ATO Interpretative Decision

ATO ID 2005/238 (Withdrawn)

Excise

• This ATO ID is withdrawn from the database because it contains a view in respect of the diesel fuel rebate provisions of the Excise Act 1901 and or the Customs Act 1901 that were repealed with effect from 1 July 2003. Despite its withdrawal from the database, this ATO ID continues to be a precedential view in respect of decisions for fuel purchased before 1 July 2003.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is diesel fuel used in a self-drive hired vessel, used in marine transport, eligible for the diesel fuel rebate under subsection 164(1) of the Customs Act 1901 or subsection 78A(1) of the Excise Act 1901 where the boat hire entity is reimbursed by the customer for the specific amount of diesel fuel that is used by the hired vessel during a hire period?

Decision

Yes. The diesel fuel used in a self-drive hired vessel, used in marine transport, is eligible for the diesel fuel rebate under subsection 164(1) of the Customs Act or subsection 78A(1) of the Excise Act where the boat hire entity is reimbursed for the specific amount of diesel fuel that is used by the hired vessel during a hire period.

Facts

The boat hire entity operates a business that hires out self-drive vessels.

The boat hire entity purchases diesel fuel for use in the vessels which are available for hire by the public.

The entity's vessels are propelled by diesel powered engines that consume diesel fuel and each vessel runs a diesel powered generator that provides electricity for various appliances on the vessel such as cookers and lighting.

At the start of the hire, the vessel leaves the wharf with a full tank of fuel. At the end of the hire, the vessel is returned to the same wharf where it is refuelled.

The boat hire entity charges a hire fee and a bond which are paid prior to the start of the hire. At the end of the hire, a charge is calculated for the precise amount of fuel used during the hire. This charge is deducted from the bond. The balance of the bond, less any other charges, is then refunded to the customer.

Reasons for Decision

Subsection 78A(1) of the Excise Act and subsection 164(1) of the Customs Act provide for a rebate to be payable to a person in respect of diesel fuel purchased for use by that person in 'marine transport'.

An essential requirement for eligibility is the purchase and use of the fuel by the same person. This requirement is emphasised by paragraph 78A(2)(b) of the Excise Act and paragraph 164(2)(b) of the Customs Act which deny a diesel fuel rebate if the person who purchased the fuel subsequently sells or otherwise disposes of the fuel.

Thus, if the person has already received the rebate on the basis of prospective use, and then sells or disposes of the fuel, these provisions cancel the original entitlement.

Did the boat hire entity use the fuel?

Subsection 78A(7) of the Excise Act provides that 'use' has the same respective meaning as that provided in subsection 164(7) of the Customs Act. The definition of 'use' in subsection 164(7) of the Customs Act limits the ordinary meaning of the term 'use' by stating that:

'use', in relation to diesel fuel in relation to a person, does not include the sale or other disposal of the diesel fuel by the person to another person or the loss of the diesel fuel by the person.

To be entitled to the rebate, the diesel fuel purchased by the boat hire entity must be 'used' by that entity during the period when the vessel was under hire to a customer.

The term 'use' has been given a wide meaning by the Courts in Commissioner of Taxation v. Brambles Holdings Ltd (1991) FCR 451; 91 ATC 4285; (1991) 21 ATR 1429 and Collector of Customs v. Rottnest Island Authority (1994) 48 FCR 177. More recently, the issue was considered in relation to hire boats in 'marine transport' in Re Riviera Nautic Pty Ltd v. Federal Commissioner of Taxation [2002] AATA 657; (2002) 50 ATR 1106. These authorities show that the term 'use' does not require sole use by one entity. Using the Courts' interpretation of the term 'use' the fuel can be said to have been used by both the boat hire entity and the customer.

The diesel fuel rebate may be claimed by an entity if diesel fuel is used by that entity for a specific purpose even though it can be said that the fuel was to be used by, or its use may benefit, another entity.

Did the boat hire entity sell or dispose of the fuel?

Although the terms of the hire agreement require the customer to pay (among other fees and charges) an amount for the fuel used during the hire period, the proper construction of the hire arrangement is that the overall final fee for the hire contract is to be calculated with regard to the actual amount of fuel used. The parties are not considered to have entered into a contract for the sale of fuel and the fuel was not sold or disposed of to the customer.

As the boat hire entity has both purchased and used the diesel fuel in marine transport it is eligible for a diesel fuel rebate under subsection 164(1) of the Customs Act or subsection 78A(1) of the Excise Act.

Legislative References:
Customs Act 1901
   subsection 164(1)
   paragraph 164(2)(b)
   subsection 164(7)

Case References:
Re Riviera Nautic Pty Ltd v. Commissioner of Taxation (Cth)
    [2002] AATA 657
   (2002) 50 ATR 1106

Keywords
DFRS claims
DFRS marine
Diesel fuel rebate scheme
Excise
Excise payments

Business Line:  Excise

Date of publication:  12 August 2005

ISSN: 1445-2782