ATO Interpretative Decision

ATO ID 2006/51 (Withdrawn)

Excise

Energy Grants (Credits) Scheme: on-road - incidental use - manufacture and unloading
FOI status: may be released
Status of this decision: Decision Withdrawn 16 July 2010
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.

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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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 fuel used to conduct on-site manufacture in a vehicle and to unload the manufactured goods, integral to the operation of the vehicle under paragraphs 42(2)(b) and 42(2)(c) of the Energy Grants (Credits) Scheme Act 2003 (EGCSA)?

Decision

No. The fuel used to conduct on-site manufacture in a vehicle and to unload the manufactured goods is not integral to the operation of the vehicle under paragraphs 42(2)(b) and 42(2)(c) of the EGCSA.

Facts

An entity operates a vehicle which has a gross vehicle mass (GVM) of more than 20 tonnes.

The vehicle is fitted with auxiliary equipment to manufacture explosives and to unload the explosives by pumping.

The vehicle is also fitted with several tanks and bins to transport the ingredients/goods which are used in the manufacture. For safety reasons the manufacture is conducted at the site where the explosives are to be used.

The vehicle's engine provides power to mix the ingredients/goods in the final step of manufacture and to pump the explosive where directed.

Reasons for Decision

Section 42 of the EGCSA details the circumstances when an entity will be entitled to an on-road credit for the use of diesel or alternative fuel in a registered vehicle that has a GVM of 20 tonnes or more.

Subsection 42(1) of the EGCSA provides that a claimant is entitled to an on-road credit if they purchase on-road diesel fuel or on-road 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.

In this case, the vehicle is effectively a mobile manufacturing unit which operates (carries out the manufacture of explosives) at the place where the explosives are to be used. It is therefore not a vehicle for transporting passengers or goods under paragraph 42(2)(a) of the EGCSA.

Thus the entitlement to an on-road fuel grant is limited under paragraph 42(2)(b) of the EGCSA to the extent to which the relevant fuel is used in operating the vehicle on a road in Australia for the purpose of moving it:

(i)
to a place (whether or not on a road) where it is to operate; or
(ii)
from a place (whether or not on a road) where it has operated.

Paragraph 42(2)(c) of the EGCSA relevantly provides that entitlement includes the incidental use, or any other use, of the vehicle that is integral to operating the vehicle as mentioned in paragraphs 42(2)(b) of the EGCSA.

The use of fuel to manufacture explosives, and pump them from the vehicle, is not a use that is integral to moving the vehicle to or from the place where the manufacture of explosives is or was undertaken.

Consequently the use of the fuel is not integral to operating the vehicle as mentioned in paragraph 42(2)(b) of the EGCSA. There is no entitlement to the on-road grant for the use of the fuel.

Date of decision:  25 January 2006

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

Related ATO Interpretative Decisions
ATO ID 2004/215

Keywords
EGCS incidental use
EGCS on-road

Business Line:  Excise

Date of publication:  24 February 2006

ISSN: 1445-2782

history
  Date: Version:
  25 January 2006 Original statement
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