ATO Interpretative Decision

ATO ID 2004/671 (Withdrawn)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• This ATO ID is withdrawn from the database because of amendments to the Energy Grants (Credits) Scheme Act applying after 30 June 2006.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

Does an entity that could potentially connect to a commercial supply of electricity, but due to high costs and access problems does not, have 'ready access' to a commercial supply of electricity for the purposes of subparagraph 53(4)(a)(ii) of the Energy Grants (Credits) Scheme Act 2003 (EGCSA)?

Decision

No. An entity that could potentially connect to a commercial supply of electricity, but due to high costs and access problems does not, does not have 'ready access' to a commercial supply of electricity for the purposes of subparagraph 53(4)(a)(ii) of the EGCSA.

Facts

An entity purchases diesel fuel and uses it to generate electricity for use in carrying on an enterprise that has as its principal purpose the retail sale of goods or services or the provision of hospitality. The electricity generated is used at the premises where the retail/hospitality business is carried on.

The premises used for the enterprise are not on the commercial electricity grid, and the entity uses a generator to generate the electricity.

The entity has the ability to connect to a commercial supply of electricity, but has elected to generate its own power because of the high cost relative to the size of the enterprise.

The high cost is largely due to the distance (over 1 kilometre) between the commercial power source and the premises.

A further impediment is that the power line would have to cross a neighbour's property, which would involve the clearing of a broad, long path through bush land. This would have a significant environmental impact and the neighbour is not willing to allow this to happen.

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...

The requirements of subparagraph 53(4)(a)(i) of the EGCSA have been met. What must be considered is whether the entity has 'ready access to a commercial supply of electricity' at the temporary site.

The phrase 'ready access' is not defined in the EGCS, but the Explanatory Memorandum to the Diesel Fuel Rebate Scheme Amendment Bill 2002, says that a business would be regarded as having ready access if:

A commercial supply of electricity was present or convenient to the business and immediately available for connection. (emphasis added)

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 Customs Act and the Excise 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.

In this instance, a commercial supply of electricity is not present, in terms of the business already being connected to it. It must therefore be determined whether a commercial supply of electricity is 'convenient' to the business. If so, it must then be determined whether the electricity supply is 'immediately available' for connection.

The term 'convenient' in this context suggests that connection to the electricity supply should not be burdensome to the business in terms of cost and effort. It also suggests that connection to the power supply should suit the business.

In this case, whilst the entity has the ability to connect to a commercial supply of electricity, it has elected to generate its own power because of the high cost of connecting to the commercial power supply (relative to the size of the entity's business). Furthermore, the power line would have to cross a neighbour's property, which would involve the clearing of a broad, long path through bush land. This would have a significant environmental impact and the neighbour is not willing to allow this to happen.

Therefore, connection to the electricity supply is not 'convenient' to the entity's business, as connection would be burdensome to the business in terms of cost and effort.

Accordingly, an entity that could potentially connect to a commercial supply of electricity, but due to high costs and access problems does not, does not have 'ready access' to a commercial supply of electricity for the purposes of subparagraph 53(4)(a)(ii) of the EGCSA.

Legislative References:
Customs Act 1901
   Table of Contents

Related ATO Interpretative Decisions
ATO ID 2004/421
ATO ID 2004/422
ATO ID 2004/423
ATO ID 2004/469

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

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

Business Line:  Excise

Date of publication:  13 August 2004

ISSN: 1445-2782