ATO Interpretative Decision

ATO ID 2005/50 (Withdrawn)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• This ATO ID is withdrawn from the database because of amendments to the Energy Grants (Credits) Scheme Act applying after 30 June 2006.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 the use of diesel fuel to generate electricity for a school a use that qualifies for an off-road credit under paragraph 53(4)(a) of the Energy Grants (Credits) Scheme Act 2003 (EGCSA)?

Decision

No. The use of diesel fuel to generate electricity for a school is not a use that qualifies for an off-road credit under paragraph 53(4)(a) of the EGCSA.

Facts

An entity operates a school.

The entity purchases diesel fuel and uses the fuel in a generator to generate electricity for use by the school.

The generator is located at the school.

The entity does not have ready access to a commercial supply of electricity at the premises.

The entity is not carrying on a hospitality business, nor is it selling goods.

Reasons for Decision

Subsection 53(1) of the EGCSA states that, subject to such restrictions and conditions that are specified in the regulations, an entity is entitled to an off-road credit if they purchase diesel fuel for a use by it that qualifies. Paragraph 53(4)(a) of the EGCSA provides that the following is a use that qualifies:

...

(a)

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:

1.

The diesel fuel must be used at particular premises to generate electricity

2.

The electricity generated 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

3.

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

The first and third requirements are clearly satisfied.

The second requirement has two parts. Firstly, as the entity is not engaged in the retail sale of goods or the provision of hospitality, to qualify it must be engaged in the retail sale of services. Secondly, the principal purpose of the enterprise being carried on at the premises must be the retail sale of services.

The term 'retail' is not defined in the EGCSA. The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW defines the term as:

the sale of commodities to household or ultimate consumers, usually in small quantities (opposed to wholesale)...

The Australian Oxford Dictionary, 1999, Oxford University Press, Melbourne defines the term as:

the sale of goods in relatively small quantities to the public and usu. not for resale (cf wholesale).

The above definitions relate to commodities or goods and not to services. Therefore, while they have relevance in determining what constitutes the retail sale of goods, they are of little value in determining what constitutes the retail sale of services.

The meaning of the term 'retail' should be considered in the context in which it appears in the EGCSA. Paragraph 53(4)(a) of the EGCSA focuses on the enterprise conducted at particular premises. Hence, in effect, the paragraph requires those premises to be retail premises. Retail premises would commonly be viewed as being shopfronts and the like. School grounds would not be commonly considered to be retail premises. Rather they would be viewed as places of learning.

The above reasoning is supported by the inclusion within paragraph 53(4)(a) of the EGCSA of 'hospitality'. The term hospitality is defined in The Macquarie Dictionary as:

The reception and entertainment of guests or strangers with liberality and kindness.

If paragraph 53(4)(a) of the EGCSA were intended to apply to the supply of any services to end consumers, it would have been unnecessary to expressly extend entitlement to hospitality enterprises. The individuals to whom hospitality is provided can be considered final consumers. Accommodation and meals can be considered services.

Therefore, read broadly, paragraph 53(4)(a) of the EGCSA would cover the provision of hospitality without making specific reference to it. This reinforces the notion that the paragraph's focus is on the provision of services from retail premises. Examples include hairdressing and retail banking.

It is clear that paragraph 53(4)(a) of the EGCSA does not extend entitlement to all enterprises that provide services to end consumers. Rather entitlement under retail sale of services only extends to enterprises that operate in the retail sectors. Accordingly, the use of diesel fuel to generate electricity for a school is not a use that qualifies for an off-road credit under paragraph 53(4)(a) of the EGCSA.

Legislative References:
Energy Grants (Credits) Scheme Act 2003
   subsection 56(1)
   subsection 53(1)
   paragraph 53(4)(a)

Related ATO Interpretative Decisions
ATO ID 2004/643
ATO ID 2004/801

Other References:
The Australian Oxford Dictionary, 1999, Oxford University Press, Melbourne
The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW

Keywords
EGCS electricity generation
EGCS use to generate electricity
EGCS use to generate electricity as its principal purpose
EGCS use to generate electricity at a retail/hospitality enterprise

Business Line:  Excise

Date of publication:  18 February 2005

ISSN: 1445-2782