ATO Interpretative Decision
ATO ID 2006/80 (Withdrawn)
Excise
Energy Grants (Credits) Scheme: off-road credit - generation of electricity at an airfieldFOI status: may be released
-
This ATO ID is withdrawn from the database because of amendments to the Energy Grants (Credits) Scheme Act applying after 30 June 2006. Despite its withdrawal from the database, this ATO Interpretative Decision continues to be a precedential view in respect of entitlement to an off-road credit for the period 1 July 2003 to 30 June 2006.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
For the purposes of subparagraph 53(4)(a)(i) of the Energy Grants (Credits) Scheme Act 2003 (EGCSA), is an entity that operates an airstrip and aircraft hangars at particular premises carrying on an enterprise at those premises that has as its principle purpose the retail sale of goods or services (other than electricity) or the provision of hospitality?
Decision
No. For the purposes of subparagraph 53(4)(a)(i) of the EGCSA an entity that operates an airstrip and aircraft hangars at particular premises is not carrying on an enterprise at those premises that has as its principle purpose the retail sale of goods or services (other than electricity) or the provision of hospitality.
Facts
An entity carries on an enterprise at a bush airfield.
The enterprise consists of the operation of an airstrip and aircraft hangers.
The entity does not have at those premises ready access to a commercial supply of electricity.
The entity uses diesel fuel at the premises to generate electricity.
Reasons for Decision
Subsection 53(1) of the EGCSA provides that, subject to such restrictions and conditions as are specified in the regulations, an entity is entitled to an off-road credit if it purchases diesel fuel for a use by it that qualifies. Paragraph 53(4)(a) of the EGCSA provides that the following is a use that qualifies:
- (a)
- 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
This paragraph effectively imposes three requirements for eligibility:
- 1.
- the diesel fuel must be used at particular premises to generate electricity
- 2.
- the electricity generated must be used in the course of carrying on at those premises, an enterprise that has as its the principal purpose the retail sale of goods or services (other than electricity) or the provision of hospitality, and
- 3.
- the enterprise must not have, at those premises, ready access to a commercial supply of electricity.
The first and third requirements are clearly satisfied.
The second requirement has two parts. Firstly, as the entity is not engaged in making retail sales of goods or the provision of hospitality, to satisfy the requirements of paragraph 53(4)(a) of the EGCSA it must be engaged in the retail sale of services. Secondly, the 'principal purpose' of the enterprise being carried on at the premises must be the retail sale of services.
Is the entity making retail sales of services?
Although it is acknowledged that the enterprise conducted by the entity involves the provision of services to transport, the phrase 'retail sale of goods or services (other than electricity) or hospitality' anticipates the provision of services in the context of 'retailing'.
The former diesel fuel rebate scheme contained an equivalent entitlement to that contained in paragraph 53(4)(a) of the EGCSA. When the former provision was introduced, the second reading speech and Explanatory Memorandum to the Diesel Fuel Rebate Scheme Amendment Bill 2002 (the Bill) made it clear that the types of enterprises which were considered as having the retail sale of goods or services or the provision of hospitality as their principal purpose were caravan parks, tourist resorts and road houses.
Records of Parliamentary debate confirmed that not all enterprises would be covered by this provision. In fact, the Member for New England sought to move an amendment to extend the provision to manufacturing or service enterprises, including foundries and crash repair businesses (Australia, House of Representatives, Debates 29 May 2002, at pp 2585-2568). The amendment was not moved and the restricted scope of the provision was confirmed by the Member for Fisher and Parliamentary Secretary to the Minister for Finance and Administration (Australia, House of Representatives, Debates , 29 May 2002, p 2600).
When the Bill was before the Senate, Senator O'Brien queried why the extension applied only to retail and hospitality businesses and was not extended to 'remote manufacturing and construction industries' (Australia, Senate, Debates , 27 June 2002, p 2987). This further clarifies that the enterprises intended to be covered by this provision are those engaged in the provision of services in the traditional retail sector as their principal purpose, rather than enterprises engaged in other industrial sectors that happen to provide services to end users.
Therefore, enterprises in industrial sectors other than traditional retailing, such as those providing services to transport, are not considered to be enterprises which have as their principal purpose, the retail sale of goods or services.
In this instance, the entity carries on the enterprise of operating a bush airfield. Such an enterprise is not considered to be an enterprise that has, as its principal purpose, the 'retail sale of goods or services' for the purposes of subparagraph 53(4)(a)(i) of the EGCSA, even though it provides services to transport in the course of carrying on that enterprise.
As the principal purpose of the enterprise being carried on at the premises is not the retail sale of goods or services or the provision of hospitality, the requirements of subparagraph 53(4)(a)(i) of the EGCSA are not satisfied.
Date of decision: 10 March 2006Year of income: Year ended 30 June 2003 Year ended 30 June 2004 Year ended 30 June 2005
Legislative References:
Energy Grants (Credits) Scheme Act 2003
subsection 53(1)
paragraph 53(4)(a)
subparagraph 53(4)(a)(i)
ATO ID 2004/643
ATO ID 2006/81
Other References:
The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW
Australia, House of Representatives, Debates, 2002
Australia, Senate, Debates, 2002
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
Energy grants (credits) scheme
Excise
Excise payments
ISSN: 1445-2782
| Date: | Version: | |
| 10 March 2006 | Original statement | |
| You are here | 12 February 2010 | Archived |