ATO Interpretative Decision
ATO ID 2004/292 (Withdrawn)
Excise
Energy Grants Credits Scheme: sale of fuel - use of equipment on a farm by a contractorFOI status: may be released
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This ATO ID is withdrawn as the position stated is potentially misleading as it relates to fuel tax credits. The current ATO position on this issue is contained in Draft FTR 2008/D1 Fuel tax: Entitlement to a fuel tax credit under section 41-5 of the Fuel Tax Act 2006 in a vehicle or equipment hire arrangement.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
Status of this decision: Decision Withdrawn 9 January 2009
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 an entity that provides the use of equipment and an operator to farmers, sell or otherwise dispose of diesel fuel for the purposes of paragraph 55(b) of the Energy Grants (Credits) Scheme Act 2003 (EGCSA), when it is reimbursed (either with money or with fuel) by a farmer for the fuel used in the equipment?
Decision
No, an entity that provides the use of equipment and an operator to farmers, does not sell or otherwise dispose of diesel fuel for the purposes of paragraph 55(b) of the EGCSA when it is reimbursed (either with money or with fuel) by a farmer for the fuel used in the equipment.
Facts
The entity provides the use of equipment and an operator to farmers under contract. The equipment is used in eligible agricultural activities on agricultural properties.
The entity supplies the fuel that is used in the equipment. The farmer reimburses the entity for the fuel used in the equipment at the end of the contract (in money or fuel) under the terms of the contract.
Reasons for Decision
Subsection 56(1) of the EGCSA provides that a person is entitled to an energy grant if they are entitled to an on-road or off-road credit. Subsection 53(1) of the EGCSA provides that a person is entitled to an off-road credit if they purchase diesel fuel for a use by them that qualifies.
Subsection 53(2) of the EGCSA provides that use in primary production is a use that qualifies.
Section 21 of the EGCSA says 'primary production' means agriculture, fishing or forestry.
However, section 55 of the EGCSA provides that an off-road credit is denied if fuel is subsequently used for an ineligible purpose, sold or otherwise disposed of, or lost.
The operator has purchased the diesel fuel in the generator for use in eligible agricultural activities. Therefore, the operator will be entitled to an off-road credit for diesel fuel purchased and used in agriculture, as long as the fuel has not been used for an ineligible purpose, sold or otherwise disposed of, or lost. In this instance, the operator has not used the fuel for an ineligible purpose or lost it. The remaining issue is whether the operator has sold or otherwise disposed of the fuel.
The Administrative Appeals Tribunal considered the issues of 'use' and to a lesser extent 'sale or disposal' in Re Riviera Nautic Pty Limited v. Federal Commissioner of Taxation [2002] AATA 657; (2002) 50 ATR 1106 (Riviera Nautic) which concerned the hire of a houseboat. The case was decided in relation to the Diesel Fuel Rebate Scheme which was the precursor to the Energy Grants (Credits) Scheme and was administered under the Excise Act 1901 and the Customs Act 1901. In that case, the AAT considered that in determining whether something has been sold, one should consider whether property in it is intended to pass. Dwyer J. said that it was not as if the hirer of a house boat could 'siphon off and take home any unused fuel'. Dwyer J. likened the hiring of the vessel to the hiring of a car. He concluded that the owner of a car does not 'relinquish, part with or get rid of' the car merely because they make it available for hire. The same logic would apply to the fuel supplied in the entity's equipment.
The operator has purchased the fuel and used it in powering the equipment. There is nothing to suggest that there is any intention that the property in the fuel will pass to the farmer. Following the principles in Riviera Nautic, the operator has not sold or otherwise disposed of the fuel for the purposes of paragraph 55(b) when it is reimbursed for the fuel it used in the equipment.
Date of decision: 22 March 2004
Legislative References:
Energy Grants (Credits) Scheme Act 2003
subsection 53(1)
subsection 53(2)
paragraph 55(b)
subsection 56(1)
section 78A Customs Act 1901
subsection 164(1)
Case References:
Re Riviera Nautic Pty Limited v. Federal Commissioner of Taxation
[2002] AATA 657
(2002) 50 ATR 1106
Keywords
EGCS purchase
Energy grants (credits) scheme
ISSN: 1445-2782
| Date: | Version: | |
| 22 March 2004 | Original statement | |
| You are here → | 9 January 2009 | Archived |