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Ruling

Subject: Fuel Tax Credits for petrol used in aircraft

This ruling applies for the following periods:

2012-13 income year

2013-14 income year

2014-2015 income year

The scheme commences on:

1 July 2012

Relevant facts and circumstances

You operate an aircraft business.

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

You do not use aviation gasoline (avgas) in your aircraft but a product you refer to as motor vehicle fuel or mogas.

You have stated that mogas is a term used in the aviation industry, but that the product that you acquire and purchase from service stations is unleaded petrol.

Relevant legislative provisions

Fuel Tax Act 2006 section 41-5

Fuel Tax Act 2006 subdivision 41-B

Fuel Tax Act 2006 section 41-30

Fuel Tax Act 2006 division 43

Fuel Tax Act 2006 sub-section 43-5(1)

Fuel Tax Act 2006 section 43-8

Fuel Tax Act 2006 sub-section 43-8(4)

Fuel Tax (Consequential and Transitional Provisions) Act 2006

Energy Grants (Credits) Scheme Act 2003

Question

Are you entitled to fuel tax credits at the full rate, less carbon charge for the petrol you acquire and use in your aircraft?

Answer

Yes.

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 for use in carrying on your enterprise, if you are registered for GST. However this entitlement is affected by the disentitlement rules of subdivision 41-B of the FTA which disallows a fuel tax credit:

· if another entity was previously entitled to a credit,

· for fuel used in light vehicles travelling on public roads,

· for fuel used in motor vehicles that do not meet environmental criteria, or

· for aviation fuels used in aircraft.

You utilise unleaded petrol in your aircraft acquired from service stations for use in your enterprise. The industry commonly refers to this fuel as 'mogas'.

As noted above section 41-30 of the FTA provides that there will be no entitlement to fuel tax credits for any taxable fuel acquired for use as fuel in an aircraft if the fuel was entered for home consumption for that use. Unleaded petrol acquired at a service station by you for use in your aircraft is not a fuel entered for the purpose of operating aircraft and is hence not captured by section 41-30 of the FTA. The other disentitlement rules do not apply to the use of unleaded petrol used in your aircraft.

Division 43 of the FTA provides the rules for working out your fuel tax credit where your fuel tax credit amount is worked out by the following formula:

· amount of effective fuel tax - amount of carbon reduction

Further, the amount of effective fuel tax is worked out by the following formula:

· fuel tax amount - any grant or subsidy

In addition you need to use the rate of fuel tax that applied on the day the fuel was acquired.

From 1 July 2012, entitlement for fuel tax credits is still provided for under section 41-5 of the FTA however, the previous entitlement provisions of the Energy Grants (Credits) Scheme Act 2003 (EGCSA) provided for under Part 3 of Schedule 3 to the Fuel Tax (Consequential and Transitional Provisions) Act 2006 (FTCTPA) have been repealed. Further, entitlement to fuel tax credits under the FTA is no longer affected by the FTCTPA.

These changes mean that the fuel tax credit rate increased for liquid fuels such as unleaded petrol used in those off-road activities eligible since 1 July 2008 (previously the half rate).

However, also applicable from 1 July 2012, are changes to the FTA resulting from the Clean Energy (Fuel Tax Legislation Amendment) Act 2011, some of which include:

· how the amount of your fuel tax credit for the taxable fuel is calculated, taking into account the amount of carbon reduction

· the inclusion of circumstances where the amount of carbon reduction to apply to fuels will be nil.

Subsection 43-5(1) of the FTA (as amended) provides that the amount of your fuel tax credit for taxable fuel is the amount worked out by reducing the amount of effective fuel tax by the amount of carbon reduction.

The carbon charge reduces the fuel tax credit rates for some fuel types and activities, however there are some exceptions where the carbon charge, will not apply. This includes use of taxable fuels in heavy vehicles travelling on a public road, specified off-road activities in agriculture, fishing and forestry and where fuel has been acquired for a use otherwise than by combustion.

Carbon charge amounts will increase annually, further reducing fuel tax credit rates until 30 June 2015.

Section 43-8 of the FTA provides the rules for working out the amount of carbon reduction by using the following formula:

· quality of fuel x carbon price x carbon emission rate.

The exemption from carbon reduction in subsection 43-8(4) does not apply to you because:

· you are not involved in agriculture, fishing operations or forestry

· the fuel you acquire is not used in a vehicle of more than 4.5 tonnes travelling on a public road

· the fuel you acquire is combusted.

Consequently, from 1 July 2012, you are entitled to claim fuel tax credits at the full rate, less carbon charge for the unleaded fuel you acquired for use in your aeroplanes.

Your eligible fuel tax credits from 1 July 2012 to 30 June 2015 are listed in the table below.

Fuel Tax Credits

From 1 July 2015, the carbon charge may change every six months.

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