Edited version of your written advice

Authorisation Number: 1013112228693

Date of advice: 15 November 2016

Ruling

Subject: Fuel Tax Credits

Question 1

Is the methodology applied by you in calculating your FTC entitlement for the purposes of section 41-5 of the Fuel Tax Act 2006 (FTA), fair and reasonable and consistent with ATO guidelines and pronouncements?

Answer

Yes

Question 2

Is the methodology applied by you in apportioning fuel used by light vehicles (vehicles with a gross vehicle mass of 4.5 tonne or less) for the purposes of section 41-20 of the FTA fair and reasonable and consistent with ATO guidelines and pronouncements?

Answer

Yes

This ruling applies for the following periods:

20XX to 30 June 20YY

The scheme commences on:

20XX

Relevant facts and circumstances

Site and operations

You have been registered for goods and services tax (GST) fuel tax credits for the duration of the relevant period.

Fuel acquisitions and storage

During the review period, you only acquired fuel for carrying out its activities from fuel supplier X.

In determining the litres purchased, you rely on invoices and delivery dockets received from fuel supplier X. You subsequently reconcile these documents to payments made for each period.

The price charged by fuel supplier X to you included the relevant excise amounts for each period.

You hold tax invoices for all fuel charged by fuel supplier X for each month of the review period.

Each tax invoice is matched to delivery dockets and purchase order numbers. The tax invoices state the volume of fuel supplied and specifies where deliveries were made. In regards to fuel delivered to the contractors, the references on the tax invoices include identifying information.

Fuel usage

Fuel is consumed in various pieces of equipment and vehicles.

Fuel disposal

You back charged fuel to Contractors A and B during the particular period.

Light Vehicles

Historically, you have excluded all fuel consumed in light vehicles. The proposed methodology for determining the FTC entitlement includes fuel consumed in light vehicles onsite and on private roads.

Fuel used in light vehicles is readily identifiable.

Light vehicles are used in an ancillary support role to operations on site. During the review period, all light vehicle activity was conducted off-road and on site, with the exception of selected travel on public roads.

In calculating the fuel consumption rate of the light vehicles on site you applied the fuel consumption rate of the vehicles per 100 kilometres.

You have identified a number of light vehicles over the review period which makes ineligible journeys.

Proposed methodology

In calculating your FTC entitlement under the proposed methodology for the relevant the following process was adopted:

● Quantification from Fuel Supplier X of the total amount of fuel acquired by you (Fuel Acquisition);

● Consideration of the extent to which the fuel was used in your business activities (Eligibility);

● Quantification of the amount of acquired fuel subsequently disposed of by you (Fuel Disposal);

● Consideration of the circumstances which may disentitle you to an FTC (Other Considerations);

● Consideration of the extent to which you have claimed FTCs for the fuel; and

● Calculation of the quantum of unclaimed FTCs and application of the relevant FTC rate to that fuel.

Under the proposed methodology, total fuel purchases have been used as the starting point for the calculation, with deductions for all ineligible fuel usage which can be positively demonstrated through your records.

Relevant legislative provisions

Fuel Tax Act 2006 Subsection 41-5(1),

Fuel Tax Act 2006 Subsection 41-20,

Fuel Tax (Consequential and Transitional Provisions) Act 2006 Subsection 11(5) of Schedule 3,

Fuel Tax (Consequential and Transitional Provisions) Act 2006 Subsection 11(6) of Schedule 3,

Energy Grants (Credits) Scheme Act 2003 Section 53 and

Energy Grants (Credits) Scheme Act 2003 Subsection 11(1).

Question 1

Summary

Taking the following matters into account, it is considered that the methodology applied by you in calculating your FTC entitlement for the purposes of section 41-5 of the Fuel Tax Act 2006 (FTA) is fair and reasonable and consistent with ATO guidelines and pronouncements.

Detailed reasoning

Subsection 41-5(1) of the FTA provides that an entity is entitled to a fuel tax credit for taxable fuel they acquire for use in their enterprise. The entity must be registered for GST at the time of acquisition of the fuel. The subsection refers to taxable fuel acquired to 'the extent that' it is acquired for the use in the enterprise.

In Fuel Tax Determination 2010/1 the Commissioner explains that the phrase 'to the extent that' in subsection 41-5(1) of the FTA indicates that the FTA contemplates the requirement to apportion taxable fuel that is acquired to uses that either disentitles an entity to an FTC or gives rise to different rates of FTC for the fuel.

Relevantly, paragraphs six and seven of FTD 2010/1 explain that the apportionment must be fair and reasonable in the circumstances. Paragraph eight of FTD 2010/1 confirms that where there is more than one fair and reasonable way of apportioning fuel, an entity may choose any method as long as it is fair and reasonable in the entity's circumstances.

In determining the extent of your FTD entitlements the following matters were taken into account:

● Fuel purchase invoices and delivery dockets were reconciled to payments made in determining fuel acquired in each period.

● It was confirmed that the fuel purchased was taxable fuel such that excise duty was included in the price of the fuel.

● The quantity of fuel back charged to contractors was identified through invoices issued by fuel supplier X and excluded from the calculation of the fuel for which an FTC entitlement was claimed.

● Fuel used in ineligible activities, such as travel on public roads by light vehicles was excluded from the calculation of the fuel for which an FTC entitlement was claimed. (See detailed reasoning regarding question two for further information).

● Reference was made to the FTC rate in force at the relevant tax period.

● The amount of FTC previously claimed was taken into account in determining if there was any additional FTC entitlement for the fuel.

In applying the proposed method of apportionment under the review, the quantity of taxable fuel was calculated by reference to the tax invoices and delivery dockets issued by fuel supplier X. As such it is reasonable to conclude that the relevant tax invoices have been relied on to determine the quantity of fuel purchased during the review period.

The quantity of fuel purchased has appropriately been reduced by the amount of fuel used in ineligible activities and back charged to contractors.

The applicable fuel tax credit rates were applied appropriately in working out the FTC entitlements.

Question 2

Summary

Taking the following matters into account, it is considered that the methodology applied by you in apportioning fuel used by light vehicles for the purposes of section 41-20 of the FTA is fair and reasonable and consistent with ATO guidelines and pronouncements.

Detailed reasoning

Subsection 11(5) of Schedule 3 to the Fuel Tax (Consequential and Transitional Provisions) Act 2006 (FTCTPA) provides that an entity is entitled to an FTC for fuel acquired prior to 1 July 2012 under section 41-5 of the FTA provided the entity would have been entitled to an off-road credit under the Energy Grants (Credits) Scheme Act 2003 (Grants Act).

Section 53 of the Grants Act provides an entitlement to an off-road credit provided an entity purchases or imports into Australia off-road diesel fuel for a use that qualifies, which includes mining operations.

Subsection 11(6) of Schedule 3 of the FTCTPA provides that from 1 July 2008, an entitlement to an FTC arises under the FTA if an entity would not have been entitled to a credit previously. 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 an FTC:

● 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 environment criteria, or

● For fuel used in aircraft.

Section 41-20 of the FTA provides that light vehicles travelling on a public road are not entitled to an FTC. As such, fuel used by light vehicles will only be eligible for an FTC to the extent that they do not travel on a public road. The concept “to the extent that” was discussed in the detailed reasoning for question 1, above, and applies equally here.

The following matters were taken into account in determining the proposed method of apportionment in relation to light vehicles is appropriate in your circumstances:

● Fuel used in light vehicles is positively identified.

● You have used the fuel consumption rates of vehicles

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