Private ruling: Fuel tax credits - apportionment
Date of advice: 20 August 2015
Published: August 2015
Ruling period: 1 March 2011 to 30 June 2018
Date scheme commenced: 1 March 2011

Ruling: A2: Yes

Relevant facts and circumstances: You are responsible for providing services to communities. You are registered for goods and services tax (GST) and fuel tax credits (FTC). As part of your operations, you provide services in various regional and remote areas. These regional and remote areas include roads that are not considered to be 'public roads' for the purposes of section 41-20 of the Fuel Tax Act 2006 . You propose to apportion your FTC claims between fuel used in vehicles with a GVM of 4.5 tonnes or less travelling on a public road, and fuel used in the vehicles travelling on other than public roads. Apportionment methodology You provided a copy of your proposed worksheet you propose to record the data for working out the travel on your vehicles and how the data is to be applied. The worksheet records the following details: • Date of travel. • Vehicle number. • Point of origin and destination for each trip. • Purpose of each trip. • Vehicle odometer readings for each vehicle at the start and the end of the period. • Fuel used in each vehicle for the period, calculated using total kilometres travelled by each vehicle as per odometer readings and an estimated consumption rate of 9 kilometres per litre of fuel. • Total kilometres travelled on a public road for the period. • The percentage of travel on a public road, calculated by dividing the total kilometres travelled on a public road for the period by the total kilometres travelled for the period as per the odometer readings. • The percentage of travel on roads that are other than public roads calculated by subtracting the percentage of the total travel that was on a public road from 100%. You have multiple bases from which you provide your services. Work at each base is generally routine resulting in a stable pattern of use of the vehicles at each base. You intend to apply the methodology for each base. All your vehicles with a GVM of 4.5 tonnes or less are four wheel drive vehicles which run on diesel fuel and have similar fuel consumption rates. When calculating your FTC claims, you intend to apply the percentage of travel on roads that are other than public roads to the actual quantity of fuel used in vehicles with a GVM of 4.5 tonnes or less (that is, not the quantity of fuel calculated based on odometer readings and estimated consumption rate). You intend to establish separate percentages of travel on roads that are other than public roads by using the methodology at each base for a period of one calendar month. You intend to establish a new worksheet for each base after a period of five years. You intend to establish a new worksheet for any particular base as soon as the percentage of travel on roads that are other than public roads ceases to be representative of the travel related to the base.

Relevant legislative provisions: Fuel Tax Act 2006 section 41-5, | Fuel Tax Act 2006 section 41-20 and | Fuel Tax Act 2006 section 60-5.

Reasons for decision: Detailed Reasoning - Issue 1 Question 1: Section 41-5 of the Fuel Tax Act 2006 (FTA) states that you are entitled to a FTC for taxable fuel you acquire to the extent that you do so for use in carrying on your enterprise, provided you were registered or required to be registered for GST at the time you acquired the fuel. However, your entitlement to FTCs is also affected by other provisions of the FTA. Section 41-20 of the FTA states that you are not entitled to an FTC for taxable fuel to the extent that you acquire the fuel for use in a vehicle with a GVM of 4.5 tonnes or less travelling on a public road. Section 60-5 of the FTA outlines the process for working out your net fuel amount. 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 ?, sets out the Commissioner's view on determining FTC entitlements. The Commissioner considers that the use of the phrase 'to the extent that', in the context of determining FTC entitlements, contemplates apportionment, in the context of section 41-5 of the FTA between: • a use of taxable fuel that entitles you to an FTC and one that does not, and • uses of fuel that give rise to different rates of FTCs. In FTD 2010/1 the Commissioner considers that an entity can use any apportionment method that is fair and reasonable in its circumstances. Guidance on whether a method of apportionment is fair and reasonable in the circumstances is provided in Practice Statement Law Administration (PSLA) 2010/3 - Apportionment for the purposes of the Fuel Tax Act 2006 . PSLA 2010/3 discusses reasonable methods of apportionment of fuel used in vehicles undertaking on-road and off-road use. You have provided an example of the worksheet you intend to use to apportion your FTC claims between fuel used in vehicles with a GVM of 4.5 tonnes or less travelling on a public road and fuel used in vehicles with a GVM of 4.5 tonnes or less travelling on roads that are other than public roads for the purposed of calculating your net fuel amount under section 60-5 of the FTA. We consider the methodology used on the worksheet provides a fair and reasonable basis of apportioning your FTC claims for the following reasons: • You intend to establish a worksheet for each base. • You have stated that the taxable fuel usage on public roads and roads that are other than public roads will be reasonably constant for each base. • You intend to keep detailed records (that is, the worksheet for a period of one calendar month as the pattern of use of the vehicles at each base is regular. • The worksheet will record the: • total number of trips undertaken by each vehicle • point of origin and destination for each trip undertaken by each vehicle • purpose of each trip • odometer readings for each vehicle at the beginning and end of the calendar month, and these readings will be used to calculate the total kilometres travelled by each vehicle for the period; and • number of kilometres travelled on a public road for each trip. • The percentage of travel on roads that are other than public roads for each base will be calculated by dividing the total kilometres travelled on public roads by the total kilometres travelled for the calendar month, multiplying the result by 100, and then subtracting the result from 100. • You have stated that all the vehicles with a GVM of 4.5 tonnes or less are diesel four wheel drive vehicles with similar fuel consumption rates. • You intend to establish a new worksheet for each agency at each base after five years. • You intend to establish a new worksheet in the event the existing worksheets are no longer representative of the actual travel by the vehicles on a public road. We consider that the information you intend to record in the worksheet for the purposes of establishing the percentage of fuel used for travel on roads that are other than public roads for each base is a fair and reasonable basis for apportioning your FTC claims between fuel used in eligible and ineligible uses in accordance with the discussion at '6 Percentage Method' in PSLA 2010/3. You have also stated that you intend to apply the percentages established to the actual quantity of fuel dispensed to each vehicle when working out your FTC claims. Hence we consider your proposed apportionment methodology to be fair and reasonable for the purposes of establishing your entitlements to FTC under section 41-5 and section 60-5 of the FTA. | Detailed Reasoning - Issue 2 Question 1: PSLA 2010/3 states that the percentage use method may provide a fair and reasonable basis of apportionment where an entity's taxable fuel usage between activities is fairly constant over tax periods. You have stated that work for each agency at each base is generally routine resulting in a stable pattern of use. If this pattern of use is representative of the travel on roads that are other than public road over previous tax periods we consider that the methodology can be applied retrospectively.

Is the proposed methodology a fair and reasonable method of apportionment for the purposes of calculating fuel tax credits for fuel used in vehicles with a gross vehicle mass (GVM) of 4.5 tonnes or less travelling on roads that are other than public roads? | Can the proposed methodology be applied retrospectively?