Edited version of private ruling

Authorisation Number: 1011503750560

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Subject: Fuel tax credits

Question 1:

Are you entitled to claim a higher fuel tax credit rate on the heating oil component of the fuel you acquire?

Answer

No.

Question 2:

Are you entitled to claim a fuel tax credit, for the fuel you acquire and use in your 4 wheel drives (4WDs) that have a gross vehicle mass (GVM) of less than 4.5 tonnes, when they are travelling on public roads?

Answer

No.

Question 3:

Are you entitled to claim a fuel tax credit, at the full rate less road user charge (RUC), for the taxable fuel you acquire and use in your buses that have a GVM of greater than 4.5 tonnes, when they are travelling on public roads?

Answer

Yes. Subject to the buses satisfying one of the environmental criteria.

Question 4:

Are you entitled to claim a fuel tax credit, at the full rate, for that the fuel you acquire and use in your generators to generate electricity?

Answer

Yes.

Question 5:

Are you entitled to claim a fuel tax credit, at the full rate, for the fuel you acquire and use in your specialised vehicles and 4WDs, when they are not travelling on a public road?

Answer

No.

Question 6:

Are you entitled to claim a fuel tax credit, at the half rate, for the fuel you acquire and use in your specialised vehicles and 4WDs that undertake maintenance activities, when they are not travelling on a public road?

Answer

Yes.

Periods the ruling applies to:

2008 - 2009 income year

2009 - 2010 income year

2010 - 2011 income year

2011 - 2012 income year

Commencement date of scheme:

1 July 2008

Relevant facts and circumstances

You are registered for goods and services tax (GST).

You operate a business that is located in an area that experiences extreme temperatures.

You acquire a fuel that contains diesel and heating oil.

You provided a guide with your application. It provides tables that indicate areas where and when diesel fuel mixed with undyed heating oil may need to be used.

The heating oil is added to the diesel to lower the cloud point and prevent wax crystals separating out in the diesel and comes at a premium price.

The diesel and heating oil are combined by your fuel supplier.

The fuel is used in the following vehicles and equipment:

· diesel powered 4WDs that have a GVM less than 4.5 tonnes;

· buses that has a GVM of more than 4.5 tonnes;

· generators; and

· specialised vehicles that have a gross vehicle mass (GVM) greater than 4.5 tonnes.

Your 4WDs are used to carry tools and workers to different parts of your enterprise, with some of the travels for maintenance purposes. The 4WDs operate on roads as well as off the roads. During certain parts of the year, the 4WDs tend to remain on roads, and other times the 4WDs are used on roads and off the road to undertake the maintenance of signs and equipment.

Your buses are used to transport passengers. One of your buses was built after January 1996, with the remaining buses subject to regular in-house maintenance program. All the buses operate on public roads.

Your generators are used to generate electricity for your enterprise in case of failure of the electrical grid.

Your specialised vehicles undertake special maintenance work for your enterprise. The specialised vehicles are not used on roads and are in fact not suitable for use on roads. If required, the specialised vehicles are placed on trucks and taken to places where they can operate.

You pay the excise on the diesel and heating oil.

Relevant legislative provisions

Fuel Tax Act 2006 subdivision 41-B

Fuel Tax Act 2006 section 41-5

Fuel Tax Act 2006 section 41-20

Fuel Tax Act 2006 section 41-25

Fuel Tax Act 2006 subsection 43-5(1)

Fuel Tax Act 2006 subsection 43-5(2)

Fuel Tax Act 2006 subsection 43-5(4)

Fuel Tax Act 2006 subsection 43-10(2)

Fuel Tax Act 2006 section 110-5

Fuel Tax (Consequential and Transitional Provisions) Act 2006 Division 2 of Schedule 3

Fuel Tax (Consequential and Transitional Provisions) Act 2006 sub item 11(1) of Schedule 3

Fuel Tax (Consequential and Transitional Provisions) Act 2006 subparagraph 11(1)(b)(i) of Schedule 3

Fuel Tax (Consequential and Transitional Provisions) Act 2006 subparagraph 11(1)(b)(ii) of Schedule 3

Fuel Tax (Consequential and Transitional Provisions) Act 2006 subparagraph 11(1)(b)(iii) of Schedule 3

Fuel Tax (Consequential and Transitional Provisions) Act 2006 sub item 11(5) of Schedule 3

Fuel Tax (Consequential and Transitional Provisions) Act 2006 sub item 11(6) of Schedule 3

Energy Grants (Credits) Scheme Act 2003 section 53

Excise Tariff Act 1921 sub item 10.10 of the Schedule

Excise Tariff Act 1921 sub item 10.15 of the Schedule

Reasons for decision

Section 41-5 of the Fuel Tax Act 2006 (FTA) provides that you are entitled to a fuel tax credit for taxable fuel that you acquire in Australia to the extent that you do so for use in carrying on your enterprise if you are registered for GST. However, this entitlement is affected by Division 2 of Schedule 3 to the Fuel Tax (Consequential and Transitional Provisions) Act 2006 (FTCTPA) that operates to restrict this entitlement to specific activities for fuel purchased between 1 July 2008 and 30 June 2012, whilst retaining entitlements under the Energy Grant (Credits) Scheme Act 2003 (EGCSA).

Fuel tax

Subsection 43-5(1) of the FTA states that the amount of your fuel tax credit is the amount of 'effective fuel tax' that is payable on the fuel. Under subsection 43-5(2), the amount of 'effective fuel tax' is the 'fuel tax amount - grant or subsidy amount', and 'fuel tax amount' is the amount of 'fuel tax' that was or would be payable on the fuel at the beginning of the tax period in which the credit is attributable.

Section 110-5 of the FTA states that 'fuel tax' means duty that is payable on fuel under the Excise Act 1901 (Excise Act) and the Excise Tariff Act 1921 (the Tariff Act). Taxable fuel is also defined and means fuel in which duty is payable under the Excise Act and the Tariff Act but does not include fuel covered under certain items of the Tariff Act. However, diesel and heating oil are taxable fuels for the purposes of fuel tax credits.

The formula in subsection 43-5(2) of the FTA is affected by subsection 43-5(4) of the FTA which states that the effective tax for a taxable fuel that is a blend of more than one kind of fuel and that blend meets a fuel standard under the Fuel Quality Standards Act 2000 (FQSA) for petrol or diesel, is worked out as if the fuel were entirely that kind of petrol or diesel.

You acquire a fuel that consists of diesel and heating oil components. The heating oil is added to the diesel to lower the cloud point and prevent wax crystals separating out in the diesel.

Currently, the excise duty applied to diesel under sub item 10.10 of the Schedule to the Excise Tariff Act 1921 (the Schedule) is at $0.38143. Heating oil is classified under sub item 10.15 of the Schedule and attracts a rate of duty of $0.38143.

The guide attached to your application indicates that it is described as automotive diesel fuel. There is no indication that the blend (described as diesel fuel) meets the fuel standard for petrol or diesel under the FQSA. However, the article clarifies that the fuel is a particular type of diesel blend. As such, the fuel would be considered a blended diesel and the duty rate on a fuel that is diesel would be subject to a rate of $0.38143 as notified previously.

There is no 'higher rate' for the heating oil component of the blended diesel that you acquire for use in your enterprise. The rate of duty is the same as diesel. As explained, the effective tax for a fuel that is blended is worked out, subject it to meeting the fuel standard under the FQSA as if the fuel were entirely of the kind - petrol or diesel.

Note, if a fuel blend does meet a fuel standard, the amount of fuel tax credit is not more than the actual fuel tax paid on the fuels that make up the blend. The rate of fuel tax paid on your blend is only $0.38143 and therefore, the amount of credit is not more than that rate. However, it is necessary to determine whether the rate is reduced if it is affected by other factors, for example, the fuel is used in vehicles travelling on a public road or type of equipment and activities in which the fuel is used.

You are not entitled to claim a higher fuel tax credit rate on the heating oil component of the fuel you acquire. As a result, you will not be entitled to claim fuel tax credits at a higher rate on the heating oil for previous years.

You use fuel in vehicles travelling on public roads, in electricity generation and in other equipment. Each of these will be discussed.

Activities, vehicles and equipment

Subitem 11(1) of Schedule 3 to the FTCTPA lists a number of uses where an entitlement for fuel tax credits may effectively apply under section 41-5 of the FTA. These include:

· use in a vehicle travelling on a public road or, incidental use in relation to the vehicle, or

· use by you in generating electricity, or

· use other than as a fuel, or

· use other than as a fuel in an internal combustion engine, or

· use as a heating oil.

4WDs with a GVM less than 4.5 tonnes travelling on a public road

Section 41-20 of the FTA states that you are not entitled to a fuel tax credit if the fuel is for use in a vehicle with a GVM of 4.5 tonnes or less travelling on a public road.

You acquire a taxable fuel for your 4WDs. The 4WDs travel on public roads and have a GVM of less than 4.5 tonnes. As such, you are not entitled to a fuel tax credit for the taxable fuel you acquire and use in these vehicles when they are travelling on public roads.

Buses with a GVM greater than 4.5 tonnes travelling on a public road

Subparagraphs 11(1)(b)(i) and 11(1)(b)(ii) of Schedule 3 to the FTCTPA includes the use of taxable fuel in a vehicle travelling on a public road and for use of taxable fuel for incidental use in relation to a vehicle travelling on a public road.

However, entitlement to a fuel tax credit is also subject to the vehicle meeting one of the environmental criteria listed in section 41-25 of the FTA. The environmental criteria are:

· it is manufactured on or after 1 January 1996; or

· it is registered in an audited maintenance program that is accredited by the Transport Secretary; or

· it meets Rule 147A of the Australian Vehicle Standards Rules 1999 (the DT80 test); or

· it complies with a maintenance schedule that is endorsed by the Transport Secretary.

You acquire fuel for use in your buses that have a GVM of greater than 4.5 tonnes that travel on public roads. Therefore, provided your buses satisfy one of the above criteria, you are entitled to claim a fuel tax credit.

The amount of your fuel tax credit entitlement on the taxable fuel you acquire and use in a vehicle when travelling on a public road is subject subsection 43-10(2) of the FTA. Subsection 43-10(2) of the FTA states that the amount of your fuel tax credit for fuel is reduced by the amount of the road user charge (RUC) for the fuel.

As such, you are entitled to a full tax credit at the full rate less RUC for the taxable fuel you acquire and use in your buses that have a GVM greater than 4.5 tonnes, when travelling on a public road, if your vehicles satisfy one of the environmental criteria.

Generators (electricity generation)

Subparagraph 11(1)(b)(iii) of Schedule 3 to the FTCTPA in conjunction with section 41-5 of the FTA provides that you are entitled to a fuel tax credit for taxable fuel that is for use by you in generating electricity.

In the context of the fuel tax provisions, it is the purpose for which the fuel is acquired that is important when deciding whether it was acquired to generate electricity.

Fuel is used for the purpose of generating electricity where the electricity is an end in itself and can in turn be used for any purpose for which electricity is required. This includes fuel used in generating electricity when it is used in a generator to provide power to a business premises and/or a range of equipment. You acquire a taxable fuel for use in generators that generate electricity in case of failure of the electrical grid. As such, the fuel you use in your generators is for the purpose of generating electricity and therefore satisfies the subparagraph 11(1)(b)(iii) of Schedule 3 to the FTCTPA.

Accordingly, you are entitled to a fuel tax credit at the full rate under section 41-5 of the FTA for the fuel you acquire and use in your generators to generate electricity.

Specialised vehicles and 4WDs when not travelling on a public road

You use specialised vehicles and 4WDs to undertake various activities such as:

· special maintenance work; and

· carrying tools and workers for maintenance activities, such as maintenance of signs and equipment.

The use of your specialised vehicles, 4WDs and equipment undertaking these activities while not on a public road are not listed as activities under sub item 11(1) of the FTCTPA.

However, sub items 11(5) of Schedule 3 to the FTCTPA provides that you are entitled to a fuel tax credit under 41-5 of the FTA if you would have been entitled to an off-road credit under the EGCSA.

Section 53 of the EGCSA provides that you are entitled to an off-road credit if you purchase fuel for a use by you that qualifies.

Qualifying uses for an off-road credit include:

· use in mining operations or primary production (otherwise than for the purpose of propelling any vehicle on a public road)

· use in rail transport and marine transport (otherwise than for the purpose of propelling a road vehicle on a public road) in the course of carrying on an enterprise

· use at certain premises, e.g. hospital or nursing home

· use in certain industrial processes

· various other uses, e.g. use other than as a fuel

· certain diesel fuel for use other than in an internal combustion engine.

Your special maintenance work, maintenance of signs and equipment are not qualifying uses for an off-road credit under the EGCSA. Therefore, you would not have been entitled to an off-road credit and as such, a fuel tax credit under sub item 11(5) of the FTCTPA for fuel acquired and used in vehicles and equipment.

However, sub item 11(6) of Schedule 3 to the FTCTPA provides that from 1 July 2008, an entitlement to a fuel tax credit will arise under the FTA if you were not previously entitled to an on-road or an off-road credit. The amount of the credit is half of the amount of the full rate.

This provision is subject to the disentitlement rules of subdivision 41-B of the FTA which disallows a fuel tax credit:

· if another entity was previously entitled to the credit;

· for fuel used in vehicles with a GVM of less than 4.5 tonnes travelling on public roads;

· for fuel used in motor vehicles that do not meet environmental criteria when travelling on a public road; or

· for fuel used in aircraft.

Therefore, you are entitled to a fuel tax credit at the half rate for the acquisition and use of the taxable fuel in your specialised vehicles and 4WDs when they undertake maintenance activities, when they are not travelling on a public road.

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