ATO Interpretative Decision

ATO ID 2004/18

Excise

• This ATOID was amended by adding legislative references subsection 42(1), subsection 42(2), paragraph 42(2)(a), paragraph 42(2)(b), paragraph 42(2)(c) and subsection 56(1) of the Energy Grants (Credits Scheme) Act 2003.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is an entity entitled to an on-road credit under section 42 of the Energy Grants (Credits) Scheme Act 2003 (EGCSA) for on-road diesel fuel purchased for use in a prime mover to operate auxiliary equipment on the prime mover, where the auxiliary equipment is used to load goods onto a semi-trailer that is hitched to the prime mover?

Decision

Yes. An entity is entitled to an on-road credit under section 42 of the EGCSA for on-road diesel fuel purchased for use in a prime mover to operate auxiliary equipment on the prime mover, where the auxiliary equipment is used to load goods onto a semi-trailer that is hitched to the prime mover.

Facts

An entity owns a prime mover and semi-trailer that are used in the course of the entity's enterprise.

The semi-trailer is hitched to the prime mover which has a gross vehicle mass (GVM) of 20 tonnes or more. While the semi-trailer is hitched to the prime mover, the engine of the prime mover is used to power auxiliary equipment on the prime mover. The auxiliary equipment is used to load goods onto the semi-trailer.

The semi-trailer and the prime mover are each 'registered vehicles' and 'vehicles for transporting passengers or goods' for the purposes of the EGCSA.

The combined prime mover and semi-trailer is not a 'registered vehicle' for the purposes of the EGCSA.

Reasons for Decision

Subsection 56(1) of the EGCSA provides that if you are entitled to an on-road credit or an off-road credit, you are entitled to an energy grant.

Section 42 of the EGCSA deals with entitlement to an on-road credit for vehicles with a GVM of 20 tonnes or more.

Subsection 42(1) of the EGCSA provides that a claimant is entitled to an on-road credit if they purchase on-road diesel or alternative fuel for:

(a)

use in a registered vehicle that has a gross vehicle mass of 20 tonnes or more; or

(b)

incidental use in relation to such a vehicle.

However, the extent of the entitlement is limited by subsection 42(2) of the EGCSA which stipulates that the fuel must be used in carrying on the entity's enterprise. This test is satisfied as the prime mover and semi-trailer are being used in the course of the entity's enterprise.

Subsection 42(2) of the EGCSA also separates entitlement based on whether or not the vehicle is a vehicle for transporting passengers or goods.

As the prime mover is a vehicle for transporting passengers or goods, paragraph 42(2)(a) of the EGCSA is relevant and states that the entity is entitled to an on-road credit to the extent that on-road diesel fuel or on-road alternative fuel is used in operating the vehicle on a road in Australia.

However, regardless of whether a vehicle is a vehicle for transporting passengers or goods, paragraph 42(2)(c) of the EGCSA provides that entitlement extends to incidental use, or any other use, of the vehicle that is integral to operating the vehicle as mentioned in paragraphs 42(2)(a) or 42(2)(b) of the EGCSA.

Therefore, in order to meet the requirements of section 42 of the EGCSA, the use of auxiliary equipment on the prime mover that is used to unload goods from the semi-trailer, must be:

•

an incidental use of the vehicle; or

•

any other use of the vehicle

that is integral to operating the vehicle as mentioned in paragraph 42(2)(a) or 42(2)(b) of the EGCSA.

Each test will be considered in turn.

Is the use of auxiliary equipment on the prime mover that is used to unload goods from the semi-trailer an incidental use of the prime mover that is integral to operating the prime mover as mentioned in paragraph 42(2)(a) of the EGCSA?

'Incidental use' is defined in section 8 of the EGCSA which states:

Each of the following, whether or not it takes place on a road, is an incidental use in relation to a vehicle:

(a)

power the vehicle, or auxiliary equipment in or on the vehicle, while:

(i)

goods to be transported in or on the vehicle are loaded or goods that have been so transported are unloaded; or

(ii)

passengers who are to be transported in or on the vehicle board or passengers who have been so transported alight; or

(iii)

the vehicle is moved to a place where anything in subparagraph (i) or (ii) is to happen or from a place where such a thing has happened;

(b)

powering the vehicle, or auxiliary equipment on the vehicle in order to maintain the quality of goods transported, or to be transported, in or on the vehicle;

(c)

powering the vehicle or auxiliary equipment in or on the vehicle, in order to clean or otherwise maintain the vehicle or auxiliary equipment in or on the vehicle;

(d)

using the vehicle for training operators of vehicles..

Given the prime mover is powering auxiliary equipment that is loading and unloading goods onto and off the semi-trailer, paragraph 8(a)(i) of the EGCSA above is of most relevance.

In essence, the powering of auxiliary equipment in or on the vehicle, to enable the loading or unloading of goods to be transported on the vehicle will be incidental use of the vehicle.

The repeated use of the word 'the' in the paragraph indicates that the vehicle that has the auxiliary equipment and the vehicle upon which the goods are to be transported must be one and the same.

In this instance, the prime mover and the semi-trailer are each, independently, 'registered vehicles' for the purposes of the EGCSA. As the goods are transported on the semi-trailer, the powering of auxiliary equipment to load the goods will only be incidental use if the auxiliary equipment is on the semi-trailer itself.

In this instance, the auxiliary equipment is on the prime mover. Therefore the powering of the auxiliary equipment does not qualify as incidental use of a vehicle.

Is the use of auxiliary equipment on the prime mover that is used to unload goods from the semi-trailer 'any other use' of the prime mover that is integral to operating the prime mover as mentioned in paragraph 42(2)(a) of the EGCSA?

The term 'any other use' in paragraph 42(2)(c) of the EGCSA is not defined in the EGCSA. Therefore, it takes on its ordinary broad meaning. The use of the engine of the prime mover to power auxiliary equipment on the prime mover is clearly an 'other use' of the vehicle.

However, the eligibility of any other use (or incidental use) of a vehicle is dependent upon the use being integral to operating the vehicle as mentioned in paragraph 42(2)(a) or 42(2)(b) of the EGCSA. As explained above, paragraph 42(2)(b) of the EGCSA is not relevant, as the vehicle is a vehicle for transporting passengers or goods.

Therefore, the powering of auxiliary equipment on the prime mover to load a semi-trailer attached to the prime mover, will only be eligible if it is integral to operating the prime mover on a road in Australia. 'Integral' is not defined in the legislation and therefore takes on its common meaning. It is defined in the Macquarie Dictionary 2001 rev. 3rd edn, The Macquarie Library Pty Ltd, NSW as:

1.

of or relating to a whole; belonging as a part of the whole; constituent or component: the integral parts of the human body

2.

necessary to the completeness of the whole

3.

made up of parts which together constitute a whole

Therefore an incidental use of the vehicle will be integral to operating the vehicle on a road in Australia where it is necessary to and forms a fundamental part of the operation of the prime mover on a road in Australia.

While a prime mover is attached to a semi-trailer, the principal purpose of the prime mover is to haul the semi-trailer, and any goods on it. Consequently, the powering of auxiliary equipment on the prime mover to load and unload goods from a semi-trailer attached to the prime mover, forms a necessary and fundamental part of the operation of the prime mover on a road in Australia.

Therefore, an entity is entitled to an on-road credit for on-road diesel fuel purchased for use in a prime mover that is used to power auxiliary equipment on the prime mover where the auxiliary equipment is used to load goods onto a semi-trailer hitched to the prime mover.

Legislative References:
Energy Grants (Credits) Scheme Act 2003
   section 42
   subsection 42(1)
   subsection 42(2)
   paragraph 42(2)(a)
   paragraph 42(2)(b)
   paragraph 42(2)(c)
   subsection 56(1)
   section 58

Related ATO Interpretative Decisions
ATO ID 2004/17
ATO ID 2004/19
ATO ID 2003/1163

Other References:
The Macquarie Dictionary 2001 rev. 3rd edn, The Macquarie Library Pty Ltd, NSW

Keywords
EGCS incidental use
EGCS on-road
EGCS registered vehicle
Energy grants (credits) scheme
Vehicle for transporting passengers or goods

Business Line:  Indirect Tax

Date of publication:  16 January 2004

ISSN: 1445-2782