ATO Interpretative Decision

ATO ID 2004/469 (Withdrawn)

Excise

• This ATO ID should be withdrawn as the fuel tax credits scheme has replaced the energy grants credit scheme for eligible fuel acquired from 1 July 2006 for the purpose of electricity generation.
  This decision is applicable to eligible fuel purchased between 1 July 2003 and 30 June 2006 for the purposes of the Energy Grants (Credits Scheme) Act 2003. Entitlement to a credit for eligible fuel acquired from 1 July 2006 for use in generating electricity is dealt with under the Fuel Tax Act 2006 and Fuel Tax (Consequential and Transitional Provisions) Act 2006.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Does an entity that conducts a retail/hospitality enterprise have 'ready access' to a commercial supply of electricity for the purposes of subparagraph 53(4)(a)(ii) of the Energy Grants (Credits) Scheme Act 2003 (EGCSA) if it is connected to a commercial supply of electricity, but the electricity supply at the place where they carry on their retail/hospitality enterprise is insufficient to meet their needs at certain times?

Decision

Yes. An entity that conducts a retail/hospitality enterprise has 'ready access' to a commercial supply of electricity for the purpose of subparagraph 53(4)(a)(ii) of the EGCSA, if it is connected to a commercial supply of electricity, but the electricity supply at the place where they carry on their retail/hospitality enterprise is insufficient to meet their needs at certain times.

Facts

An entity operates an enterprise that has, as its principal purpose, the retail sale of goods or services (other than electricity).

The premises where the enterprise is carried on are connected to a commercial supply of electricity.

At certain times, the commercial supply of electricity is not sufficient to meet the needs of the enterprise. At these times, the entity purchases and uses diesel fuel to operate generators at the site to generate electricity for use in carrying on their enterprise.

Reasons for Decision

Subsection 53(1) of the EGCSA states that you are entitled to an off-road credit if you purchase diesel fuel for a use by you that qualifies. Paragraph 53(4)(a) of the EGCSA provides that the following is a use that qualifies:

use at particular premises to generate electricity for use in the course of carrying on, at those premises, an enterprise that:

(i)

has, as its principal purpose, the retail sale of goods or services (other than electricity) or the provision of hospitality; and

(ii)

does not have, at those premises, ready access to a commercial supply of electricity;

The entity operates an enterprise that has, as its principal purpose, the retail sale of goods or services (other than electricity). Therefore, the requirements of subparagraph 53(4)(a)(i) of the EGCSA have been met and the use of the fuel will be a use that qualifies under paragraph 53(4)(a) provided the entity does not have, at its premises, 'ready access' to a commercial supply of electricity.

The phrase 'ready access' is not defined in the EGCSA, but the Explanatory Memorandum to the Diesel Fuel Rebate Scheme Amendment Bill 2002 (the Explanatory Memorandum), in discussing entitlement to off-road credits for diesel fuel used in retail/hospitality enterprises states that:

The amendment does not extend to businesses with ready access to a commercial supply of electricity who generate their own power or who operate an emergency backup generator. A business would be regarded as having ready access if a commercial supply was present or convenient to the business and immediately available for connection.

The Diesel Fuel Rebate Scheme was the precursor to the Energy Grants (Credits) Scheme (EGCS) and was administered under the Customs Act 1901 and the Excise Act 1901. The Excise Act and the Customs Act both contained similar provisions to that contained in paragraph 53(4)(a) of the EGCSA. Consequently, the Explanatory Memorandum remains relevant.

Therefore, if a commercial supply of electricity is not present, in terms of the enterprise already being connected to it, it needs to be determined whether a commercial supply of electricity is 'convenient' to the business. If so, it must then be determined whether the electricity supply is 'immediately available' for connection.

In this instance, a commercial supply of electricity is present, in terms of the enterprise already being connected to it and it is therefore unnecessary to consider convenience and availability. Accordingly, the entity does have ready access to a commercial supply of electricity.

That is, an entity has ready access to a commercial supply of electricity for the purposes of subparagraph 53(4)(a)(ii) of the EGCSA if it is connected to such a power supply, even if at certain times the supply of electricity available at the place where they carry on their enterprise is insufficient to meet the needs of the enterprise.

Legislative References:
Energy Grants (Credits) Scheme Act 2003
   subsection 53(1)
   subsection 53(4)
   subparagraph 53(4)(a)(i)
   subparagraph 53(4)(a)(ii)

Related ATO Interpretative Decisions
ATO ID 2004/421
ATO ID 2004/422

Other References:
Explanatory Memorandum to the Diesel Fuel Rebate Scheme Amendment Bill 2002

Keywords
EGCS off-road
EGCS use of eligible fuel at certain premises
EGCS use to generate electricity
EGCS use to generate electricity at a retail/hospitality enterprise
EGCS use to generate electricity for ready access

Business Line:  Excise

Date of publication:  11 June 2004

ISSN: 1445-2782