ATO Interpretative Decision

ATO ID 2004/670 (Withdrawn)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• This ATO ID is withdrawn from the database because of amendments to the Energy Grants (Credits) Scheme Act applying after 30 June 2006.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

Is an entity's use of diesel fuel at particular premises to generate electricity for use in accommodation for staff employed by the enterprise, a use that qualifies for an off-road credit for the purposes of paragraph 53(4)(a) of the Energy Grants (Credits) Scheme Act 2003 (EGCSA)?

Decision

Yes. An entity's use of diesel fuel at particular premises to generate electricity for use in accommodation for staff employed by the enterprise, is a use that qualifies for an off-road credit for the purposes of paragraph 53(4)(a) of the EGCSA.

Facts

An entity carries on an enterprise that has as its principal purpose, the retail sale of goods or services, or the provision of hospitality.

At the place where it carries on its enterprise the entity also provides accommodation for staff employed by the enterprise.

The entity purchases diesel fuel for use in generating electricity at the place where the enterprise is carried on and the accommodation provided.

The premises of the retail/hospitality business (including the staff residences) do not have ready access to a commercial supply of electricity.

Reasons for Decision

Subsection 53(1) of the EGCSA states that an entity is entitled, subject to certain prescribed conditions, to an off-road credit if they purchase diesel fuel for a use by them that qualifies.

Paragraph 53(4)(a) of the EGCSA provides that the following is a use that qualifies:

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:

•

the diesel fuel must be used at particular premises to generate electricity;

•

the resultant electricity must be used in the course of carrying on at those premises, an enterprise that has as its principal purpose the retail sale of goods or services (other than electricity) or the provision of hospitality; and

•

the enterprise must not have at those premises, ready access to a commercial supply of electricity.

In this instance, the generators are being operated by the entity at the premises where the diesel fuel is used and where the enterprise is carried on. The electricity generated is used by the retail/hospitality business in the course of carrying on its enterprise which has, as its principal purpose, the retail sale of goods or services or the provision of hospitality.

The entity does not have, at the premises of the retail/hospitality business (including the staff residences), ready access to a commercial supply of electricity.

What must then be considered is whether the carrying on of an enterprise which has, as its principal purpose the retail sale of goods or services (other than electricity) or the provision of hospitality, can include the provision of residential accommodation for the staff.

The Diesel Fuel Rebate Scheme was the precursor to the Energy Grants (Credits) Scheme, and was administered under the Customs Act 1901, and the Excise Act 1901. The Excise Act and the Customs Act both contained similar provisions to that contained in paragraph 53(4)(a) of the EGCSA. Therefore the Explanatory Memorandum to the Diesel Fuel Rebate Scheme Amendment Bill 2002 remains relevant.

Example 1.1 of the Explanatory Memorandum to the Diesel Fuel Rebate Scheme Amendment Bill 2002, states that:

South Seas Pty Ltd operates a tourist resort in a remote part of Western Australia that does not have a ready access to a commercial supply of electricity. It uses diesel fuel to generate power for its own use in van sites, motel accommodation, a retail store and residential accommodation...

South Seas Pty Ltd is eligible for rebate for diesel fuel used to generate electricity for its own business including the residential accommodation, as the principal purpose of its enterprise is the provision of hospitality services...

This indicates that the carrying on of an enterprise which has, as its principal purpose the provision of retail/hospitality, can include the provision of residential accommodation for the staff, provided that accommodation can still be regarded as 'at' the premises where the diesel fuel is used and the enterprise is carried on, as is the case in this instance.

Accordingly, an entity's use of diesel fuel at particular premises to generate electricity for use in accommodation for staff employed by the enterprise, is a use that qualifies for an off-road credit for the purposes of paragraph 53(4)(a) of the EGCSA.

Legislative References:
Energy Grants (Credits) Scheme Act 2003
   subsection 53(1)
   paragraph 53(4)(a)

Other References:
Explanatory Memorandum to the Diesel Fuel Rebate Scheme Amendment Bill 2002

Keywords
EGCS off-road
EGCS off-road diesel
EGCS use to generate electricity at a retail/hospitality enterprise

Business Line:  Excise

Date of publication:  13 August 2004

ISSN: 1445-2782