Private ruling: Fuel tax credits and apportioning fuel use for light vehicles.
Published: January 2015
Ruling period: 2010 - 11 income year | 2011 - 12 income year | 2012 - 13 income year | 2013 - 14 income year | 2014 - 15 income year | 2015 - 16 income year
Date scheme commenced: 1 July 2010

Ruling: Q1: Is it fair and reasonable for you to calculate your fuel tax credit entitlement for fuel used in light vehicles for 'off-road' activities using the 'estimate use' apportionment methodology as proposed? | A1: Yes. | Q2: Is it fair and reasonable for you to use the 'off-road' percentages obtained from current vehicle estimates to calculate fuel tax credit entitlement for fuel acquired and used in light vehicles which that are replaced? | A2: Yes. Where replacement vehicles are used by the same employees to conduct the same operations as the current vehicles, it is fair and reasonable that the percentage of 'off-road' travel of the replacement vehicles would be the same as, or similar to, the percentage of 'off-road' travel of the current vehicle estimates. | Q3: Is it fair and reasonable for you to calculate your ongoing fuel tax credit claims by applying the 'off-road' percentages obtained from current vehicle estimates to all fuel acquisitions made by light vehicles? | A3: Yes, subject to any significant change in your circumstances.

Relevant facts and circumstances: • You are registered for goods and services tax (GST) and fuel tax credits. • You have a large and varied client base and provide a wide range of services. • Your operations are conducted in numerous regions and from numerous locations across the state. Light vehicles • In carrying on your operations, you currently utilise a large fleet of utility vehicles and four wheel drives, all with a gross vehicle mass (GVM) of 4.5 tonnes or less (light vehicles). The fleet is regularly maintained every vehicle is replaced periodically. • Fuel used by your fleet of light vehicles is used both for travel on public roads and for travel off public roads - 'off-road' to conduct a wide range of activities on a number of different types of roads, both public and private. • Your fleet of light vehicles are used by a variety of staff in varying roles. Questionnaires • Due to the nature of your operations, it is not possible to precisely quantify the amount of fuel used by your fleet of light vehicles for 'off-road' activities. • You developed and sent a questionnaire to the drivers of each light vehicle in your fleet (the Questionnaire). The main purpose of the Questionnaire was to ascertain the type of 'off-road' activities undertaken and the estimated percentage of 'off-road' travel for each vehicle. Drivers were instructed of the definition of 'off-road' travel for fuel tax credit purposes and this definition was also written into the Questionnaire. • In addition to the Questionnaire, you have also implemented a separate form, which staff are now required complete each time a new vehicle is required for use in your operations. The form requires staff to provide a range of information regarding each vehicle and its proposed operations, including an estimate of off-road use. Proposed apportionment methodology • All light vehicles operated by you were identified and the Questionnaire was developed, and sent to the drivers as detailed above. • The completed Questionnaires were reviewed and the estimated 'off-road' percentages for each vehicle were populated into a spreadsheet, along with information about the driver's role and other vehicle information. • As a safeguard measure, the estimated percentages from the Questionnaires were checked against those from the separate forms for new vehicles that have been completed to date. • Following this methodology, an average percentage of 'off-road' travel across the entire light vehicle fleet was calculated. • The vehicles were then separated by site location and average 'off-road' percentages were calculated for each site.

Relevant legislative provisions: Fuel Tax Act 2006 section 41-5 | Fuel Tax Act 2006 subdivision 41-B | Fuel Tax Act 2006 section 41-20 | 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(6) | Energy Grants (Credits) Scheme Act 2003

Reasons for decision: Detailed Reasoning - Apportionment methodology: Section 41-5 of the Fuel Tax Act 2006 (FTA) provides that you are entitled to a fuel tax credit to the extent that you acquire taxable fuel for use in carrying on your enterprise, if you are registered for GST. However, this is subject to the disentitlement rules under subdivision 41-B of the FTA. Relevantly, section 41-20 of the FTA disallows fuel used in light vehicles, i.e. vehicles with a gross vehicle mass (GVM) of 4.5 tonnes or less, travelling on public roads. It is also important to note that fuel tax credit 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 limit the amount of entitlement in relation to specific activities and continues the previous entitlement provisions of the Energy Grants (Credits) Scheme Act 2003 (EGCSA) for fuel purchased between 1 July 2008 and 30 June 2012. Relevantly, subitem 11(6) of the FTCTPA provides that if you acquire taxable fuel for use in carrying on your enterprise between 1 July 2008 and 30 June 2012, and you would not have been entitled to an on-road or off-road credit under the EGCSA, you are entitled to half of the amount of the fuel tax credit that you would be entitled to under the FTA. You currently operate a large fleet of light vehicles in respect of which there is a fuel tax credit entitlement for their use 'off road'. However, these vehicles also travel on public roads ('on-road'). As there is no fuel tax credit entitlement in respect of fuel used for 'on road' travel, the quantity of fuel for which there is a fuel tax credit entitlement must be determined. The Commissioner states in 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? (FTD 2010/1), that the use of the phrase 'to the extent that' in the FTA contemplates apportionment in the case of a use that entitles you to fuel tax credit and one that does not. The Commissioner's view is that the 'fair and reasonable' principle applies. Where there is more than one fair and reasonable way of apportioning, you may choose any method as long as it is fair and reasonable in your circumstances. Practice Statement Law Administration PS LA 2010/3 Apportionment for the purposes of the Fuel Tax Act 2006 (PSLA 2010/3) provides guidance in determining whether a method of apportionment to calculate an entity's fuel tax credit entitlement is fair and reasonable in the entity's circumstances, and sets out which methods may be used to calculate the quantity of taxable fuel that you acquire for use in your enterprise. The following commonly used methods are considered to be a fair and reasonable basis for apportionment: • the constructive methods (actual use or planned use) • the deductive methods (actual use or planned use) • the percentage use method, and • the estimate use method. However, there may be other methods or variations to these methods which could prove to be a fair and reasonable basis for apportionment, depending on your circumstances. You propose using the 'estimate use' method to apportion fuel acquired for use in your light vehicles for travelling 'on-road' and 'off-road'. The estimate use method of working out the quantity of taxable fuel that an entity acquires for use in an eligible activity in a tax period requires the entity to make a fair and reasonable estimate of the quantity of taxable fuel it acquires for use or actually uses in a tax period. PSLA 2010/3 provides that a 'measure' may be used as part of an apportionment method. The Commissioner accepts that a number of measures may be appropriate in an entity's circumstances. Examples of appropriate measures include but are not limited to, odometer readings of kilometres actually travelled and route distances if a vehicle operates on fixed routes. PSLA 2010/3 also provides that an entity may use acceptable statistical sampling as part of any method it uses. This means that if an entity has a number of the same or similar vehicles or equipment that is used in the same or similar way: • it may use statistical sampling to work out the relevant method or measure (for example, percentage use, average hourly fuel consumption) for some of the vehicles or equipment, and • the sample result may be applied to the other same or similar vehicles or equipment. The appropriateness of statistical sampling is determined by consideration of the circumstances of each particular case. The Commissioner has considered and weighed all of the following factors in determining whether your proposed apportionment methodology is fair and reasonable: • the size and scale of your operations; • variations in the purposes for which your light vehicles are used, the staff that drive them, the daily activities of the drivers and consequent variations in their 'on-road' and 'off-road' use; • variations in the types of public and private roads used by the drivers of your light vehicles in the course of carrying out their daily operations; • the types, makes and models of the various light vehicles that comprise your fleet; • the information provided in the Questionnaires in relation to 'on-road' and 'off-road' travel, as well as the information required of each driver; • whether the drivers of each vehicle are best placed to estimate percentages of 'on-road' and 'off-road' travel undertaken by each vehicle of each vehicle, or whether an alternative and more accurate measure should be used (e.g. maintenance of log books that accurately account for 'on-road' and 'off-road' travel); • the absence of statistical sampling on the basis that the Questionnaire was issued to all drivers of all the light vehicles in your fleet; • the number of vehicles in respect of which a Questionnaire was issued; • the result of testing the estimates obtained from the Questionnaires against those obtained from the forms issued for new vehicles; • the result of calculating the initial apportionment estimates on a site-by-site basis; and • adjustment of the apportionment percentages resulting from the Questionnaires on the basis of 'incidental use'. In considering and weighing all of the above factors, the Commissioner considers that the proposed methodology is fair and reasonable in your circumstances. | Detailed Reasoning - Replacement vehicles: Where vehicles are replaced and the new vehicles are used by the same employees to conduct the same operations as conducted with the old vehicles, the Commissioner considers it to be fair and reasonable that the percentage of 'off-road' travel of the replacement vehicles would be the same as, or similar to, the percentage of 'off-road' travel of the current vehicle estimates. | Detailed Reasoning - Future application of 'off-road' percentage: Therefore, the Commissioner considers it to be fair and reasonable for you to calculate your ongoing fuel tax credit claims for your light vehicles by applying the 'off-road' percentages obtained from current vehicle estimates to all fuel acquisitions made by light vehicles at each site. However, this is subject to any significant change in your circumstances. Where there has been a significant impact on your enterprise, including losing or gaining contracts or any other significant change in the size, scale or nature of your operations, the current estimate use percentages, and the method of apportionment will need to be reviewed to establish if it is still a fair and reasonable basis on which to calculate your fuel tax credit entitlement.