ATO Interpretative Decision

ATO ID 2004/745 (Withdrawn)

Excise

Energy Grants (Credits) Scheme: on-road transport - refrigerated container mounted on semi-trailer
FOI status: may be released

This ATO ID is withdrawn from 1 July 2012, the date the Energy Grants (Credits) Scheme Act 2003 was repealed.
Despite its withdrawal, this ATO ID continues to be a precedential ATO view in respect of the period the Act was in force, 1 July 2003 up to and including 30 June 2012.

This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Status of this decision: Decision Withdrawn 1 July 2012

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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.

Issue

Is the use of diesel fuel to power the generator of a refrigerated container mounted on a semi-trailer an 'incidental use' that is integral to operating the semi-trailer as provided in paragraphs 42(2)(a) or 42(2)(b) of the Energy Grants (Credits) Scheme Act 2003 (EGCSA)?

Decision

Yes. The use of diesel fuel to power the generator of a refrigerated container mounted on a semi-trailer is an 'incidental use' that is integral to operating the semi-trailer as provided in paragraphs 42(2)(a) or 42(2)(b) of the EGCSA.

Facts

An entity operates a transport business.

The entity operates a prime mover which tows a skeletal semi-trailer which carries a refrigerated container.

The prime mover and skeletal semi-trailer are both registered vehicles as defined in the EGCSA, and each has a gross vehicle mass (GVM) of 20 tonnes or more. The prime mover and skeletal semi-trailer are both considered to be vehicles for transporting passengers or goods for the purposes of the EGCSA.

The refrigerated container uses diesel fuel from its own tank to generate electricity to power auxiliary equipment to chill the container, in order to maintain the quality of the goods being transported.

The refrigerated container may use the diesel fuel while the vehicle carrying it is travelling on a road, or while it is stationary.

Reasons for Decision

Under Part 3 of the EGCSA an entity is, subject to the requirements specified in that part, entitled to an on-road credit in certain circumstances.

Section 42 of the EGCSA details the circumstances when a client will be entitled to an on-road credit for the use of 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 entitlement is limited by subsection 42(2) of the EGCSA which requires that the fuel is for use in the carrying on of the entity's enterprise. This requirement is satisfied.

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

As the semi-trailer is a vehicle for transporting passengers or goods, paragraph 42(2)(a) of the EGCSA is relevant and states that the use of fuel will be eligible if the 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).

Therefore, in order to meet the requirements of section 42 of the EGCSA, the operation of auxiliary equipment mounted on a vehicle 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 paragraphs 42(2)(a) or 42(2)(b).

Each test will be considered in turn.

Is the operation of a refrigerated container's auxiliary equipment whilst the container is carried on a skeletal semi-trailer an 'incidental use'?

'Incidental use' in relation to a vehicle 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: ...

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

The term 'auxiliary equipment' is not defined in the EGCSA, and therefore takes on its common meaning.

The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW (Macquarie Dictionary), defines 'auxiliary' as:

1.: giving support; helping; aiding; assisting;
2.: subsidiary; additional.

Clearly, the equipment on the refrigerated container is 'auxiliary equipment' that is 'on' the skeletal semi-trailer.

There is nothing in either subsection 42(1) of the EGCSA, or the definition of incidental use in section 8 of the EGCSA that requires the power for the auxiliary equipment on the vehicle to come from that particular vehicle.

That is, there is no requirement that the fuel used to power the auxiliary equipment on the refrigerated container must come from the prime mover. It will be sufficient if the client has purchased on-road diesel fuel for incidental use in relation to a registered vehicle with a GVM of 20 tonnes or more.

Similarly, whether or not a use is an 'incidental use' is not necessarily affected by whether or not the vehicle is stationary at the time the use occurs.

The operation of the auxiliary equipment on the refrigerated container falls within the definition of incidental use contained in paragraph 8(b) of the EGCSA. In this case, powering the auxiliary equipment on the semi-trailer takes place in order to maintain the quality of the goods transported, or to be transported, on the semi-trailer.

Therefore the diesel fuel used in operating auxiliary equipment is an 'incidental use' of that vehicle for the purposes of subsection 42(1) of the EGCSA.

Is the incidental use integral to operating the vehicle as mentioned in paragraphs 42(2)(a) or 42(2)(b) of the EGCSA?

The powering of equipment on the vehicle to maintain the quality of the goods transported, is an incidental use of the vehicle. However, the incidental use must also be integral to operating the vehicle as mentioned in paragraphs 42(2)(a) or 42(2)(b) of the EGCSA.

As explained above, paragraph 42(2)(a) of the EGCSA is the relevant paragraph in this instance, as the prime mover towing the skeletal semi-trailer is a vehicle for transporting passengers or goods.

Therefore, the powering of the auxiliary equipment will be eligible if it is an incidental use of the vehicle that is integral to operating the vehicle 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 as:

1.: of or relating to a whole; belonging as 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 registered vehicle on a road in Australia.

The semi-trailer is being operated on a road for the purpose of transporting its cargo in a satisfactory condition. Therefore, the chilling of the food within the refrigerated container is fundamental to the operation of the semi-trailer.

Accordingly, the use of diesel fuel to power a refrigerated container's generator, while the refrigerated container is being towed by a prime mover, is 'incidental use' that is integral to operating the vehicle as provided in paragraphs 42(2)(a) or 42(2)(b) of the EGCSA.

Date of decision: 26 August 2004

Legislative References:
Energy Grants (Credits) Scheme Act 2003
   section 4
   section 8
   paragraph 8(b)
   section 42
   subsection 42(1)
   subsection 42(2)
   paragraph 42(2)(a)
   paragraph 42(2)(b)
   paragraph 42(2)(c)

Related ATO Interpretative Decisions
ATO ID 2003/818
ATO ID 2003/1163
ATO ID 2004/17
ATO ID 2004/19
ATO ID 2004/63
ATO ID 2004/215
ATO ID 2004/535

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

Keywords
EGCS on-road
Refrigerated trailers

Business Line: Indirect Tax

Date of publication: 10 September 2004

ISSN: 1445-2782

history

	Date:	Version:
	26 August 2004	Original statement
You are here →	1 July 2012	Archived

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