Private ruling: Fuel tax credits - forestry road
Published: June 2012
Ruling period: 1 January 2012 to 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Is X Road, between suburb A and suburb B considered a forestry road for the purposes of fuel tax credits? | A1: Yes. | Q2: Are you entitled to claim fuel tax credits at the full rate (38.143 cents per litre) for diesel used in heavy vehicles with a gross vehicle mass (GVM) exceeding 4.5 tonnes travelling on X Road. for the transport of timber within the meaning of paragraphs 35(c) or 35(e) of the EGCSA for the period 1 January 2012 to 30 June 2012? | A2: Yes.

Relevant facts and circumstances: You conduct pulpwood, saw-wood logging and log haulage contracting activities from forest, plantation and private block locations. You acquire diesel fuel for use in your haul trucks for transporting logs on both public and private/forestry roads log haul roads. Your trucks are road registered vehicles and have a gross vehicle mass (GVM) greater than 4.5 tonnes. You state diesel fuel used by the trucks on public roads is eligible at the prevailing road transport rate [full rate of fuel tax credits less road user charge] and the remainder of transport conducted on private, forestry or plantation roads and coup tracks (non-public) is eligible and claimed at the applicable forestry rate [full rate of fuel tax credits, that is 38.143 cents per litre]. You state X Road has Forests signage posts around 1km from the X Highway stating that the X Road was constructed and is maintained by X. The road is sealed and to your knowledge all ongoing repair, maintenance and line marking is undertaken by X. The road does provide a right of access to the public which is regularly exercised. However, you have not been able to find any state or local government authorities which have gazetted, declared or proclaimed X Road to be a public road within their responsibility. You seek the Commissioner's view on whether the X Road, between A and B is considered a forestry road or a public road for the purposes of calculating fuel tax credits. You state the outcome to this question determines whether you can claim fuel tax credits at what you state is either the applicable road transport road [full rate less road user charge] or forestry fuel tax credit rate. You are registered for both fuel tax credits and goods and services tax (GST).

Relevant legislative provisions: Fuel Tax Act 2006 section 41-5 | Fuel Tax (Consequential and Transitional Provisions) Act 2006 Division 2 of Part 3 of Schedule 3 | Fuel Tax (Consequential and Transitional Provisions) Act 2006 subitem 11(5) of Schedule 3 | Energy Grants (Credits) Scheme Act 2003 section 21 | Energy Grants (Credits) Scheme Act 2003 section 35 | Energy Grants (Credits) Scheme Act 2003 paragraph 35(a) | Energy Grants (Credits) Scheme Act 2003 paragraph 35(b) | Energy Grants (Credits) Scheme Act 2003 paragraph 35(c) | Energy Grants (Credits) Scheme Act 2003 paragraph 35(e) | Energy Grants (Credits) Scheme Act 2003 section 53 | Energy Grants (Credits) Scheme Act 2003 subsection 53(2) Issue 2 | Question 1: | From 1 July 2012, are you required to reduce your fuel tax credit entitlement for the use of diesel in vehicles with a GVM exceeding 4.5 tonnes travelling on forestry roads for the transport of timber within the meaning of paragraphs 43-75(c) and 43-75(e) of the FTA, by the amount of the carbon reduction? | Answer: | No.

Reasons for decision: Detailed Reasoning - Detailed reasoning: 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 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 Part 3 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. Subitem 11(5) of Schedule 3 of the FTCTPA provides that you are entitled to a fuel tax credit under section 41-5 of the FTA if you would have been entitled to an off-road credit under the Energy Grants (Credits) Scheme Act 2003 (EGCSA). Section 53 of the EGCSA provides that you are entitled to an off-road credit if you purchase off-road diesel fuel for a use by you that qualifies. Further, subsection 53(2) of the EGCSA provides that use in primary production (otherwise than for the purposes of propelling a road vehicle on a pubic road), is a use that qualifies. You seek the Commissioner's view on whether X Road, between X and B is considered a public or private/forestry road for the purposes of calculating fuel tax credits. | Detailed Reasoning - Forestry road v Public road: For the purposes of the exclusion in subsection 53(2), it is necessary to determine wether the travel you undertake is on a public road or not. Fuel Tax Ruling (FTR) 2006/3 Fuel tax: fuel tax credits for taxable fuel acquired or manufactured in, or imported into Australia for use in carrying on an enterprise involving 'forestry" as defined in section 35 of the EGCSA' provides for the Commissioner's view on roads that are public roads and those that are not. FTR 2006/3 provides a road is a public road if: · it is opened, declared or dedicated as a public road under a statute; · it is vested in a government authority having statutory responsibility for the control and management of public road infrastructure; or · it is dedicated as a public road at common law. From research undertaken X Road, between A and B appears to be a sealed road. Whilst the road does provide a right of access to the public which is regularly exercised, no records can be found that indicate that X Road, between A and B has been declared, dedicated or opened as a public road. Therefore for the purposes of section 35 of the EGCSA, X Road is not considered to be a public road. Further, FTR 2006/3 provides for roads that are not public roads, which includes: · a road constructed or maintained under a statutory regime by a public authority that is not an authority responsible for the provision of road transport infrastructure, in circumstances where the statutory regime provides that public use of, or access to, the road is subordinate to the primary objects of the statutory regime; or · a forestry road · a road that has not been dedicated as a public road over privately owned land. A forestry road is a road maintained within a forest or plantation which is constructed and maintained primarily and principally for the purposes of providing access to an area to facilitate forestry activities. Further, you state X Road has signage posts around 1km from the X Highway stating that X Road was constructed and is maintained X. This government authority, is not the government authority that have responsibility for the control and management of public road infrastructure more broadly, but did construct and now maintain X Road, for the purpose of providing access to an area that facilitates forestry activities. As such, it is considered that X Road, between X and B is considered to be a forestry road for the purposes of fuel tax credits. | Detailed Reasoning - Are your transport activities forestry?: As we have determined that the road on which you travel (that is, X Road, between A and B) is a forestry road for the purposes of the fuel tax provisions, it is now necessary to determine if an entitlement to fuel tax credits arises at the full rate (38.143 cents per litre) for taxable fuel used in your heavy vehicles for the transport of timber when travelling on X Road. Section 21 of the EGCSA provides for the definition of 'primary production' as including forestry. Section 35 of the EGCSA states that the expression 'forestry' means: · the planting or tending, in a forest or plantation, of trees intended for felling; or · the thinning or felling, in a forest or plantation, of standing timber; and includes: (c) the transporting, milling or processing, in a forest or plantation, of timber felled in the forest or plantation; or where timber is milled at a sawmill or chipmill that is not situated in the forest or plantation in which the timber was felled - the transporting of the timber from the forest or plantation in which it was felled to the sawmill or chipmill; or The expression 'transporting…of timber' in paragraph 35(c) of the EGCSA refers to the conveying or carrying, in a forest or plantation, of felled timber from one place in the forest or plantation where it was felled to another place in that forest or plantation, usually to a mill located in that forest or plantation. Further, the 'transporting…of timber' in paragraph 35(c) of the EGCSA also includes the return journey of the transport vehicle after the felled timber has been delivered to a sawmill or chip mill or log dump situated within the forest or plantation back to the loading point so it can continue to transport timber. The 'transporting of timber' in paragraph 35(c) of the EGCSA is subject to subsection 53(2) as described above and thus where the timber is transported by road, no entitlement to a fuel tax credit will arise for the purposes of being 'forestry' (although other entitlement provisions would apply). Paragraph 35(e) of the EGCSA also provides that you will be entitled to a fuel tax credit for the transporting of timber from the forest or plantation, in which it was felled, to a sawmill or chipmill situated outside the forest or plantation. This includes the return journey of the transport vehicle from the sawmill or chipmill back to the forest or plantation so that it can continue transporting timber from the forest or plantation to the sawmill or chipmill. However, if timber is felled for export, then forestry ceases when the timber is felled and placed in log dumps ready for transport to a port for export. As such, the transport of timber to the port does not qualify as a forestry activity under paragraph 35(e) of the EGCSA. Further, 'transporting of timber' in paragraph 35(e) of the EGCSA is also subject to subsection 53(2) as described above, and thus where the timber is transported by road, no entitlement to a fuel tax credit will arise for the purposes of being 'forestry' (although other entitlement provisions would apply). Accordingly, you are entitled to claim fuel tax credits at the full rate (38.143 cents per litre) for diesel used in your heavy vehicles travelling on forestry roads for the transport of timber within the meaning of paragraph's 35(c) or 35(e) of the EGCSA for the period 1 January 2012 to 30 June 2012. | Detailed Reasoning - Detailed reasoning: 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 you do so for use in carrying on your enterprise, if you are registered for GST. However, entitlement to fuel tax credits is still subject to the disentitlement rules under subdivision 41-B of the FTA, amongst other requirements. This provides that you are not entitled; if another entity has previously been entitled to a fuel tax credit, or for fuel used in vehicles with a gross vehicle mass (GVM) of 4.5 tonnes, or less, travelling on a public road, or for fuel used in motor vehicles that do not meet the environmental criteria. However, subsection 43-5(1) of the FTA (as amended) provides that the amount of your fuel tax credit for taxable fuel is the amount worked out by reducing the amount of effective fuel tax by the amount of carbon reduction. Subsection 43-8(4) of the FTA provides for circumstances where the amount of carbon reduction to apply to the fuel will be nil. Specifically, subparagraph 43-8(4)(b)(iii) of the FTA states that the carbon reduction does not apply to a use of fuel in 'forestry'. Further, subparagraph 43-8(4)(c) provides that the carbon reduction does not apply to the use of fuel in a vehicle with a GVM of more than 4.5 tonnes travelling on a public road. You use heavy vehicles with a GVM of more than 4.5 tonnes that travel on X Road, between A and B for the transport of timber. X Road, as described is considered a forestry road for the purposes of fuel tax provisions. | Detailed Reasoning - Are your transport activities forestry?: The definition provided for within section 43-75 of the FTA mirrors the previous definition of forestry provided for within section 35 of the EGCSA (now repealed). Amongst other things, 'forestry' includes: (c) the transporting, milling or processing, in a forest or plantation, of timber felled in the forest or plantation; and if timber is milled at a sawmill or chipmill that is not situated in the forest or plantation in which the timber was felled - the transporting of the timber from the forest or plantation in which it was felled to the sawmill or chipmill; and It follows that for the period from 1 July 2012, the Commissioners view in FTR 2006/3 equally applies as the previous EGCSA definition of 'forestry' is mirrored, subject to minor variations, in the FTA. As such, it is considered that the expression 'transporting…of timber' in paragraph 43-75(c) of the FTA refers to the conveying or carrying, in a forest or plantation, of felled timber from one place in the forest or plantation where it was felled to another place in that forest or plantation, usually to a mill located in that forest or plantation. Further, it is considered the 'transporting…of timber' in paragraph 43-75(c) of the FTA also includes the return journey of the transport vehicle after the felled timber has been delivered to a sawmill or chip mill or log dump situated within the forest or plantation back to the loading point so it can continue to transport timber. Paragraph 43-75(e) of the FTA also provides that you will be entitled to a fuel tax credit for the transporting of timber from the forest or plantation, in which it was felled, to a sawmill or chipmill situated outside the forest or plantation. This includes the return journey of the transport vehicle from the sawmill or chipmill back to the forest or plantation so that it can continue transporting timber from the forest or plantation to the sawmill or chipmill. However, if timber is felled for export, then forestry ceases when the timber is felled and placed in log dumps ready for transport to a port for export. As such, the transport of timber to the port does not qualify as a forestry activity under paragraph 43-75(e) of the FTA, although other entitlement provisions may apply in this context. | Detailed Reasoning - Clean Energy Reduction: As highlighted above, subsection 43-8(4) of the FTA provides for the situations where the amount of the carbon reduction to apply to the fuel will be nil. Specifically, subparagraph 43-8(4)(b)(iii) of the FTA states that the carbon reduction does not apply for fuel you acquire, manufacture or import for use in 'forestry'. You have acquired fuel for use in a vehicle with a GVM of more than 4.5 tonnes travelling on forestry road, between A and B in a particular state. Therefore, where your activities involving the transport of timber within the meaning of paragraphs 43-75(c) and 43-75(e) of the FTA then paragraph 43-8(4)(b) of the FTA applies. This provides that the amount of carbon reduction to apply to the fuel will be nil. Accordingly, you are not required to reduce the fuel tax credit entitlements for the use of diesel in vehicles with a GVM exceeding 4.5 tonnes travelling on forestry roads for the transport of timber from 1 July 2012 by the amount of the carbon reduction.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | This ruling applies for the following period: 1 July 2012 to 30 June 2014 | Fuel Tax Act 2006 subdivision 41-B | Fuel Tax Act 2006 subsection 43-5(1) | Fuel Tax Act 2006 subsection 43-8(4) | Fuel Tax Act 2006 paragraph 43-8(4)(b) | Fuel Tax Act 2006 subparagraph 43-8(4)(b)(iii) | Fuel Tax Act 2006 paragraph 43-8(4)(c) | Fuel Tax Act 2006 section 43-75 | Fuel Tax Act 2006 paragraph 43-75(c) | Fuel Tax Act 2006 paragraph 43-75(e)