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ATO Interpretative Decision

ATO ID 2005/317

Excise

Energy Grants (Credits) Scheme: Off-road diesel fuel - blend of diesel and ethanol
FOI status: may be released

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CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Does a blend of diesel and ethanol fall within the definition of 'off-road diesel fuel' as defined in regulation 9 of the Energy Grants (Credits) Scheme Regulations 2003 (the Regulations)?

Decision

Yes. A blend of diesel and ethanol falls within the definition of 'off-road diesel fuel' as defined in regulation 9 of the Regulations for the purposes of the Energy Grants (Credits) Scheme.

Facts

An entity produces a blend of diesel and ethanol for use in vehicles and equipment powered by diesel engines.

The blend produced by the entity is a blend of diesel, hydrated ethanol and an emulsifier. Hydrated ethanol is ethyl alcohol that contains approximately 5% water. The sulphur content of the blend does not exceed 50 parts per million.

The entity producing the fuel has paid excise duty on the blend at the required rate.

Reasons for Decision

The Energy Grants (Credits) Scheme Act 2003 (EGCSA) sets out the circumstances under which an entity is entitled to off-road credits (which are paid in the form of energy grants).

To be entitled to an off-road credit, the entity must purchase, or import into Australia, 'off-road diesel fuel' for use in certain defined activities. 'Off-road diesel fuel' is defined in regulation 9 of the Regulations.

Subregulation 9(1) states that the following are off-road diesel fuel:

(a)
...a product on which: ...

(ii)
excise duty has been paid at a rate that is applicable to diesel fuel, under the Schedule to the Excise Tariff Act 1921, at the time of payment;

that is capable of being used as fuel in a diesel engine ...

Subregulation 9(3) of the Regulations specifically excludes certain products from being 'off-road diesel fuel'. A blend of diesel and ethanol is not one of the specific exclusions.

Under the Schedule to the Excise Tariff Act 1921 (Excise Tariff Act), two rates are given for diesel fuel, depending on the sulphur content of the diesel. Accordingly, a blend of diesel and ethanol will be considered to be 'off-road diesel fuel' if:

•
excise duty has been paid on the product at either of the rates that apply to diesel fuel; and
•
the product is capable of being used as a fuel in a diesel engine.

Section 5 of the Excise Tariff Act imposes excise duty on those goods which are described in the Schedule to the Excise Tariff Act (the Schedule). The Schedule specifies those goods which are excisable, and the rate of duty levied on those goods.

Item 12 of the Schedule deals with blended petroleum products. The rate of duty that applies to items classified to Item 12 is calculated in accordance with section 6G of the Excise Tariff Act.

Subsection 6G(2B) of the Excise Tariff Act gives the formula for calculating the rate of duty of a product that is a blend of diesel, ethanol and any other substances. Under this formula, a product will attract excise duty at one of the rates that applies to diesel fuel where the sulphur content does not exceed 50 parts per million.

As the sulphur content of the blend does not exceed 50 parts per million, it is a product on which excise duty is payable at the diesel rate. As duty has been paid on the blend at this rate and it is capable of being used as a fuel in a diesel engine, the blend is 'off-road diesel fuel' as defined in regulation 9 of the Regulations for the purposes of the Energy Grants (Credits) Scheme.

Date of decision:  4 October 2005

Legislative References:
Excise Tariff Act 1921
   section 5
   section 6G
   subsection 6G(2B)
   The Schedule, item 12

Energy Grants (Credits) Scheme Regulations 2003
   Regulation 9
   subregulation 9(1)
   subregulation 9(3)

Related ATO Interpretative Decisions
ATO ID 2003/1166

Keywords
EGCS off-road
EGCS off-road diesel

Business Line:  Excise

Date of publication:  18 November 2005

ISSN: 1445-2782

history
  Date: Version:
You are here 4 October 2005 Original statement
  30 April 2010 Archived

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