Private ruling: Eligibility for fuel tax credits
Date of advice: 22 April 2016
Published: June 2016
Ruling period: 1 November 20XX to 30 June 2019
Date scheme commenced: 1 November 20XX

Ruling: Q1: Do you have entitlement to fuel tax credits under section 41-5 of the Fuel Tax Act 2006 (FTA) for fuel you acquire to provide dynamometer testing (dyno-testing) services to your clients? | A1: Yes

Relevant facts and circumstances: You carry on an enterprise which involves the provision of machinery, construction equipment and whole-of-life management solutions for machinery, including maintenance and repairs to your customers. You are registered for GST and FTC. In the course of providing repair and maintenance services to your customers, you undertake dyno-testing. Dyno-testing involves connecting a customer's engine/motor to a dynamometer to measure things such as the force, torque and power of the engine/motor. Fuel is consumed to run the engine which is connected to the dynamometer and the quantity of fuel used to perform dyno-testing is determined by the size of the engine. Your standards terms and conditions provide for the price to include consumables where they are expressly stated in a quote, invoice or other document. Your invoices list fuel as a separate item however the cost of fuel is included in the total amount payable. You purchase bulk diesel fuel from various suppliers to undertake dyno-testing. All of the diesel fuel you acquire for the purposes of dyno-testing is consumed, during the testing process. Your dyno-testing services are performed at your premises.

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

Reasons for decision: Summary: Section 41-5 of the 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. | Detailed Reasoning - Acquisition of taxable fuel: As the term 'acquire' is not defined in the FTA, it takes its ordinary meaning. Paragraph 21 of Fuel Tax Ruling 2007/1 (FTR 2007/1) states that you acquire fuel if: • you purchase fuel • the fuel is gifted to you; or • you get the fuel as your own by any other means (other than manufacture or import). This necessarily means that you get ownership of, or proprietary rights in respect of, the fuel. You have stated that you purchase taxable fuel from fuel wholesalers, which is in turn used in the provision of dyno-testing services. We consider you have acquired this taxable fuel for the purposes of section 41-5 of the FTA. | Detailed Reasoning - Disposal of fuel: Paragraph 19 of FTR 2007/1 states that the Commissioner considers that the term 'acquire' takes its ordinary meaning of to 'get as one's own' for the purposes of the FTA. Paragraph 20 of FTR 2007/1 explains that the phrase to 'get as one's own' requires property in or ownership of the relevant taxable fuel to pass from one entity to another entity, or alternatively, that ownership is conferred because the fuel has been obtained by an entity as its own. We have previously established that you have acquired taxable fuel from fuel wholesalers, which is used in the provision of dyno-testing services. It is necessary to consider whether this fuel is subsequently acquired by the customers you provide dyno-testing services to. Your contract states that the price for your dyno testing services excludes diesel unless otherwise expressly stated in any document of you attaching these terms. Your invoices list Diesel - Dyno as a separate line item, however this amount forms part of the invoice total. We consider that the fuel charge component forms part of the overall service of dyno-testing that you provide to your clients. In addition, we do not consider that your clients acquire the relevant fuel from you, as the fuel is only used during the dyno-testing process. At no time do your customers have physical access to, or control the use of, the fuel. | Detailed Reasoning - Used in carrying on an enterprise: Paragraph 1 of Fuel Tax Ruling 2009/1 (FTR 2009/1) defines 'use' to mean 'expend or consume in use', which in turn requires that the fuel be expended or consumed, such that it no longer exists as fuel, but putting it into service in carrying on your enterprise' Further, paragraph 2 states that 'fuel that is acquired, manufactured in, or imported into Australia would be used in carrying on your enterprise if, in the course of carrying on that enterprise: • it ceases to exist after an action to use it • it is used in the production of another thing that no longer constitutes a fuel • it ceases to exist as fuel as an ordinary incident of putting it into service in one of these ways The fuel you purchase is fully consumed during your dyno-testing services at your premises and therefore ceases to exist at the conclusion of the testing. Therefore we consider that the fuel is used by you in carrying on your enterprise. | Detailed Reasoning - Registered for GST at the time you acquired the fuel: You have been registered for GST since 1 July 2000 and therefore were registered at the time the fuel subject to this ruling was acquired. | Detailed Reasoning - Reasonable to conclude another entity has previously been entitled to an FTC: We do not consider that it is reasonable to conclude another entity has previously been entitled to an FTC as per subsection 41-15(1) of the FTA for the fuel used during dyno-testing for the following reasons: • Your fuel wholesalers have sold the fuel to you and would not have an entitlement to an FTC for the fuel you acquire from them. • You do not dispose of the fuel to your dyno-testing customers hence they have not acquired fuel from you. Therefore, under section 41-5 of the FTA you are entitled to FTCs for the taxable fuel you acquire in providing dyno-testing services to your customers as you are the entity who uses the fuel as part of your enterprise and you were registered for GST at the time you acquired the fuel.