ATO Interpretative Decision

ATO ID 2006/81 (Withdrawn)

Excise

• This ATO ID is withdrawn from the database because of amendments to the Energy Grants (Credits) Scheme Act applying after 30 June 2006.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.

Issue

For the purposes of paragraph 53(4)(a) of the Energy Grants (Credits) Scheme Act 2003 (EGCSA), can an entity's activities in (a) operating a landing strip and hangers at an airfield and (b) providing retail sales of goods, and meals and accommodation to tourists at the airfield be categorised as two separate enterprises?

Decision

Yes. For the purposes of paragraph 53(4)(a) of the EGCSA, an entity's activities in (a) operating a landing strip and hangers at an airfield and (b) providing retail sales of goods, and meals and accommodation to tourists at the airfield can be categorised as two separate enterprises.

Facts

An entity operates a bush airfield.

Users of the airfield are the members of a local aero club, tourism operators providing sightseeing flights and light aircraft operators transporting the flying public to and from the airfield.

The airfield does not have ready access to a commercial supply of electricity.

The entity uses diesel fuel at the premises to provide electricity for:

•

lighting

•

heating and air-conditioning

•

cooking

•

driving a water pump, and

•

operating general equipment, such as power tools, radios, televisions, fridges, freezers and other domestic type electrical devices.

The facilities powered by the generator are the club room and office, aircraft hangars, some outdoor entertainment areas, a number of on-site caravans, a caretaker's residence and a water pump house.

The entity sells souvenirs and light refreshments to club members, tourists and the public using the airfield. Meals are provided for both day-trippers and over night visitors. These facilities are made available in a separate building adjacent to the airstrip and hangars.

The entity's activities are profitable

Reasons for Decision

Subsection 56(1) of the EGCSA provides that if an entity is entitled to an off-road credit, it is entitled to an energy grant. Subsection 53(1) of the EGCSA provides that an entity will be 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;

...

In Miscellaneous Taxation Ruling MT 2000/1 the meaning of 'entity carrying on an enterprise for the purposes of entitlement of an Australian Business number' is considered. The Ruling states:

20. For an entity to be entitled to an ABN, it is only necessary to identify one enterprise. Where an entity carries on a number of activities, it is only necessary that one of those activities constitute an enterprise in order for the entity to be entitled to an ABN.

At paragraph 58, Example 6, the following appears:

Example 6: more than one enterprise carried on by an entity in its own right

A partnership, DEF, owns and runs two hotels, a restaurant and a wholesale liquor outlet, all of which operate in different locations.

The partnership applies for and is granted an ABN.

DEF carries out four series of activities, each of which constitutes a separate enterprise, but is still only entitled to one ABN.

These extracts clearly show that an entity may undertake more than one enterprise simultaneously.

The meaning of the term 'enterprise' is set out in section 38 of the A New Tax System (Australian Business Number) Act 1999 (ABNA). The types of activities included within the term 'enterprise' (and the types of activities that are excluded) are listed in paragraphs 15 to 17 of MT 2000/1.

15. Section 38 of the ABNA includes certain activities in 'enterprise' and excludes other activities. Carrying on an enterprise also includes activities done in the course of commencement or termination of the enterprise, under section 41 of the ABNA.

16. Section 38 provides an enterprise is an activity, or a series of activities, done:

•

in the form of a business;

•

in the form of an adventure or concern in the nature of trade;

•

on a regular or continuous basis, in the form of a lease, licence or *

•

other grant of an interest in property;

•

by the trustee of a fund that is covered by, or by an authority or institution that is covered by, Subdivision 30-B of the ITAA 1997 and to which deductible gifts can be made;

•

by a charitable institution or by a trustee of a charitable fund;

•

by a religious institution; or

•

by the Commonwealth, a State or a Territory, or by a body corporate, or corporation sole, established for a public purpose by or under a law of the Commonwealth, a State or a Territory.

17. The following activities are excluded from the section 38 meaning of enterprise:

•

activities done by a person as an employee or in connection with earning withholding payments covered by subsection 38(3) (second occurring) of the ABNA (see paragraph 18) unless it is done in supplying services as the holder of an office that the person has accepted in the course of, or in connection with, an activity, or series of activities, of a kind mentioned in the activities included in an enterprise;

•

activities done as a private recreational pursuit or hobby;

•

activities done by an individual (other than a trustee of a charitable fund) or a partnership (all the members of which are individuals) without a reasonable expectation of profit or gain; and

•

activities done as a member of a local governing body established by or under a State Law or Territory law (except a local governing body to which subsection 12-45(3) in Schedule 1 to the Taxation Administration Act 1953 ('TAA') applies).

In this instance, the entity is conducting two distinct types of activity - the operation of an airstrip and aircraft hangars, and the provision of goods and hospitality to tourists and others.

The following factors (although not necessarily essential) support the conclusion that the entity is operating two distinct enterprises:

The enterprises consist of markedly different activities each of which can be considered a business in its own right.

The enterprises are carried on in different buildings.

Therefore it is accepted that the entity is conducting two separate enterprises for the purposes of paragraph 53(4)(a) of the EGCSA.

Year 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
   paragraph 53(4)(a)

Related Public Rulings (including Determinations)
Miscellaneous Taxation Ruling MT 2000/1

Related ATO Interpretative Decisions
ATO ID 2006/80

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

Business Line:  Excise

Date of publication:  24 March 2006

ISSN: 1445-2782