ATO Interpretative Decision

ATO ID 2003/885 (Withdrawn)

Excise

• This ATO ID is withdrawn from the database because it contains a view in respect of the diesel fuel rebate provisions of the Excise Act 1901 and or the Customs Act 1901 that were repealed with effect from 1 July 2003. Despite its withdrawal from the database, this ATO ID continues to be a precedential view in respect of decisions for fuel purchased before 1 July 2003.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is a non profit organisation set up to administer essential services to a number of remote communities, eligible for a diesel fuel rebate under paragraph 78A(1)(b) of the Excise Act 1901 and corresponding paragraph 164(1)(b) of the Customs Act 1901 for diesel fuel they purchase and use at communal powerhouses in each community to generate electricity for the residents of each of those communities?

Decision

Yes. A non profit organisation set up to administer essential services to a number of remote communities is eligible for a diesel fuel rebate under paragraph 78A(1)(b) of the Excise Act and corresponding paragraph 164(1)(b) of the Customs Act for diesel fuel they purchase and use at communal powerhouses in each community to generate electricity for the residents of each of those communities.

Facts

All but one community contains houses only. The other community contains houses, a community store, a visiting clinic, a school, a meeting area and a workshop. The buildings within each community are owned by the respective community.

Each community has its own communal powerhouse. The capacity of each powerhouse is commensurate with the power demands of the particular community it serves. In each community, the distance of each residence from the powerhouses varies from a few metres up to 1,000 metres.

A non-profit organisation, in the form of a council, consists of representatives from each of the communities. Each community has equal representation on the council.

The council purchases the diesel fuel for use in each of the powerhouses. The powerhouses are operated by employees of the council. The council partially recovers the cost of diesel fuel used to provide power to residences by charging a concessional fee that is well below commercial rates. The council charges a commercial rate to the school and store in the relevant community. The council receives funding from a government department toward the cost of diesel fuel. Overall, the council incurs an overall deficit between the cost of the diesel fuel and the total revenue received.

Reasons for Decision

In order to the entitled to a diesel fuel rebate under paragraph 78A(b) of the Excise Act, or paragraph 164(1)(b) of the Customs Act, a person must purchase diesel fuel for use by them, at residential premises, in generating electricity for use in meeting various domestic requirements of the residents of those premises.

It is accepted that the council purchases the diesel fuel and uses that fuel to generate electricity and that houses accommodating members of the remote communities are 'residential premises'.

The tests to be applied in this case are:

1.

is the diesel fuel used 'at' residential premises?; and

2.

is the diesel fuel purchased for use (at residential premises) in generating electricity for use in meeting various domestic requirements of residents of those premises?

Is the diesel fuel used 'at' residential premises?

Two cases considered by the courts are useful in determining whether fuel has been used 'at' residential premises, Customs, Collector of (Tas) v. Flinders Island Community Association (1985) 7 FCR 205 and Customs, Collector of v. Rottnest Island Authority (1994) 48 FCR 177. From those cases it can be determined that a person will be considered to have purchased diesel fuel, for use in generating electricity 'at' residential premises where:

(a)

the generator is physically proximate to the premises; and

(b)

belongs to the premises and forms a coherent part of them.

In considering whether or not a generator is located 'at' more than one premises (eg employee cabins, remote communities), the following factors will be taken into consideration, along with any other facts specific to that particular case:

(a)

whether there is common ownership of the premises

(b)

the proximity of each premises to the generator

(c)

the existence of relationships, other than merely contractual relationships, between the user of the diesel fuel and the residents of the premises, and between the residents themselves

(d)

whether electricity is supplied to each resident at cost, rather than as a commercial transaction

(e)

the communality of operation of the generator

(f)

whether the generator is of a suitable size and design to fulfil the purpose of meeting the domestic needs of the residents of the premises.

The buildings within each community are owned by the respective community, rather than by individuals, so there is common ownership of premises.

The proximities of the power houses to residences in the three communities range up to 1,000 metres. This is a similar distance to a case involving the Warmun community (Warmun Community (Turkey Creek) Inc v. Chief Executive Officer of Customs [2000] AATA 177) where the Administrative Appeals Tribunal considered that the 'at residential premises' requirement was met.

The distance of the generator from the residences also needs to be considered in the context of the nature of the location. For example, a distance of 200 metres from a house in an urban street would be relatively further than a distance of 200 metres from a farm house where there are no other dwellings within 5 kilometres.

In this case, a number of isolated outback communities are far removed from any other township or other buildings. Accordingly, each power house is considered reasonably proximate to its respective community.

The council is made up of members of the communities with each community having equal representation on the council. The members of each community are part of the same tribal group. As such, relationships, other than merely contractual relationships, exist between the user of the diesel fuel and the residents of the premises, and between the residents themselves.

Electricity is supplied to residents at less than the cost of the diesel fuel to the council as the residents' charges are subsidised by government funding and profit from the commercial sale of electricity to the store and school in the relevant community. Accordingly the supply of electricity to residences is not considered a commercial transaction.

The diesel fuel generators at the powerhouses are considered of a suitable size and design to fulfil the purpose of meeting the domestic needs of the residents of the premises.

The factors present in this case are that there is common ownership of the premises, the powerhouses are reasonably proximate to the premises, relationships exist between the parties that are not merely contractual, electricity is supplied as a non commercial transaction, and the powerhouses are appropriate in size and design to meet the needs of the communities.

Accordingly, the diesel fuel is used 'at' all of the groups of residential premises.

Has the diesel fuel has been purchased for use (at residential premises) in generating electricity for use in meeting various domestic requirements of residents of those premises?

In this case, the supply of electricity is not a commercial operation and is used predominantly for the domestic needs of persons in residential premises.

As the council is not engaged in a commercial operation it can be accepted that they are purchasing diesel fuel for use (at residential premises) in generating electricity for use in meeting various domestic requirements of residents of those premises.

Legislative References:
Customs Act 1901
   paragraph 164(1)(b)

Case References:
Customs, Collector of (Tas) v. Flinders Island Community Association
   (1985) 7 FCR 205

Related ATO Interpretative Decisions
ATO ID 2003/732

Keywords
DFRS generation of electricity
DFRS power generation
DFRS residential premises

Business Line:  Excise

Date of publication:  3 October 2003

ISSN: 1445-2782