ATO Interpretative Decision

ATO ID 2008/87 (Withdrawn)

Excise

• This ATO ID is withdrawn as it is a restatement of the law and does not contain an interpretative decision.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is an entity entitled to a fuel tax credit under section 41-5 of the Fuel Tax Act 2006 (FTA) for taxable fuel it acquires for use in a refrigerated container (reefer) with an integral mechanically-driven compressor while being transported by a prime mover?

Decision

Yes. An entity is entitled to a fuel tax credit under section 41-5 of the FTA for taxable fuel it acquires for use in a reefer with an integral mechanically-driven compressor while being transported by a prime mover.

Facts

An entity operates a transport enterprise and is registered for GST.

The entity acquires taxable fuel for use in a reefer with an integral mechanically-driven compressor.

A reefer is a refrigerated container that ensures the quality of perishable goods during transportation by maintaining the desired temperature of its contents.

The reefer has its own fuel tank.

The reefer is transported on a skeletal trailer that is towed by a prime mover.

The disentitlement rules in Subdivision 41-B of the FTA do not apply.

Reasons for Decision

Section 41-5 of the FTA provides that an entity is entitled to a fuel tax credit for taxable fuel it acquires or manufactures in, or imports into Australia to the extent that it does so for use in carrying on its enterprise.

In this case, the reefer is used by the entity to transport perishable goods to the desired destination using fuel in the reefer with an integral mechanically-driven compressor. Thus, the fuel acquired by the entity is for a use in carrying on its enterprise and therefore a fuel tax credit entitlement exists.

However, items 10 and 11 of Schedule 3 to the Fuel Tax (Consequential and Transitional Provisions) Act 2006 (Fuel Tax Transitional Act) provide restrictions on entitlement to fuel tax credits for fuel acquired, manufactured or imported between 1 July 2006 and 30 June 2012. Subparagraphs 10(1)(b)(ii) and 11(1)(b)(ii) of Schedule 3 to the Fuel Tax Transitional Act provides that items 10 and 11 of Schedule 3 to the Fuel Tax Transitional Act respectively do not apply if an entity acquires, manufactures or imports fuel for use by the entity that is an incidental use (within the meaning of section 8 of the Energy Grants Credit Scheme Act 2003 [Energy Grants Act]) in relation to a vehicle travelling on a public road.

'Incidental use' in relation to a vehicle is defined in section 8 of the Energy Grants Act which states:

Each of the following, whether or not it takes place on a road, is an incidental use in relation to a vehicle: ...

(b)

powering the vehicle, or auxiliary equipment in or on the vehicle, in order to maintain the quality of the goods transported, or to be transported, in or on the vehicle; ...

The term 'auxiliary equipment' is not defined in the Energy Grants Act, and therefore takes on its common meaning having regard to the legislative context in which it is used.

The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW (Macquarie Dictionary), defines 'auxiliary' as:

1.

giving support; helping; aiding; assisting;

2.

subsidiary; additional.

The Commissioner considers the reefer to be 'auxiliary equipment' for the purposes of section 8 of the Energy Grants Act.

In terms of fuel that is used to power the reefer, there is nothing in the definition of incidental use in section 8 of the Energy Grants Act that requires the power for the auxiliary equipment on the vehicle to come from that particular vehicle. It will be sufficient if the entity has purchased the taxable fuel for incidental use.

Similarly, whether or not a use is an 'incidental use' is not necessarily affected by whether or not the vehicle is stationary at the time the use occurs.

Thus, the operation of the reefer with an integral mechanically-driven compressor falls within the definition of incidental use contained in paragraph 8(b) of the Energy Grants Act. In this case, powering the reefer on the skeletal trailer takes place in order to maintain the quality of the goods transported, or to be transported, on the skeletal trailer.

With subparagraphs 10(1)(b)(ii) and 11(1)(b)(ii) of Schedule 3 to the Fuel Tax Transitional Act satisfied, items 10 and 11 of Schedule 3 to the Fuel Tax Transitional Act respectively do not apply to restrict an entitlement available under section 41-5 of the FTA.

Thus, the entity is entitled to a fuel tax credit under section 41-5 of the FTA for the taxable fuel it acquires for use in a reefer with an integral mechanically-driven compressor while being transported by a prime mover.

Legislative References:
Fuel Tax Act 2006
   section 41-5
   sub-section 41-B

Related ATO Interpretative Decisions
ATO ID 2008/88
ATO ID 2004/745

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

Keywords
Excise
Excise offsets
FTC commercial electricity generation
FTC Full credit
FTC use to generate electricity
Fuel tax credits

Siebel/TDMS Reference Number:  5956521

Business Line:  Indirect Tax

Date of publication:  13 June 2008

ISSN: 1445-2782