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  • Fuels used as an ingredient in manufacture

    You can claim fuel tax credits for certain taxable fuels you use as an ingredient in the products you make, as long as they cannot be used as a fuel in an internal combustion engine.

    Fuel blends that cannot be used in an internal combustion engine include:

    • paints
    • certain solvents and cleaning agents
    • printing inks
    • adhesives.

    While some products that contain a percentage of fuel in the blend (like paint or printing inks) can’t be used as a fuel in an internal combustion engine, it may not be as clear when assessing other fuel blends.

    In these cases, we would consider that the blend could not be used as a fuel in an internal combustion engine if you can demonstrate that the blend would:

    • not be capable of starting up an engine
    • cause material damage to an engine or its components within a short period.

    We accept that ‘use’ also includes the loss of fuel through evaporation and temperature changes in the course of carrying on the activity.

    Fuel blends determined not to be a fuel

    We have issued a determination to provide further guidance on when a blend of taxable fuel and another product no longer constitutes a fuel for fuel tax credit purposes.

    Taxable fuels are specifically defined in the determination to include:

    • liquid aromatic hydrocarbons (for example, benzene, toluene and xylene)
    • mineral turpentine
    • white spirit
    • petroleum products other than diesel, petrol, heating oil, kerosene, fuel oil, denatured ethanol, biodiesel or fuel blends (for example lighter fluids or low-flash solvents).

    A blend of a taxable fuel and another product is not a fuel if the following applies:

    • the blend is not marketed or sold for use as a fuel in an internal combustion engine
    • the blend contains either of the following:
      • a product listed in the following table at a concentration equal to, or greater than, the specified minimum
      • more than one product listed in the following table and the total concentration of those products is equal to or exceeds 10% by volume.
       
    Table: Minimum concentrations for blends

    Item

    Product

    CAS registry number

    Minimum concentration % v/v

    1

    Tertiary butyl alcohol

    75-65-0

    0.5

    2

    Other alcohols (other than methanol, ethanol and isopropyl alcohol)

    -

    10.0

    3

    Ketones

    -

    10.0

    4

    Methyl tertiary butyl ether

    1634-04-4

    1.0

    5

    Di-isopropyl ether

    108-20-3

    1.0

    6

    Other ethers

    -

    10.0

    7

    Esters

    -

    10.0

    8

    Surfactants

    -

    1.0

    9

    Silicone oils

    -

    2.0

    10

    Oleic acid

    112-80-1

    2.0

    11

    Water

    -

    5.0

    See also:

    • EXC 2006/19 Fuel Tax (Fuel Blends) Determination 2006 (No.3)
    • ATO ID 2015/20 Petroleum: Fuel blends that can be used as fuel in an internal combustion engine

    Example

    Northern Paints acquires 1,500 litres of toluene from their supplier. They use the toluene to make an acrylic thinner (a fuel blend).

    To make the thinner, Northern Paints blends the following products:

    • 70% toluene (taxable fuel)
    • 30% methyl ethyl ketone (MEK) – item 3 of the table specifies that ketones must have a minimum concentration of 10% when they are blended with a taxable fuel.

    The blend is not considered a fuel for the purpose of fuel tax credits because:

    • the thinner is produced using toluene
    • it contains more than the minimum amount of ketone
    • Northern Paints does not market or sell the thinner as fuel for use in an internal combustion engine.

    Northern Paints can:

    • claim full fuel tax credits for the toluene they have acquired to make the acrylic thinner
    • take the fuel tax credit entitlement into account when setting the price of their thinner.
    End of example
      Last modified: 03 Apr 2017QC 18872