ATO Interpretative Decision

ATO ID 2004/829 (Withdrawn)

Excise

• This ATO ID is withdrawn from 1 July 2012, the date the Energy Grants (Credits) Scheme Act 2003 was repealed.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.

Issue

Is the use of diesel fuel in a vessel's generator to power the refrigeration plant of a reefer being transported by the vessel 'use in marine transport' for the purposes of section 36 of the Energy Grants (Credits) Scheme 2003 (EGCSA)?

Decision

Yes. The use of diesel fuel in a vessel's generator to power the refrigeration plant of a reefer being transported by the vessel is 'use in marine transport' for the purposes of section 36 of the EGCSA.

Facts

A vessel is engaged in marine transport.

A reefer is placed on the entity's vessel and transported between two places by sea.

A reefer is a refrigerated container that ordinarily uses diesel fuel from its own tank to power the reefer's refrigeration plant. The reefer's refrigeration plant must be kept running at all times to ensure that the contents of the reefer are kept at the required temperature. In this case, while it is being transported by the vessel, the reefer does not use its own fuel, but draws its electricity from the vessel's power supply.

Reasons for Decision

Subsection 53(1) of the EGCSA provides that an entity is, subject to certain conditions, entitled to an off-road credit if they purchase diesel fuel for a use by them that qualifies. Under subsection 53(3) of the EGCSA, 'use in marine transport' is a use that qualifies.

Section 36 of the EGCSA sets out the meaning of the expression ' use in marine transport '. The most pertinent provision that needs to be considered is contained in subsection 36(6), which states that:

Use:

(a)

in equipment in or on a vessel; and

(b)

while the vessel is in or on the sea or fresh water; and

(c)

for air-conditioning, heating, lighting or for any purpose incidental to use of the vessel:

(i)

in marine transport; or

(ii)

for any of the purposes mentioned in subsection (4); or

(iii)

as mentioned in paragraph (5)(c);

is use in marine transport.

In order for the diesel fuel consumed by the vessel to be accepted as being for 'use in marine transport' the fuel must be for use in equipment in or on a vessel, while the vessel is in or on the sea or fresh water, for any purpose incidental to use of the vessel in marine transport. Each test will be considered in turn.

Is the use of diesel fuel in the vessel to power the reefer, 'use in equipment in or on a vessel'?

In this instance the reefer is placed onto and transported by the entity's vessel. Whilst on the vessel the reefer is hooked up to electrical power from the vessel's power supply.

The vessel's generator is clearly equipment on the vessel (or part of the vessel itself). Therefore this requirement is satisfied.

Is the diesel fuel used while the vessel is in or on sea or fresh water?

The diesel fuel is used while the vessel is at sea. Therefore this requirement is satisfied.

Is the diesel fuel used 'for any purpose incidental to use of the vessel in marine transport'?

The phrase 'incidental to' is not defined in the EGCSA in relation to marine transport. The ordinary meaning of the phrase must then be considered.

The phrase 'incidental to' is defined in The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW as:

liable to happen in connection with; naturally appertaining to.

In this case the reefer's refrigeration plant must be kept running at all times to ensure that the contents of the reefer are kept at the required temperature. In addition, the diesel fuel is being consumed while the vessel is transporting the reefer.

Therefore, the use of diesel fuel in the vessel's generator to power the reefer is a use of diesel fuel that is both liable to happen in connection with and naturally appertaining to the transport of a reefer by a vessel engaged in marine transport.

Accordingly, the use of diesel fuel in a vessel's generator to power the refrigeration plant of a reefer being transported by the vessel is 'use in marine transport' for the purposes of section 36 of the EGCSA.

Legislative References:
Energy Grants (Credits) Scheme Act 2003
   section 36
   section 36(6)
   subsection 53(1)
   subsection 53(3)

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

Keywords
EGCS marine transport
EGCS marine transport incidental use

Business Line:  Indirect Tax

Date of publication:  15 October 2004

ISSN: 1445-2782