ATO Interpretative Decision
ATO ID 2009/61
ExciseFuel Tax Credits: refrigerated trailers
FOI status: may be released
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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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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.
Is taxable fuel you acquire to use in a refrigeration unit that is fitted to a 'purpose-built insulated trailer', fuel to use, in a vehicle, for travelling on a public road for the purposes of subsection 43-10(3) of the Fuel Tax Act 2006 (FTA)?
Yes. Taxable fuel you acquire to use in a refrigeration unit that is fitted to a 'purpose-built insulated trailer' is fuel to use, in a vehicle for travelling on a public road for the purposes of subsection 43-10(3) of the FTA.
An entity operates a transport enterprise and is registered for goods and services tax.
The entity transports temperature sensitive cargo on roads in purpose-built insulated trailers.
Purpose-built insulated trailers are registered with a road transport authority and are towed by prime movers. A purpose-built insulated trailer is an insulated body on a mainframe which is specifically designed for transporting 'temperature sensitive' goods by road. A purpose-built insulated trailer is specifically designed to allow for the fitting of the refrigeration unit.
Refrigeration units, each with their own fuel tank, are fitted to the purpose-built insulated trailers to produce cool air which is circulated within the insulated body of the trailer in order to maintain the quality of goods being transported. The refrigerated unit may be removed and is interchangeable with other purpose-built insulated trailers and reefers. The refrigeration units contain either a mechanically driven generator or mechanically driven compressor.
The entity acquires taxable fuel for use in the refrigeration units.
Reasons for Decision
Subsection 43-10(3) of the FTA stipulates that the amount of an entity's fuel tax credit entitlement is reduced by the road user charge to the extent that the fuel is 'to use, in a vehicle, for travelling on a public road'.
It must, therefore, be determined if a purpose-built insulated trailer is a vehicle and if so, is the fuel used in the refrigeration unit, 'fuel to use, in a vehicle, for travelling on a public road' for the purposes of subsection 43-10(3) of the FTA.
Is a 'purpose-built insulated trailer' a vehicle?
The term 'vehicle' is not defined for the purposes of subsection 43-10(3) of the FTA.
The Commissioner's view on the term 'vehicle' for the purposes of subsection 43-10(3) of the FTA is expressed in paragraphs 11 to 13 of Fuel Tax Ruling FTR 2008/1.
The Commissioner considers the term 'vehicle' includes any vehicle that is capable of being authorised to travel on a public road by a relevant road traffic authority, whether or not the vehicle is designed for road travel or ordinarily travels on a public road. It is not restricted to a conveyance for the carriage of passengers or goods and is not limited to a self-propelled vehicle. It includes plant, equipment or machinery that is capable of locomotion and which may be authorised to travel on a public road by the relevant road traffic authority.
This view aligns with the Interstate Road Transport Act 1985 (Road Transport Act) which is a Federal Act relating to road transport and provides among other things, for the interstate registration of motor vehicles and trailers. Section 3 of the Road Transport Act defines 'trailer' to be a 'vehicle that is built to be towed, or is towed, by a motor vehicle, but does not include a motor vehicle that is being towed' and defines a 'vehicle' to be 'any means of conveyance which runs on wheels ...'. Under section 8 of the Road Transport Act, motor vehicles and trailers are required to be registered to be driven on a public road.
It follows that a purpose-built insulated trailer that is fitted with a refrigeration unit, being a conveyance on wheels for the carriage of 'temperature sensitive' goods and authorised to travel on a public road by a road transport authority, falls within the term 'vehicle' for the purposes of subsection 43-10(3) of the FTA.
Is fuel to use in a refrigeration unit, fuel to use, in a vehicle, for travelling on a public road?
For the purposes of determining whether to reduce a fuel tax credit amount by the road user charge pursuant to subsection 43-10(3) of the FTA, it is necessary to determine the meaning of 'fuel to use, in a vehicle, for travelling on a public road'.
The Commissioner's view on the meaning of the term 'travel or travelling', as expressed in paragraphs 14 to 17 of the FTR 2008/1, is 'to move from one point to another point and that travel or travelling includes all the ordinary incidents of a journey undertaken by a vehicle'.
The functions of the 'vehicle', (the 'purpose-built insulated trailer' fitted with a refrigeration unit) are to transport and maintain the quality of temperature sensitive goods from their point of collection until delivery. The refrigeration unit provides and maintains a controlled atmosphere for the transportation by road of temperature sensitive goods, and as such is essential to the purpose-built insulated trailer's travel on a public road.
The purpose-built insulated trailer is specifically designed so that the refrigeration unit may be fitted. It is only when the refrigeration unit is fitted to the purpose-built insulated trailer that there is a 'refrigeration system'. The refrigeration unit is reliant on the purpose-built insulated trailer to perform the function of maintaining the quality of goods being transported. Similarly, the purpose-built insulated trailer cannot properly maintain the quality of goods being transported without the use of a refrigeration unit.
Taking these factors into account when the refrigeration unit is fitted to the purpose-built insulated trailer, the vehicle comprises both the refrigeration unit and the trailer. That is, they are not two separate items but one vehicle.
Therefore, fuel acquired to power the refrigeration unit which is fitted to the purpose-built insulated trailer is fuel acquired 'to use, in a vehicle, for travelling on a public road'.
Legislative intent of the 'road user charge' and its application in the FTA
The Explanatory Statement (ES) to the Road User Charge Determination 2006 (No. 1) made under subsection 43-10(5) of the FTA (as the Act then stood), explained that the purpose of the 'road user charge' is to notionally recover the Australian Government's share of road construction and maintenance costs attributed to heavy vehicles.
The ES to the Road User Charge Determination 2006 (No. 1) explained the following:
Until the determined road user charge rate takes effect, the Energy Grants (Credit) Scheme Act 2003 (EGCS Act) entitles certain heavy vehicle operators to an on-road credit of $0.18510 per litre of diesel used for eligible on-road activities. This credit is paid to partially offset the diesel fuel excise and results in a net effective excise rate of $0.19633 per litre.
Importantly, the analogy between the road user charge and the amount of credit provided under the EGCS Act is emphasised as follows:
The road user charge rate determined by this instrument is equivalent to the net effective excise rate under the EGCS Act applying the current rate of charge.
Hence, the legislature at the time intended that the amount of the fuel tax credit as reduced by the amount of the road user charge should equate to the same amount of excise relief that would have been provided through an on-road credit under the EGCS Act.
The EGCS Act provided for an on-road credit for diesel fuel used in a registered vehicle where the vehicle was a vehicle for transporting passengers or goods. An entitlement to an on-road credit was also provided for fuel for 'incidental use' in relation to the vehicle, that is, activities considered integral to normal transport operations as defined in section 8 of the EGCS Act. For example, section 8 of the EGCS Act includes fuel for use in 'powering the vehicle, or auxiliary equipment in or on the vehicle, in order to maintain the quality of goods transported, or to be transported, in or on the vehicle'. Therefore, based on previous discussion, it follows that the legislature intended a similar entitlement should apply under the FTA.
In the current case, if the EGCS Act still applied there would be an on-road credit for fuel for use in the vehicle being fuel for use in operating the refrigeration unit in order to maintain the quality of the goods being transported. The amount of the excise relief as provided at that time by the on-road credit being $0.18510 per litre (as of 30 June 2006) simply equates to the amount of the fuel tax credit as reduced by the road user charge (that is $0.38143 per litre - $0.19633 per litre as of 1 July 2006) as would be worked out under the FTA.
Having regard to the ES to the Road User Charge Determination 2006 (No. 1), the operation of the EGCS Act and the intent of the FTA, it follows that fuel acquired to power the refrigeration unit which is fitted to a purpose-built insulated trailer 'is fuel to use, in a vehicle, for travelling on a public road'. Therefore, the amount of the fuel tax credit is reduced by the road user charge as per subsection 43-10(3) of the FTA.
Energy Grants (Credits) Scheme Act 2003
subsection 43-10(5) Interstate Road Transport Act 1985
Related Public Rulings (including Determinations)
Fuel Tax Ruling FTR 2008/1
Explanatory Statement to the Road User Charge Determination 2006 (No. 1)
FTC amount of credit
FTC fuel tax
FTC heavy vehicle
FTC incidental use
FTC Partial Credit
FTC registered vehicle
FTC road user charge
Fuel tax credits