ATO Interpretative Decision

ATO ID 2007/80

Excise

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Issue

Is an entity's fuel tax credit entitlement in relation to an 'incidental use' as defined in section 8 of the Energy Grants (Credits) Scheme Act 2003 (Energy Grants Act) reduced by the amount of the road user charge under section 43-10 of the Fuel Tax Act 2006 (FTA 2006)?

Decision

Yes. An entity's fuel tax credit entitlement in relation to an incidental use as defined in section 8 of the Energy Grants Act is reduced by the amount of the road user charge under section 43-10 of the FTA 2006.

Facts

An entity acquires diesel fuel for use in carrying on its enterprise.

The entity operates a diesel powered cement truck with a gross vehicle mass (GVM) of over 4.5 tonnes.

The fuel is used in the cement truck for travelling on public roads.

The fuel is also used in the truck for the following uses, which constitute an incidental use under section 8 of the Energy Grants Act:

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powering the truck and the cement agitator on the truck while cement is loaded onto or unloaded from the truck.

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powering the truck and the cement agitator on the truck while the truck is moved to and from a place where cement is loaded or unloaded.

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powering the cement agitator on the truck, in order to maintain the quality of the cement.

Some of the incidental use occurs while the vehicle is travelling on a public road, and some of the use occurs while the vehicle is travelling off-road or on private roads.

The entity is entitled to a fuel tax credit in respect of the fuel used in the above activities.

Reasons for Decision

Items 10 and 11 of the Fuel Tax (Consequential and Transitional Provisions) Act 2006 (Fuel Tax Transitional Act) provide restrictions on entitlement to fuel tax credits for fuel acquired, manufactured or imported between 1 July 2006 and 30 June 2012.

However, items 10 and 11 do not apply to taxable fuel acquired, manufactured or imported for use in a vehicle travelling on a public road, or for incidental use within the meaning of section 8 of the Energy Grants Act in relation to a vehicle travelling on a public road. Therefore the normal fuel tax credit eligibility rules contained in the FTA 2006 apply.

Under section 41-5 of the FTA 2006, an entity is entitled to a fuel tax credit for taxable fuel it acquires or manufactures in, or imports into Australia to the extent that it does so for use in carrying on its enterprise.

However, subsection 43-10(3) of the FTA 2006 provides that, to the extent that an entity acquires, manufactures, or imports taxable fuel to use, in a vehicle, for travelling on a public road, the amount of the entity's fuel tax credit for the fuel is reduced by the amount of the road user charge.

We consider that, when read in context, the phrase 'fuel to use, in a vehicle, for travelling on a public road,' in subsection 43-10(3) of the FTA is intended to cover all fuel used in a vehicle while it is travelling on a public road, regardless of whether the fuel is used to propel the vehicle, or for an incidental use such as maintaining the quality of goods while they are being transported.

Therefore, an entity's entitlement to a fuel tax credit for an incidental use in relation to a vehicle while it is travelling on a public road is subject to the road user charge.

Subitems 10(3) and 11(3) of Schedule 3 to the Fuel Tax Transitional Act provide entitlement to a fuel tax credit during the period 1 July 2006 to 30 June 2012 where fuel is used in a vehicle (other than for travelling on a public road or for incidental use as defined by section 8 of the Energy Grants Act in relation to a vehicle travelling on a public road), in circumstances that would have given rise to an on-road credit under the Energy Grants Act.

These subitems serve as a 'catchall' to ensure a fuel tax credit entitlement exists for all uses of fuel that would have given rise to an on-road credit under the Energy Grants Act. Fuel that is used in a vehicle while it is travelling on a public road is covered by subparagraphs 10(1)(b)(i) and 10(1)(b)(ii) and 11(1)(b)(i) and 11(1)(b)(ii) of Schedule 3 to the Fuel Tax Transitional Act. Therefore, sub items 10(3) and 11(3) apply to other activities that would have given rise to an on-road credit under the Energy Grants Act, such as;

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travelling on a private road (including an incidental use in relation to that travel)

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travelling off road (including an incidental use in relation to that travel), or

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powering the vehicle or auxiliary equipment in or on the vehicle while goods are loaded or unloaded while the vehicle is not on a public road.

Subitems 10(4) and 11(4) of Schedule 3 to the Fuel Tax Transitional Act provide that where an entitlement arises under sub items 10(3) and 11(3), you are taken, for the purposes of section 43-10 of the FTA, to have acquired, manufactured or imported the fuel to use, in a vehicle, for travelling on a public road. Therefore, in accordance with section 43-10 of the FTA, the road user charge must be deducted from the amount of fuel tax credit payable.

Accordingly, all uses of fuel (including an incidental use) that would have given rise to an entitlement to an on-road credit under the Energy Grants Act, regardless of whether the fuel is used while the vehicle is travelling on a public road, are subject to the road user charge.

Consequently, the entity's fuel tax credit entitlement in relation to an incidental use as defined in section 8 of the Energy Grants Act is reduced by the amount of the road user charge.

Legislative References:
Fuel Tax Act 2006
   section 41-5
   section 43-10
   subsection 43-10(3)

Keywords
FTC incidental use
FTC Partial Credit
FTC road user charge
Fuel tax credits

Business Line:  Excise

Date of publication:  4 May 2007

ISSN: 1445-2782