Decision impact statement

Linfox Australia Pty Ltd and Commissioner of Taxation

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Court Citation(s):
[2012] AATA 517
(2012) 89 ATR 931

Venue: Administrative Appeals Tribunal
Venue Reference No: 2011/1053
Judge Name: S Frost, Deputy President; and R Deutsch, Deputy President
Judgment date:
Appeals on foot: No.
Decision Outcome: Adverse

Impacted Advice

Relevant Rulings/Determinations:

Subject References:
Fuel tax
Fuel tax credits
Road user charge


Outlines the ATO response to this case which concerned whether or not the amount of the fuel tax credit for fuel acquired for use in a refrigeration unit in a heavy vehicle travelling on a public road is reduced by the road user charge.

Brief summary of facts

At all relevant times, the applicant carried on an enterprise which involved the transportation of temperature sensitive goods in refrigerated trailers that were towed by a prime mover on public roads throughout Australia. A refrigerated trailer is an insulated (wheeled) trailer to which a refrigeration unit is affixed. Each prime mover and trailer used by the applicant had a gross vehicle mass in excess of 4.5 tonnes.

The refrigeration units affixed to each trailer functioned either by an internal diesel powered mechanically driven compressor, or by an internal diesel engine generator that provided power to the compressor. The supply of diesel to the refrigeration unit was always kept separate from the supply of diesel to the prime mover. Fuel was not sourced from the prime mover's fuel tank, even if the refrigeration unit's fuel tank emptied.

There was no dispute that the applicant was entitled, under section 41-5 of the Fuel Tax Act 2006, to a fuel tax credit for the use of diesel fuel in its refrigeration units.

Issues decided by the tribunal

The issue to be decided by the AAT was whether fuel acquired by the applicant for use in a refrigeration unit in a refrigerated trailer travelling on a public road was "fuel to use, in a vehicle, for travelling on a public road" for the purposes of subsection 43-10(3). If it was (as the Commissioner contended), the amount of the fuel tax credit to which the applicant was entitled for the fuel would be reduced by the amount of the road user charge.

The AAT found[1] that the punctuation in the phrase "fuel to use, in a vehicle, for travelling on a public road" in subsection 43-10(3) meant that, in order for the provision to apply, fuel must be acquired both:

to use in a vehicle; and
to use for travelling on a public road [our emphasis]

Based on the ordinary meaning of the word "for", the AAT concluded[2] that the only circumstance in which the second of these two conditions would be met is:

...where fuel is acquired to use for the purpose of travelling on a public road

The AAT found[3] that the fuel in question was not acquired for this purpose, but was instead acquired and used for the "entirely different" purpose of refrigerating cargo inside the refrigerated trailer. It followed that the fuel did not satisfy the second condition of subsection 43 10(3) and was not, therefore, subject to the road user charge.

In discussing the statutory context, the AAT referred[4] to the differences in wording between subsection 43-10(3) and the similarly worded section 41-20 and noted that:

...there is a clear intention emerging from s 41-20 to ensure that in the case of a light vehicle, the fuel tax credit is to be denied for all on-road applications of taxable fuel in the vehicle. That is not the case in s 43-10(3), where the use of the word "for" before the phrase "travelling on a public road" is evidently intended to narrow the reach of the provision, such that the RUC on taxable fuel is only imposed where the purpose is to propel the vehicle on a public road [our emphasis].

ATO view of Decision

The Commissioner considers that the AAT's reasoning leads to the conclusion that the phrase "fuel to use, in a vehicle, for travelling on a public road" in subsection 43-10(3) covers fuel that is used in a vehicle:

for the purpose of propelling that vehicle on a public road; and
all aspects of the vehicle function and operation that are for the purpose of travelling on a public road. Fuel for travelling would include fuel used for stopping and idling while stationary in the course of a journey as well as the use of lights, brakes, power-steering and windscreen wipers.

Accordingly, the road user charge will only apply to such fuel. Determining whether an aspect of the vehicle's function or operation has this character requires a practical assessment of its connection with travelling, as distinct from some other function of the vehicle. In the Commissioner's view, it does not matter whether the fuel is located in the same tank as the tank which supplies fuel to the prime mover's engine or whether it is located in a separate tank. The location of the fuel would not, of itself, determine the purpose for which the fuel was acquired (although it may be a factor that is taken into account in working out whether fuel was acquired for the purpose of travelling on a public road).

Administrative Treatment

Implications for ATO Precedential documents (Public Rulings & Determinations etc)

The AAT's reasoning differs from the view previously set out in Fuel Tax Ruling FTR 2008/1 that the phrase "fuel to use, in a vehicle, for travelling on a public road" in subsection 43-10(3) covers both fuel used for propulsion and fuel used to power auxiliary equipment, such as a refrigeration unit, in (or affixed to) a vehicle while it is travelling on a public road. Accordingly, the Commissioner has revised this ruling to reflect the AAT's reasoning.

This revision will impact the heavy trucking, cement manufacturing, and coach and bus industries. Local governments will also be affected. Specifically, fuel used to operate any apparatus or piece of machinery on a vehicle that is not for the purpose of travelling is no longer considered to be 'fuel used in a vehicle, for travelling'. Some examples of machinery of this nature are the hydraulic arm lift of a garbage collection vehicle, the mixing bowl of a cement truck, the refrigeration unit on a perishables transportation truck and air-conditioning units of commercial buses and coaches.

The Commissioner is working with industry to determine appropriate examples for apportionment methods for these fuel uses, and will be proving further guidance material in relation to this.

Implications for Law Administration Practice Statements


Legislative References:
Fuel Tax Act 2006

Fuel Tax (Consequential and Transitional Provisions) Act 2006
items 10 and 11

Other References:
ATO ID 2007/80 (withdrawn)
ATO ID 2009/61 (withdrawn)

At paragraphs 30 and 31

At paragraph 34

At paragraph 35

At paragraphs 40 to 44

Linfox Australia Pty Ltd and Commissioner of Taxation history
  Date: Version:
  19 September 2012 Identified
You are here 3 June 2013 Resolved