Edited version of your written advice

Authorisation Number: 1013052190885

Date of advice: 30 August 2016

Ruling

Subject: Fuel Tax Credits

Question 1

Do you have an entitlement to fuel tax credits under section 41-5 of the Fuel Tax Act 2006 (FTA) for fuel provided in subcontractor arrangements where the subcontractors provide their own plant, equipment and personnel?

Answer

Yes.

This ruling applies for the following periods:

1 August 2012 to 30 June 2013

1 July 2013 to 30 June 2014

1 July 2014 to 30 June 2015

1 July 2015 to 30 June 2016

1 July 2016 to 30 June 2017

1 July 2017 to 30 June 2018

The scheme commences on:

1 August 2012

Relevant facts and circumstances

You deliver projects across the contracting spectrum including roads, railways, tunnels, airports, buildings, social infrastructure and water, energy and resources facilities.

You are registered for Goods and Services tax (GST).

You are registered for Fuel Tax Credits (FTC).

Contract Arrangements

You have entered an agreement with another party to deliver the project. In the contractual agreement a schedule of rates provides the unit rates (exclusive of GST) for plant and equipment to be used in constructing the Project works. All rates are inclusive of:

• All on-site overheads of any kind,

• Contractor's supervision (from the level of supervisor and above),

• Site management,

• Site facilities,

• Travel, accommodation and meals,

• Site vehicles,

• Site surveys,

• Operators (where applicable),

• Fuels and consumables.

You have various arrangements in place to deliver the project:

1) You own and provide plant and equipment to be operated by your personnel.

2) You hire plant and equipment from subcontractors.

3) You contract with subcontractors to provide and operate plant and equipment with the subcontractors personnel.

You refuel all plant and equipment for the three arrangements listed above.

This ruling discusses your entitlement to FTCs in arrangements as stated in dot point 3) above.

You have provided copies of a Works Contract and Plant Hire Contract for the Project.

Fuel Acquisition

You acquire all fuel from you suppliers who issue tax invoices to you.

You make arrangements for all fuel deliveries to your own project fuel farm.

You issue fuel to all project based assets via your service truck (generally on a daily basis).

You maintain a "Master Plant Register" for all plant and equipment on site, including equipment supplied by the subcontractors. Each piece of plant/equipment is allocated an asset number on the register. The register is maintained to assist in:

• Identifying plant and equipment for safety inspections and maintenance.

• Identifying which plant and equipment is being operated by which operator.

• Identify the plant and equipment which require refuelling.

Fuel use/allocation

You are responsible for refuelling equipment - primarily through the use of your service truck. This service truck also provides fuel to subcontractor plant/vehicles and equipment on the project site.

Whilst operating in the project site, subcontractors do not have the ability to obtain fuel outside of your controls (from the service truck or the fuel farm).

Subcontractors cannot purchase fuel to remove from the site.

Fuel charge within subcontractor arrangements

You charge a fixed flat fee per litre for fuel which is specified in your contracts with the subcontractors.

Relevant legislative provisions

Fuel Tax Act 2006 Section 41-5

Fuel Tax Act 2006 Subsection 41-15(1)

Reasons for decision

Entitlement to claim

Section 41-5 of the FTA states you are entitled to a fuel tax credit (FTC)for taxable fuel that you acquire to the extent you do so for use in carrying on your enterprise, provided you were registered or required to be registered for GST at the time you acquire the fuel.

However, your entitlement to FTCs is also affected by other provisions of the FTA.

Subsection 41-15(1) of the FTA states that you are not entitled to claim an FTC if it is reasonable to conclude that another entity has previously been entitled to claim an FTC.

You acquired fuel for use in carrying on your enterprise and are registered for GST. You purchased the taxable fuel directly from fuel suppliers and provided it to subcontractors under the terms of the relevant project.

Under these circumstances we consider it reasonable to conclude that another entity would not have previously been entitled to claim a FTC.

Acquisition of the fuel

You purchase all taxable fuel to be used in the project from your suppliers. All invoices are issued to you. We consider that you have acquired the taxable fuel for the purposes of section 41-5 of the FTA.

Use in carrying on your enterprise

In Gem Plant Hire Pty Ltd ATF The Condello Family Trust and Commissioner of Taxation [2012] AATA 852 it was found that section 41-5 of the FTA is expressed in wide enough terms to contemplate use of taxable fuel by actions of another entity, so long as the use is in carrying on the enterprise of the taxpayer in question, whether or not the use might also be in carrying on another taxpayer's enterprise.

In carrying on your enterprise you have entered into an agreement to deliver the project. You have entered into subcontractor arrangements and provided your subcontractors access to your fuel to perform activities which form part of your activities in delivering the project. We consider the fuel is used in carrying on your enterprise to deliver the project.

Disposal of fuel

Paragraph 23 in FTR 2007/1¹ states:

If you acquire a right or a licence to use another entity's fuel in your plant or equipment in performing work for that entity, you do not acquire taxable fuel for the purposes of the FT Act. The mere grant of a right or licence to use the fuel does not result in you obtaining a proprietary interest in, or ownership of, the fuel.

Notwithstanding that there is a fuel charge within the arrangements between you and your subcontractors, we consider that you merely granted your subcontractors a licence to use the fuel.

Facts that indicate this is the correct treatment include:

• the fuel charge is set at a fixed flat fee per litre. There are no price changes due to fluctuating fuel prices throughout the life of the contract.

• the subcontractors do not take full ownership or control of the fuel as they are dictated by the scope of the contract as how the fuel is used i.e. this taxable fuel is only used in the provision of construction services under the contract.

• You maintain control of the fuel throughout the life of the arrangement.

• You directly refuel all plant and equipment to ensure that fuel can only be used in carrying out services you require. Subcontractors cannot purchase fuel to remove from the site.

• You maintain a Plant Asset Register for all plant/equipment on site to assist in controlling and designating the fuel.

Reasonable to conclude another entity has previously been entitled to an FTC

We do not consider that it is reasonable to conclude another entity has previously been entitled to an FTC as per subsection 41-15(1) of the FTA for the fuel used in your subcontractor arrangements for the following reasons:

• Your fuel wholesalers have sold the fuel to you and would not have an entitlement to an FTC for the fuel you acquire from them.

• You do not dispose of the fuel to your subcontractors, hence they would not have an entitlement to an FTC as they do not acquire the fuel.

Therefore, under section 41-5 of the FTA you are entitled to FTCs for the taxable fuel you acquire and provide to subcontractors (who provide their own plant, equipment and personnel) under the terms of your arrangements, as the use of this fuel is an incidental part of your enterprise and you were registered for GST at the time you acquired the fuel.

¹ FTR 2007/1 Fuel Taxation Ruling Fuel Tax: the meaning of 'acquire', 'manufacture' and 'import' in the expression 'taxable fuel that you acquire or manufacture in, or import into, Australia to the extent that you do so for use in carrying on your enterprise' in the Fuel Tax Act 2006

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