Private ruling: Fuel tax credits - taxable fuel
Published: March 2014
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013.

Ruling: Q1: Are you entitled to fuel tax credits for A, a solution you acquire and use in your heavy vehicles travelling on a public road? | A1: No.

Relevant facts and circumstances: You are registered for goods and services tax (GST) in the road freight transport industry. You are also registered for fuel tax credits. As part of your business, you acquire and use diesel fuel in your heavy vehicles. You also acquire and use a product called A. A is stored in a separate tank on your vehicles. Your vehicles' consumption of A is approximately 5% by volume of the diesel consumption. You also advise that A is necessary for the operation of your vehicles as failure to use A or running out of A will cause your vehicles to de-rate due to emission control on all Euro 4 and Euro 6 vehicles, making it just as critical as diesel. You acquire A directly from its manufacturer. You agree that the Australian Taxation Office can access information about A from any relevant websites. The A Australian website advises that: • A is a non-toxic aqueous solution used to chemically reduce emissions from heavy-duty diesel powered vehicles. • B and C are rival products but have the same chemical composition and the same production and handling standards • C is another name for SCR solution. • The main components of the SCR (Selective Catalytic Reduction) system are the SCR catalyst, the injection unit, the tank and the dosing control unit. The harmful molecules in the exhaust are converted to harmless elemental nitrogen and water. This happens when the molecule reacts inside the catalyst with the ammonia. Coming from the tank, the substance is injected into the exhaust pipe upstream of the catalyst where its molecules react with heat and water to form the ammonia needed. • The price of SCR may vary according to quantities delivered, but it is estimated to be less than the price of diesel per litre. Reduced fuel consumption of SCR equipped vehicles is also expected to make this technology an attractive solution in an industry where fuel is a very significant portion of operating costs. • Average SCR consumption is about 4-5% by volume of diesel consumption for ADR 80/02 and about 5-6% for ADR 80/03. • SCR is a high purity chemical grade product that is made in accordance to an ISO standard. • A transforms the harmful molecules in the exhaust of diesel vehicles into harmless nitrogen gas and water vapour. The SCR solution is metered into the exhaust system. The urea hydrolyses to ammonia which then reacts with the B in the exhaust gas. D has a factsheet about B on its web site The D factsheet advises that B is made by diluting crystals with Demineralised water to a 32.5% concentration. The D factsheet also advises that B is: • used to chemically reduce nitrogen oxide emissions from heavy-duty diesel powered vehicles • not explosive • classified under the minimum-risk category of transportable fluids Another supplier of B in Australia is D Australia Pty Ltd. F is the leading brand name for B produced by E Australia Pty Ltd and delivered all over the world. This also has a website. This website advises that B is the registered trademark for AUS32, or Aqueous Urea Solution 32.5% that is used with the Selective Catalytic Reduction system (SCR) to reduce emissions of oxides of nitrogen from the exhaust of diesel vehicles, it is non explosive, non-flammable and is neither a fuel nor a fuel additive.

Relevant legislative provisions: Fuel Tax Act 2006 section 2-1 | Fuel Tax Act 2006 section 41-5 | Fuel Tax Act 2006 section 110-5

Reasons for decision: Summary: Section 2-1 of the Fuel Tax Act 2006 (FTA) explains that the FTA provides a single system of fuel tax credits which are paid to reduce or remove the incidence of the fuel tax levied on taxable fuels with a view to fuel tax only being applied to: 1. fuel used in private vehicles and certain private purposes; and 2. fuel used on-road in light vehicles for business purposes. Section 41-5 of the FTA states 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. Therefore, for an entitlement to a fuel tax credit under the FTA, you must first acquire taxable fuel and then use it in an eligible activity in carrying on your enterprise. Taxable fuel is defined in section 110-5 of the FTA as: (a) fuel in respect of which duty is payable under: (i) the Excise Act 1901 and the Excise Tariff Act 1921 ; or (ii) the Customs Act 1901 and the Customs Tariff Act 1995 ; or (b) compressed natural gas, liquefied petroleum gas, or liquefied natural gas, that is subject to the carbon pricing mechanism (within the meaning of subsection 42A-5(3) or (4)); but does not include fuel covered by: (c) item 15, 20 or 21 of the Schedule to the Excise Tariff Act 1921 ; or (d) any imported goods that would be classified to item 15 of the Schedule to the Excise Tariff Act 1921 , if the goods had been manufactured in Australia……… Neither A nor aqueous solution is subject to duty as a fuel under any of these Acts and therefore is not a taxable fuel for the purposes of section 41-5 of the FTA. Moreover, the manufacturer of rival products with the same chemical composition and the same production and handling standards (B) in Australia (E Australia Pty Ltd) advises that B is not a fuel. This is supported by the fact that A is distributed into the exhaust of heavy vehicles rather than the engine. As we have determined that A (or aqueous solution) is not a taxable fuel, you are not entitled to fuel tax credits for its acquisition and use in your heavy vehicles travelling on public roads.