ATO Interpretative Decision
ATO ID 2007/100
ExciseFuel Tax: agricultural vehicles and environmental criteria
FOI status: may be released
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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.
Is a motor vehicle that travels more than half its total kilometres on an agricultural property being used primarily on an agricultural property for the purposes of paragraph 41-25(2)(a) of the Fuel Tax Act 2006 (FTA)?
Yes. A motor vehicle that travels more than half its total kilometres on an agricultural property is being used primarily on an agricultural property for the purposes of paragraph 41-25(2)(a) of the FTA.
An entity operates a primary production business as defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997).
The entity uses a diesel tray truck with a gross vehicle mass of over 4.5 tonnes in carrying on the primary production business.
The diesel tray truck is used:
- daily to transport fertiliser, seed, produce, equipment and other goods around the agricultural property, and
- twice a week on average to transport produce on a public road to a local market which is approximately 5 kilometres away from the property.
The entity estimates that in a calendar year, 70of the total kilometres travelled by the vehicle occurred on the agricultural property.
Reasons for Decision
Paragraph 41-25(2)(a) of the FTA provides that the environmental criteria requirement in subsection 41-25(1) of the FTA does not apply to a motor vehicle:
- that is used:
- in carrying on a primary production business; and
- primarily on an agricultural property
In determining whether the motor vehicle is not required to comply with the environmental criteria of subsection 41-25(1) of the FTA the motor vehicle must meet the requirements of both subparagraphs 41-25(2)(a)(i) and 41-25(2)(a)(ii) of the FTA.
The first limb of the test is that the motor vehicle must be used in a primary production business. Section 110-5 of the FTA provides that the term 'primary production business' has the meaning given by subsection 995-1(1) of the ITAA 1997. The entity is carrying on a primary production business.
The second limb of the test is that the motor vehicle must be used 'primarily on an agricultural property'.
The term 'primarily' is not defined in the FTA. Therefore, it takes on its ordinary meaning. The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW relevantly defines 'primarily' as 'in the first place; chiefly; principally'.
The term 'primarily' was considered in Taxation Ruling TR 96/8 in relation to the deductibility of certain contributions made to school building funds. Relevantly, the TR 96/8 considered that a valid school building fund will only be present where the primary and principal use of the building is as a school or college. Paragraph 61 of TR 96/8 states that:
A building will be accepted as being primarily and principally used as a school or college if the building is used as a school or college more than 50of the time.
Judicial consideration of phrases similar to 'primarily' support the position that the term should be interpreted as 'more than half'.
For example, Fawcett Properties Ltd v. Buckingham County Council  AC 636 included a discussion of the definition of the term 'mainly' which is similar to 'primarily'. Lord Morton of Henryton stated (at 669) that it means 'more than half'.
In Taxation Ruling TR 2001/7, the Commissioner held that implicit in the word 'mainly' is that such a phrase is used to represent a percentage equating to more than half of any relevant amount.
Therefore, it is considered that the issue of whether a motor vehicle is used 'primarily' on an agricultural property should be interpreted in a quantitative sense, consistent with judicial reasoning and in a practical and commonsense manner.
When determining the primary use of a vehicle all relevant factors may be taken into consideration, including the amount of time that the vehicle is used on the agricultural property and distance travelled on and off the agricultural property. The Commissioner accepts that as long as one of these factors indicates that the motor vehicle was used primarily on an agricultural property, the test outlined in subparagraph 41-25(2)(a)(ii) of the FTA will be satisfied.
In this case the vehicle travelled more than half its total kilometres on the agricultural property. Therefore it is accepted that the vehicle was used primarily on an agricultural property for the purposes of paragraph 41-25(2)(a) of the FTA.Date of decision: 4 May 2007 Income Tax Assessment Act 1997
Fawcett Properties Ltd v. Buckingham County Council
 AC 636
ATO ID 2007/65
The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW
FTC environmental measures
FTC vehicle emissions
Fuel tax credits
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