customs Act).

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 195-1 | Excise Act 1901 section 4 | Excise Act 1901 Part III section 78 | Fuel Tax Act 2006 section 41-5 | Fuel Tax Act 2006 section 43-5 | Fuel Tax Act 2006 subsection 43-5(2A) | Fuel Tax Act 2006 section 70-30 | Fuel Tax Act 2006 section 110-5 | Excise Tariff Act 1921 | Customs Act 1901 Part VII | Customs Act 1901 Part VII section 130C | Customs Tariff Act 1995 | Excise Tariff Amendment (Fuel Indexation) Act 2015 | Customs Tariff Amendment (Fuel Indexation) Act 2015 Excise Tariff Proposal (No. 1) 2014 | Customs Tariff Proposal (No. 1) 2014

Reasons for decision: Summary: Subsection 41-5(1) of the Fuel Tax Act 2006 (Fuel Tax Act), provides an entitlement to a fuel tax credit for taxable fuel that you acquire or manufacture in, or import into, Australia to the extent that you do so for use in carrying on your enterprise. Division 43 of the Fuel Tax Act prescribes how to work out your fuel tax credit, the amount of your fuel tax credit for taxable fuel being the amount of effective fuel amount that is payable on the fuel. In working out the effective fuel amount, section 43-5 of the Fuel Tax Act refers to the fuel tax amount. The fuel tax amount is the rate of excise or customs duty in force at the time set out in the table in subsection 43-5(2A) of the Fuel Tax Act. Under the table in 43-5(2A) the rate of fuel tax credit to be used to determine the amount of fuel tax that was or would be payable on imported fuel (including imported bunker fuel), is the rate in force on the day the fuel was imported. Although the term imported is not defined in the Fuel Tax Act, section 68 of the Customs Act prescribes that imported goods including bunker fuel, must be entered for home consumption on the day the goods arrive at their first port in Australia (unless they have been entered prior). This is considered the day the goods were imported for the purposes of the Fuel Tax Act. Department of Immigration and Border Protection however as a practice allows for the calculation and payment of customs duties for bunker fuels used when the vessel completes its domestic voyage using the applicable customs duty rate. There may be instances (due to bi-annual increases in indexation) when the customs duty rates for imported fuel are higher than the fuel tax credit rates applying to that fuel. This occurs if the customs duty is not paid at the point when the fuel is imported as required by the Customs Act. As the Fuel Tax Act prescribes that the rate of fuel tax credit for imported bunker fuel is the rate in effect the day the bunker fuel is imported, there is no legislative mechanism for the Commissioner to allow a fuel tax credit to be claimed for imported bunker fuel at a rate that is higher than the customs duty rate in force on the day the bunker fuel is imported.