Private ruling: Fuel for aircraft
Published: August 2014
Ruling period: 1 July 2014 to 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Are you entitled to fuel tax credits for the petrol you acquire and use in your aircraft to provide crop dusting services? | A1: Yes, provided that you register for fuel tax credits from 1 July 2014.

Relevant facts and circumstances: You are registered for goods and services tax (GST). You carry on an enterprise of aircraft engineering and providing crop dusting services. You are engaged by local and interstate farmers to provide crop dusting services. Your services include the provision of the aircraft, pilot and fuel. The farmers provide you with any herbicide, insecticide and soil promotion additives to be sprayed. You purchase standard unleaded petrol for use in the aircraft. The fuel is delivered to your premises and stored on site. You do not use this fuel for private consumption. You do not sell the fuel to the farmers.

Relevant legislative provisions: Fuel Tax Act 2006 section 41-5 | Fuel Tax Act 2006 section 41-30 | Fuel Tax Act 2006 subdivision 41-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 for use in carrying on your enterprise, if you are registered for GST. | Detailed Reasoning - Eligible fuel: However, section 41-30 of the FTA provides that you are not entitled to a fuel tax credit for fuel that you acquire, manufacture or import for use as fuel in aircraft if the fuel was entered for home consumption for that use (within the meaning of the Excise Act 1901 or the Customs Act 1901 , as the case requires). The Explanatory Memorandum to the Fuel Tax Bill 2006 states that section 41-30 of the FTA applies to aviation fuels such as aviation turbine fuel or Avtur and aviation gasoline or Avgas. It goes on to state: 2.61 If however, a taxpayer acquires, manufactures or imports other taxable fuels for use in an aircraft in carrying on their enterprise, for example diesel, they will be entitled to a fuel tax credit under section 41-5. You acquire and use taxable standard unleaded petrol in your aircraft. The unleaded petrol you acquire has not been entered for home consumption for use as a fuel in aircraft within the meaning of the Excise Act 1901 or the Customs Act 1901 . Therefore, section 41-30 of the FTA does not apply to disentitle you to a fuel tax credit. | Detailed Reasoning - Acquire and use: In determining whether you are entitled to fuel tax credits, it must also be determined whether you have 'acquired' taxable fuel for the purpose of the fuel tax provisions, and if so, whether you have then 'used' the fuel in an eligible activity in carrying on your enterprise. In Fuel Taxation Ruling FTR 2007/1, Fuel tax: the meaning of 'acquire', 'manufacture' and 'import' in the expression 'taxable fuel that you acquire or manufacture in, or import into, Australia to the extent that you do so for use in carrying on your enterprise' in the Fuel Tax Act 2006, the Commissioner discusses the meaning of 'acquire', 'manufacture', and 'import'. In Fuel Tax Ruling FTR 2009/1 , Fuel tax: entitlement to a fuel tax credit under section 41-5 of the Fuel Tax Act 2006 in a vehicle or equipment hire arrangement the Commissioner explains which entity is entitled to a fuel tax credit under section 41-5 of the FTA in a vehicle or equipment hire arrangement. FTR 2009/1 also sets out the principles which can be used in determining whether fuel has been disposed of by the hire company to the hirer, and consequently acquired by the hirer, and which entity has fuel tax credit entitlements under section 41-5 of the FTA. At paragraphs 14 and 15 of FTR 2009/1 the Commissioner states that when determining which entity in a hire arrangement acquires and uses the fuel, it is necessary to take into account the facts and circumstances in each case. This is because ownership and use are not always readily apparent. For example where a hire company acquires fuel and does not dispose of the fuel to the hirer, the hire company will be entitled to a fuel tax credit for fuel used in the hire vehicle or equipment in carrying on their enterprise (subject to the disentitling provisions). However, where the hire company acquires a quantity of fuel but disposes of the fuel to the hirer, the hire company will not be entitled to a fuel tax credit. | Detailed Reasoning - Acquire: At paragraph 143 of FTR 2007/1 the Commissioner states that, for the purposes of the FTA, the relevant meaning of acquire is to 'get as one's own' from someone else or through one's actions or efforts. 'Acquire' does not mean merely 'to come into possession of'. The Commissioner considers that to 'get as one's own', implies getting ownership or proprietary rights in respect of the taxable fuel. This will mean either that property in the taxable fuel passes from one entity to another or that proprietary rights or ownership is conferred by the act of obtaining the taxable fuel by other means. Therefore, the Commissioner takes the view that an entity typically 'acquires' taxable fuel upon a change in ownership of, or a transfer of proprietary rights in, the fuel from one entity to another. 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. You acquire taxable fuel if: • you purchase the 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. Conversely, if an entity simply acquires a right or a licence to use another entity's fuel in their plant or equipment in performing work for that entity, the second entity has not acquired that fuel for the purposes of the FTA as the mere grant of a right or licence to use the fuel does not result in you obtaining a proprietary interest in, or ownership of, the fuel. | Detailed Reasoning - Use: In the context of section 41-5 of the FTA, the term 'use' means 'expend or consume in use', which in turn requires that the fuel be expended or consumed, such that it no longer exists as fuel, by putting it into service in carrying on your enterprise. Taxable fuel will not be used by you in your enterprise under section 41-5 of the FTA where it is sold by you to another entity. In paragraphs 82A to 82J of FTR 2009/1 the Commissioner gives an example of fuel use in a hire arrangement which is similar to yours. That is, you own and hire aircraft to other entities. The rate you charge for use of the aircraft includes any fuel acquired by you and used by the entity hiring the aircraft. The only fuel used in the aircraft is the fuel acquired by you and you do not sell the fuel to the hirer. You supply that fuel under a licence to use situation and there is never any intention to transfer ownership in the fuel. We accept that you acquire taxable fuel for use in carrying on your enterprise of providing crop dusting services during the period 1 July 2014 to 30 June 2015. Therefore you are entitled to a fuel tax credit for that fuel under section 41-5 of the FTA.