Private ruling: Fuel tax credits - mining site activities
Published: June 2012
Ruling period: 2009-10 income year | 2010-11 income year | 2011-12 income year
Date scheme commenced: 1 January 2010

Ruling: Q1: Are you entitled to a fuel tax credit at the full rate for diesel fuel used in undertaking a mining rehabilitation activity? | A1: Yes. | Q2: Are you entitled to a fuel tax credit at the full rate for diesel fuel used in generators for electricity generation? | A2: Yes. | Q3: Are you entitled to a fuel tax credit at the full rate for diesel fuel used in loaders, loading coal in trucks for export, pumps removing water from the site, general on-site cleaning and for transporting people around the site in utes? | A3: No. | Q4: Are you entitled to a fuel tax credit at the half rate for diesel fuel used in loaders, loading coal in trucks for export, pumps removing water from the site, general on-site cleaning and for transporting people around the site in utes? | A4: Yes.

Relevant facts and circumstances: You are involved in the mining, transport, reprocessing and export sale of coal recovered from previously mined, contaminated and derelict coal mines. At the end of this process, you rehabilitate the now decontaminated land to an environmentally sustained condition. Your activities involve the clean up and rehabilitation of former coal chitter and tailings replacements. Chitter refers to the remnants of previous coal mining operations. All activities are conducted on mining leases which have been issued to you. You acquire diesel fuel for use in all plant and vehicles. All vehicles used on site have a gross vehicle mass (GVM) in excess of 3.5 tonnes. These vehicles include a range of bulldozers, excavators, front end loaders and trucks. You are responsible for all fuel consumed by the generators on the mine site. The generators are used for the sole purpose of generating power on the site. You are registered for goods and services tax (GST).

Relevant legislative provisions: Fuel Tax Act 2006 section 41-5 | Fuel Tax Act 2006 subdivision 41-B | Fuel Tax (Consequential and Transitional Provisions) Act 2006 Division 2 of Schedule 3 | Fuel Tax (Consequential and Transitional Provisions) Act 2006 subparagraph 11(1)(b)(iii) of Schedule 3 | Fuel Tax (Consequential and Transitional Provisions) Act 2006 subitem 11(5) of Schedule 3 | Fuel Tax (Consequential and Transitional Provisions) Act 2006 subitem 11(6) of Schedule 3 | Energy Grants (Credits) Scheme Act 2003 subsection 11(1) | Energy Grants (Credits) Scheme Act 2003 paragraph 11(1)(a) | Energy Grants (Credits) Scheme Act 2003 paragraph 11(1)(b) | Energy Grants (Credits) Scheme Act 2003 subparagraph 11(1)(b)(i) | Energy Grants (Credits) Scheme Act 2003 subparagraph 11(1)(b)(ii) | Energy Grants (Credits) Scheme Act 2003 paragraph 11(1)(d) | Energy Grants (Credits) Scheme Act 2003 subsection 11(2) | Energy Grants (Credits) Scheme Act 2003 paragraph 11(2)(a) | Energy Grants (Credits) Scheme Act 2003 paragraph 11(2)(b) | Energy Grants (Credits) Scheme Act 2003 paragraph 11(2)(c) | Energy Grants (Credits) Scheme Act 2003 paragraph 13(a) | Energy Grants (Credits) Scheme Act 2003 paragraph 13(b)

Reasons for decision: Summary: 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 that 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 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, whilst retaining entitlements under the Energy Grants (Credits) Scheme Act 2003 (EGCSA). Subitem 11(5) of Schedule 3 to the FTCTPA states that you are not entitled to a fuel tax credit under section 41-5 of the FTA unless you would have been entitled to an off-road credit under the EGCSA. Section 53 of the EGCSA provides that you are entitled to an off-road credit if you purchase or import into Australia off-road diesel fuel for a use by you that qualifies. Use in mining operations (otherwise than for the purpose of propelling any vehicle on a public road) is a use that qualifies. The term 'mining operations' is relevantly defined in subsection 11(1) of the EGCSA as: (a) exploration or prospecting for minerals, or the removal of overburden and other activities undertaken in the preparation of a site to enable mining for minerals to commence; or (b) operations for the recovery of minerals, being: (i) mining for those minerals including the recovery of salts by evaporation; or (ii) the beneficiation of those minerals, or of ores bearing those minerals; and includes: (d) a mining rehabilitation activity; Exclusions, including light vehicles with GVM less than 3.5 tonnes Subsection 11(2) of the EGCSA states that 'mining operations' does not include: · quarrying or dredging operations to the extent that the purpose of the operations is to obtain materials for use in building, road making, landscaping, construction or similar purposes; or · the use of a vehicle (other than a fork-lift, front end loader, tractor or other similar vehicle that is specified in the regulations) not exceeding 3.5 tonnes gross vehicle mass, other than such a vehicle that is extensively modified for use underground while it is so used; or · the transport, by any means, of people, equipment or goods to or from a place where a mining operation referred to in any of the paragraphs in subsection (1) is, or is to be, carried on… Therefore, where diesel fuel is used in the activities, plant, equipment or light vehicles as described above, this use will not be a use in 'mining operations'. | Detailed Reasoning - Mining rehabilitation activity: Paragraph 13 of the EGCSA provides that the expression mining rehabilitation activity means the rehabilitation of a place affected by a mining operation referred to in paragraph (a) or (b) of the definition of that expression in subsection 11(1) if that rehabilitation is carried out by: (a) the person who carried on the mining operation; or (b) a person contracted by that person to carry out the rehabilitation. Rehabilitation means the act of restoration. In this context, it means the act of restoring a place (usually land) affected by a paragraph 11(1)(a) or 11(1)(b) mining operation to a reasonable approximation of the condition it was in prior to that mining operation taking place, and/or to an agreed or acceptable environmental standard. Whilst rehabilitation activities will generally be undertaken when the relevant mining operations have been completed, this is not a condition of eligibility. Activities that extend beyond the restoration of a place to the condition it was in prior to the relevant mining operation taking place and/or to an agreed environmental standard are not mining rehabilitation activities. For example, preparatory work for building construction, the establishment of sports fields, or for converting a disused mine site to a garbage tip are not mining rehabilitation activities for the purposes of the energy grants scheme. You undertake activities of rehabilitating decontaminated land to an environmentally sustainable condition and you satisfy the requirement of paragraph 13(a) of the EGCSA by undertaking these activities yourself and not contracting any other entities to complete these activities. A mining rehabilitation activity does not include the rehabilitation of a place if the material extracted from or beneficiated at that place is excluded from the definition of minerals or is excluded from being a mining operation by paragraph 11(2)(a). As you have undertaken the mining of coal previously, this exclusion does not apply. Accordingly, you are entitled to a fuel tax credit at the full rate for diesel fuel used in undertaking a mining rehabilitation activity. | Detailed Reasoning - Mining water activity: A mining water activity is defined in section 14 of the EGCSA and includes (b) the pumping of water solely for fuse in a mining operation referred to in paragraph (a) or (b) of the definition of that expression in subsection 11(1) if the pumping; (i) occurs at the place where the mining operation is carried on… You are using fuel in pumps to remove water from the site. Therefore you meet the definition of a mining water activity in section 14 of the EGCSA and you are entitled to a fuel tax credit at the full rate for diesel fuel used in your pumps. | Detailed Reasoning - Electricity generation: Subparagraph 11(1)(b)(iii) of Schedule 3 to the FTCTPA provides that an entitlement to a fuel tax credit arises under section 41-5 of the FTA if you acquire taxable fuel for use by you in generating electricity. It is the purpose for which the fuel is acquired that is important when deciding whether it was acquired to generate electricity. Fuel is used for the purpose of generating electricity where the electricity is an end in itself and can in turn be used for any purpose for which electricity is required. For example, fuel is used in generating electricity when it is used in a generator so as to make power available to business premises. Similarly, the use of fuel in a generator to provide power to a range of external equipment (such as electrically powered machinery in a factory) would constitute use in generating electricity. In your business activities, you are using generators for the sole purpose of generating power on the mine site. Therefore, you are entitled to a fuel tax credit at the full rate for diesel fuel used in hire generators for electricity generation. | Detailed Reasoning - Other activities: Section 53 of the EGCSA provides that you are entitled to an off-road credit if you purchase or import into Australia off-road diesel fuel for a use by you that qualifies. Uses that qualify include use in rail transport or marine transport, at premises to generate electricity, in certain industrial processes, use other than as a fuel and use in mining operations or primary production. On the mine site, you use diesel fuel in loaders, loading coal in trucks for export, general on-site cleaning and for transporting people around the site in utes. These are not activities for which you would have previously had an entitlement to an off-road credit under the EGCSA. As you are not entitled to an off-road credit under the EGCSA, you are not entitled to a fuel tax credit under the FTA. Accordingly, you are not entitled to a fuel tax credit at the full rate for diesel fuel used in loaders, loading coal in trucks for export, general on-site cleaning and for transporting people around the site in utes. Half rate of fuel tax credits However, if you would not have been entitled to an on-road or an off-road credit under the EGCSA for a quantity of fuel you acquire and use in your business, subitem 11(6) of the Schedule 3 to the FTCTPA provides that from 1 July 2008, an entitlement to a fuel tax credit arises under the FTA. The amount of the credit is half of the amount of the full rate. This provision is subject to the disentitlement rules of subdivision 41-B of the FTA, which disallows a fuel tax credit: · if another entity was previously entitled to a credit; · for fuel used in light vehicles travelling on public roads; · for fuel used in motor vehicles that do not meet environmental criteria, or · for fuel used in aircraft. It has been determined above that you were not entitled to an off-road credit previously for diesel fuel used in loaders, loading coal in trucks for export, general on-site cleaning and for transporting people around the site in utes. Therefore, you are entitled to a fuel tax credit at the half rate for diesel fuel used in loaders, loading coal in trucks for export, pumps removing water from the site, general on-site cleaning and for transporting people around the site in utes.

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