Linfox Australia Pty Ltd and Commissioner of Taxation

[2019] AATA 222

(Decision by: Justice J Jagot, Deputy President )

Linfox Australia Pty Ltd
and Commissioner of Taxation

Tribunal:
Administrative Appeals Tribunal

Member:
Justice J Jagot, Deputy President

Legislative References:
Fuel Tax Act 2006 - 43-5; 43-10; 47-5
Taxation Administration Act 1953 - 14ZU

Case References:
Australian Hospital Care (Latrobe) Pty Ltd v Commissioner of Taxation - [2000] FCA 1509; (2000) 105 FCR 20
Cajkusic and Others v Commissioner of Taxation - [2006] FCAFC 164; (2006) 155 FCR 430
Hazelwood Power Partnership v Latrobe City Council - [2016] VSCA 129; (2016) 218 LGERA 1
Newington v Windeyer - (1985) 3 NSWLR 555
Re Linfox Australia Pty Ltd and Federal Commissioner of Taxation - [2012] AATA 517; (2012) 89 ATR 931
Statewide Roads Ltd v Holroyd City Council - (1996) 39 NSWLR 115
Szajntop v Commissioner of Taxation - (1993) 42 FCR 318

Other References:
Explanatory Memorandum to the Fuel Tax Bill 2006 and Fuel Tax (Consequential and Transitional Provisions) Bill 2006
Explanatory Memorandum in relation to the Road Charges Legislation Repeal and Amendment Act 2008

Hearing date: 29 - 30 January 2019
Decision date: 22 February 2019

Sydney


Decision by:
Justice J Jagot, Deputy President

THE ISSUES

1. In this matter four issues concerning the Fuel Tax Act 2006 (Cth) (the FTA) must be resolved. The issues are:

1)
whether the road user charge in s 43-10 of the FTA applies to fuel acquired for use in a vehicle for travelling on certain toll roads, the M2 Motorway, the Go Between Bridge, Eastlink, and the Sydney Harbour Tunnel;
2)
whether the road user charge in s 43-10 of the FTA applies to fuel acquired for use in powering air conditioning units in the heavy vehicles in the applicant's fleet;
3)
whether, as a result of the operation of s 47-5 of the FTA, the applicant has ceased to be entitled to certain fuel tax credits; and
4)
whether the applicant's objection was effective for the period ended 30 July 2012.

2. No primary facts are in dispute. The parties also agreed how the proceedings should be conducted as set out in a letter dated 9 January 2019. A copy of that letter is attachment 1 to these reasons for judgment.

3. The parties filed extensive written submissions. The length of these reasons for decision does not reflect the detail of those written submissions. This is not to say that the issues are straightforward. They are not. Issues of statutory construction are often difficult and reasonable minds may reach different conclusions about the preferable construction of a statute. I do not propose, however, to address arguments that are immaterial or of marginal weight to my primary conclusions. As will become apparent, all facts relevant to the various alternative arguments of the parties are agreed so there is also no need for me to find or recite at length the facts (or deal with the alternative arguments given that I accept two of the primary arguments for the respondent in respect of issues (1) and (2) respectively and two of the primary arguments for the applicant in respect of issues (3) and (4) respectively).

4. My conclusions in the present case are:

1)
the road user charge in s 43-10 of the FTA applies to fuel acquired for use in a vehicle for travelling on the toll roads;
2)
the road user charge in s 43-10 of the FTA applies to fuel acquired for use in powering air conditioning units in the heavy vehicles in the applicant's fleet;
3)
the applicant has not ceased to be entitled to certain fuel tax credits as a result of the operation of s 47-5 of the FTA; and
4)
the applicant's objection was valid when lodged and thus for the period ended 30 July 2012.

THE STATUTORY SCHEME

5. By s 2-1 the FTA:


provides a single system of fuel tax credits. Fuel tax credits are paid to reduce the incidence of fuel tax levied on taxable fuels, ensuring that, generally, fuel tax is effectively only applied to:

(a)
fuel used in private vehicles and for certain other private purposes; and
(b)
fuel used on-road in light vehicles for business purposes.

6. The Dictionary in s 110-5 defines certain terms including the following:


fuel tax credit means an entitlement arising under section 41-5, 41-10 or 42-5.

motor vehicle has the meaning given by section 995-1 of the Income Tax Assessment Act 1997.

taxable fuel means:

(a)
fuel in respect of which duty is payable under:

(i)
the Excise Act 1901 and the Excise Tariff Act 1921; or
(ii)
the Customs Act 1901 and the Customs Tariff Act 1995; or

7. By s 105-1 Guides form part of the FTA but s 105-10(2) provides that a Guide may only be considered in interpreting an operative provision to determine the purpose or object underlying the provision, confirm the ordinary meaning of the text, determine the meaning if the provision is ambiguous or obscure or determine the provision's meaning if the ordinary meaning is manifestly absurd or unreasonable.

8. By s 40-5(1) the object of Ch 3 (Fuel tax credits) of the FTA is to:


provide a single system of fuel tax credits to ensure that, generally, fuel tax is effectively only applied to:

(a)
fuel used in private vehicles and for certain other private purposes; and
(b)
fuel used on-road in light vehicles for business purposes.

9. Section 41-5 is the source of any entitlement to a fuel tax credit the applicant may hold. Section 41-5(1) says:


You are entitled to a fuel tax credit for 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.

10. It is common ground that the applicant acquired taxable fuel for use in carrying on its enterprise (a trucking business). It is also common ground that none of the disentitling provisions in Subdiv 41B apply but one of those provisions is material given its terms. The material provision is s 41-20 which says:


You are not entitled to a fuel tax credit for taxable fuel to the extent that you acquire, manufacture or import the fuel for use in a vehicle with a gross vehicle mass of 4.5 tonnes or less travelling on a public road.

11. Division 43 is central. By s 43-5(1) the "amount of your fuel tax credit for taxable fuel (other than a fuel tax credit to which you are entitled under Division 42A) is the amount (but not below nil) worked out using" a specified formula referring to the "amount of *effective fuel tax" as an integer. By s 43-5(2) the amount of effective fuel tax that is payable on the fuel is the amount worked out by another formula referring to fuel tax amount as an integer. The fuel tax amount is defined as the "amount of fuel tax that was or would be payable on the fuel at the rate in force on the day worked out using the table in subsection (2A)".

12. Section 43-10 is the key provision for issues (1) and (2). It provides:


1A This section applies to taxable fuel other than fuel that you acquire, manufacture or import for use in aircraft.

...

3 To the extent that you acquire, manufacture or import taxable fuel to use, in a vehicle, for travelling on a public road, the *amount of your fuel tax credit for the fuel is reduced by the amount of the road user charge for the fuel.

4 However, the *amount is not reduced under subsection (3) if the vehicle's travel on a public road is incidental to the vehicle's main use.

...

7 The *amount of road user charge for taxable fuel is worked out using the following rate:

(a)
if no rate has been determined by the *Transport Minister - 21 cents for each litre of the fuel;
(b)
otherwise - the rate determined by the Transport Minister.


8 For the purposes of subsection (7), the *Transport Minister may determine, by legislative instrument, the rate of the road user charge.

9 Before the *Transport Minister determines an increased rate of road user charge, the Transport Minister must:

(a)
make the following publicly available for at least 60 days:

(i)
the proposed increased rate of road user charge;
(ii)
any information that was relied on in determining the proposed increased rate; and

(b)
consider any comments received, within the period specified by the Transport Minister, from the public in relation to the proposed increased rate.


10 However, the *Transport Minister may, as a result of considering any comments received from the public in accordance with subsection (9), determine a rate of road user charge that is different from the proposed rate that was made publicly available without making that different rate publicly available in accordance with that subsection.

11 In determining the *road user charge, the *Transport Minister must not apply a method for indexing the charge.

12 The *Transport Minister must not make more than one determination in a financial year if the effect of the determination would be to increase the *road user charge more than once in that financial year.

13. Division 44 concerns increasing and decreasing fuel tax credits, in effect, acknowledging that fuel may be acquired for one purpose and not used for that purpose, enabling adjustments to be made as necessary.

14. Division 47 is headed "Time limit on entitlements to fuel tax credits". Section 47-1, the Guide (and thus subject to s 105-10(2)), is in these terms:


Your entitlements to fuel tax credits cease unless they are included in your assessed net fuel amounts within a limited period (generally 4 years).

However, this time limit does not apply in certain limited cases.

15. Issue (3) concerns s 47-5(1) of the FTA as follows:


You cease to be entitled to a fuel tax credit to the extent that it has not been taken into account, in an *assessment of a *net fuel amount of yours, during the period of 4 years after the day on which you were required to give to the Commissioner a return for the tax period or fuel tax return period to which the fuel tax credit would be attributable under subsection 65-5(1), (2) or (3).

16. Chapter 4 concerns common rules including for net fuel amounts. By s 60-5 your net fuel amount is worked out using a formula referring to total fuel tax credits which is defined to mean "the sum of all fuel tax credits to which you are entitled that are attributable to the period". Part 4-2 of Ch 4 concerns the attribution rules for attribution of credits to tax periods.

Issue (1) - toll roads

17. The nub of the issue between the parties is this - the applicant contends that the toll roads are not "a public road" within the meaning of the FTA and, in particular, s 43-10(3) while the respondent contends that those toll roads are "a public road" within the meaning of the FTA including s 43-10(3).

18. As noted, the facts are not in dispute. The respondent provided an appendix to its submissions identifying the relevant facts relating to each toll road. The applicant agreed that the appendix was an accurate factual summary of what must be extensive contractual and related documents concerning the construction, operation, maintenance and other legal arrangements applying to each of the toll roads. The appendix is attachment 2 to these reasons for decision.

19. For my purposes it is sufficient to record the following, adopted from the competing submissions:

1)
the object of the existence of the toll roads is for the public to use them;
2)
because the construction and/or operation of the toll roads involved some form of "public-private partnership", this object is achieved through contractual arrangements by which the road is to be kept open for use by the public;
3)
by this means, the public is generally entitled as of right to use the toll roads;
4)
by the same contractual arrangements and other arrangements which vary between toll roads, persons using the roads become subject to an obligation to pay a toll to the operator of the toll road, the obligation being enforceable by various means;
5)
the toll road operator's purpose in operating the toll roads is to make a profit; and
6)
by the contractual arrangements, the operator of the toll road is responsible for the costs of maintaining the roads for the duration of the operator's right of operation (generally commensurate with the term of the leasehold and/or other legal interests in the land on which the road is located vested in the operator), following which the roads revert to be the responsibility of one or more government entities.

20. The applicant's position is this. The toll roads are operated by a private entity for profit and are maintained by that private entity. In the context of s 43-10(3) of the FTA, in particular the function of the road user charge in that provision, the toll roads are not "public roads".

21. The respondent's position is this. "Public roads" must take the same meaning throughout the FTA. In the context of the FTA as a whole it is apparent that any road which the public may generally access as of right is a public road within the meaning of the FTA. The fact that on exercising that general right of access an obligation to pay a toll arises does not lead to a different conclusion. Nor does the fact that the toll is paid to a private operator who is responsible for the costs of maintaining the road during the period of the operator's relevant rights lead to a different conclusion as the determinative criterion of a public road, for the purpose of the FTA, is that the road be generally accessible to the public as of right, which these roads are.

22. The parties accepted that the phrase "public road" and, indeed, "public", did not have any fixed meaning, but would take meaning from context. The parties each referred to numerous cases, all in different contexts, in which the qualifier "public" has been given different meanings by reference to various indicia, including the principal matters on which the parties relied for their competing arguments and more: for example, Hazelwood Power Partnership v Latrobe City Council [2016] VSCA 129; (2016) 218 LGERA 1, Australian Hospital Care (Latrobe) Pty Ltd v Commissioner of Taxation [2000] FCA 1509; (2000) 105 FCR 20, and Statewide Roads Ltd v Holroyd City Council (1996) 39 NSWLR 115.

23. Given the specific context of the FTA, it is not apparent to me that the indicia found to be determinative in the many cases to which the parties referred are apt to determine the present case. Nor do I accept that concepts relating to the dedication of a public road at common law are material. Roads in Australia have long since been regulated by statute: for example, Newington v Windeyer (1985) 3 NSWLR 555. Nothing in the FTA suggests that common law notions of a road dedicated to the public have any role to play in the construction of the phrase "public road" in the FTA. The same conclusion must apply to the many different statutes which contain definitions of "public road". Those definitions operate for the purpose of the specific statute. There is no definition of "public road" in the FTA.

24. It follows that the orthodox approach of construing the term "public road" in the context of the FTA as a whole should be adopted. The term appears in a number of provisions of the FTA, including ss 41-10(4)(a), 41-20, 41-25(2)(c), 43-8(4)(c), and 43-10(4). Each party contended that the various uses support their inconsistent positions about the preferred meaning of the term.

25. The essence of the applicant's argument is that because the purpose of s 43-10(3) is to reduce the fuel tax credit by the amount of the road user charge, "public road" is to be understood in the context of the road user charge. A logical inference from this is that a public road is one maintained at public expense, as it is the public cost of maintaining roads used by heavy vehicles which provides the logical connection between the use and the charge. The applicant submitted that this was supported by the exclusion of incidental travel on a public road in s 43-10(4). Further, s 43-10(7)-(12), concerning the determination of the road user charge by the Transport Minister, is consistent with this need for maintenance at public expense.

26. In support of this position the applicant called in aid the decision in Re Linfox Australia Pty Ltd and Federal Commissioner of Taxation [2012] AATA 517; (2012) 89 ATR 931 (Linfox [2012]) at [49] that the "purpose of the road user charge is to recover part of the cost of road construction and maintenance costs attributable to heavy vehicles (that is, those with a gross vehicle mass of more than 4.5 tonnes), with the remainder of the costs attributed to heavy vehicles being recovered through registration charges". The applicant also called in aid the legislative history of fuel tax regimes, the Explanatory Memorandum to the Fuel Tax Bill 2006 (Cth) and Fuel Tax (Consequential and Transitional Provisions) Bill 2006 (Cth), the Explanatory Memorandum in relation to the Road Charges Legislation Repeal and Amendment Act 2008 (Cth) which introduced s 43-10(7)-(12), the related second reading speech, and documents and determinations of the National Transport Commission as referred to in the Explanatory Memorandum and second reading speech. Suffice to say that these documents refer to concepts such as the road user charge being set in accordance with the National Transport Commission's heavy vehicle charging determination process, heavy vehicles paying their fair share of road construction and maintenance costs (and no more), and, in the National Transport Commission's documents, toll roads being excluded from the expenditure calculation by the National Transport Commission to avoid double counting in accounting for heavy vehicles paying their fair share of road construction and maintenance costs. As the applicant put it, all of this shows that the purpose of the road user charge was to "reimburse the public purse for road expenditure occasioned by the damage caused by heavy vehicles to roads not already financed through tolls". Otherwise, heavy vehicles would be paying twice, once through the toll and once because of the road user charge.

27. These considerations lend some weight to the applicant's preferred construction. Ultimately, however, I am not persuaded by the applicant's approach because it is the legislation which must be construed. The process of construction must be in the context of the legislation as a whole and the circumstances in which it operates but the text cannot be ignored or some other text substituted. The road user charge is to be as determined by the Transport Minister and, if not so determined, is the rate specified: s 43-10(7). The rate is determined by legislative instrument: s 43-10(8). While there are some procedural and substantive constraints on the Transport Minister, the power is not confined to the determination of a charge to recover the costs of road construction and maintenance. No doubt the power is not unconfined, but nothing in the text of the provision or the FTA as a whole suggests that the power is available for governments (be they the Commonwealth, State, Territory or local) to recover only the costs to them of the construction and maintenance of roads. It may be accepted that this object, for governments to recover the cost of construction and maintenance of roads, lies at the centre of the determination-making power. But the applicant's approach involves assuming that this object, in effect, exhausts the entire scope of the power. It is this confining of the power which I am unable to accept. On this basis, while the logical connection between heavy vehicle use and recouping the cost to government of road construction and maintenance is plain, nothing suggests that it exhausts the scope of the power. Once this is accepted, there is no sound reason for concluding that the exclusory indicia on which the applicant relied (the road being operated for private profit and the private operator being responsible for maintenance costs during the term of the operator's rights) are decisive.

28. Similarly, what should be recognised is that it is unsurprising that the extrinsic material (if all of it be such) on which the applicant relies should focus on current practices and the fact that recoupment of road construction and maintenance costs has been central to those practices. It may also be accepted that it was anticipated that the road user charge under the FTA would be set in accordance with the National Transport Commission's determination process. These, however, are all policy statements. They are not irrelevant, but they cannot be substituted for the text of the FTA which makes no reference to the National Transport Commission's determination process and vests in the Transport Minister a broad power to determine a road user charge. That power should not be confined in the way the applicant's case would require, to a power to permit nothing more than government recouping the cost to it of constructing and maintaining roads. This should not be done because nothing in the text or context supports such a constraint on the scope of the power. The power permits more than this; what that more may be is confined only by the express provisions of the statute (s 43-10(9)-(12)) and by necessary implication from the scope, purpose and objects of the Act as a whole.

29. On this basis there is insufficient justification from the statutory text, construed in context, to understand "public road" to mean a road for which government is responsible for construction and maintenance costs or a road which is not operated with the object of yielding profit to a private entity.

30. Construed in the context of the FTA as a whole, I consider that a broader meaning of "public road" is to be preferred. First, the meaning should reflect the breadth of the determination making power of the Transport Minister. Second, the meaning should operate sensibly for all provisions. Take ss 43-10(3) and (4) as an example. If a public road excludes privately operated toll roads such as the four examples in the present case then the exclusion in s 43-10(4) becomes fraught. The "public road" travel required to be incidental to the vehicle's main use would exclude travel on private toll roads. Section 41-20 is another example. This is intended to be a disentitling provision for vehicles under 4.5 tonnes. Yet if public road does not include a privately operated toll road then travel by such a vehicle on such a road would not be subject to the disentitlement. To put it another way, a vehicle under 4.5 tonnes travelling on a private toll road would be entitled to a fuel tax credit for such travel when, by s 2-1(b), it is apparent that fuel tax is to be applied to "fuel used on-road in light vehicles for business purposes". Contrary to the applicant's arguments, this reference (and others) to "on-road" indicates that "public road" takes a meaning consistent with the respondent's proposed construction of roads generally accessible as of right to the public.

31. This meaning also accords with the breadth of the power of the Transport Minister to make a determination of a road user charge. That is, the road user charge is deducted from fuel tax credits relating to travelling on a public road. I am unable to accept that by necessary implication this power is confined to roads for which government must pay the costs of construction and maintenance and which are not operated for any element of private profit. The criterion which the respondent proposes, that a public road is one on which members of the public are generally entitled as of right to travel, accords with the breadth of the power of the Transport Minister, enables the provisions of the FTA as a whole to operate harmoniously, and, to my mind, involves no manifest absurdity or unreasonableness. Take the applicant's example of double counting for example. The applicant's point is that it makes no sense for a heavy vehicle to have to pay a toll from which the operator of the toll road must maintain the road and to also be liable to a road user charge to be used to maintain the road. Again, this approach assumes that the limits of the road user charge are set by the costs of constructing and maintaining roads. I accept that these considerations may be at the centre of the power, but not that they fix the limits of the power to determine a road user charge. It is not difficult to conceive of other external costs generated by heavy vehicles using roads which the public is generally entitled to access as of right. It is apparent that the National Transport Commission itself is well aware of those issues and the difficult policy questions to which they give rise. The relevant point for present purposes is that nothing in the FTA indicates that the criteria proposed by the applicant for the determination of a road user charge limit the exercise of the power and thus confine the meaning of "public road" within the FTA. It may also be noted that it is well known that there are public toll roads. I raised with the applicant the Sydney Harbour Bridge which is generally understood to be a tolled public road with the toll being paid to government not a private entity. Would it not be "double counting" for a heavy vehicle to pay that toll and yet also be liable to the road user charge on the applicant's approach? This suggests the double counting issue is a distraction because government constructed and maintained roads may also be tolled.

32. The respondent's construction also has the merit of making practical commercial sense. A road either is or is not one which the public is generally entitled to travel on as a matter of right, even if the exercise of the right gives rise to an obligation to pay a toll or the right is only exercisable on paying a toll. Provided the latter conditions themselves apply generally, so no member of the public who wishes to travel on the road (consistent with generally applying legal requirements) is prevented from satisfying the obligation or condition, it may be said that the public can generally use the road as of right. In most if not all cases these matters will be apparent to the heavy vehicle driver by the fact of travelling on the road and no more. No further inquiry will need to be made. On the applicant's approach, however, the heavy vehicle driver must obtain copies of and delve into the interstices of enormously complex contractual documents to ascertain the details of the public-private partnership by which the road was constructed, is operated and is maintained. A construction which avoids this impracticality, which is of a different order from the fact that the driver or driver's company must keep records of fuel acquisitions and use for the FTA to function, is to be preferred.

33. In the case of the toll roads in question, the M2 Motorway, the Go Between Bridge, Eastlink, and the Sydney Harbour Tunnel, there is no question that they are generally accessible to the public. They are fully integrated into the overall public road system presumably in order to ensure public accessibility, albeit subject to the obligation or condition of paying the toll. In my view, for the reasons given, this is sufficient to make them public roads within the meaning of the FTA. As a result, it is unnecessary to discuss the various alternative arguments, none of which I find persuasive. Issue (1) should be resolved in the respondent's favour.

Issue (2) - air conditioning units

34. Again, the facts are not in dispute. The applicant has a fleet of heavy vehicles. Those vehicles have air conditioning available in the driver's cabin. To power an air conditioning unit the engine needs to deliver extra torque to it, using more fuel than it would do otherwise. Some drivers use air conditioning and some do not, and some use it at different times depending on the circumstances. As a result, the same trip along a public road may use more or less fuel as a result of the use of air conditioning or not.

35. The parties also agree this. Section 43-10(3) requires the fuel to be acquired to use in a vehicle and the fuel to be acquired for travelling on a public road. The dispute is about the meaning of "for travelling on a public road". As with many such disputes, the issue between the parties is the level of generality or specificity which should be applied to give the phrase meaning.

36. The applicant bases its approach, that fuel used to power the air conditioning units in the driver's cabins is not fuel acquired "for travelling on a public road", on reasoning supported by Linfox [2012]. In that case the Tribunal held that the fuel acquired to power the refrigeration trailers on the back of trucks (which were powered by a diesel unit separate from the engine) was not fuel acquired for travelling on a public road. I say nothing about the result in that case. Given the competing submissions of the parties, however, it is necessary to say this:

1)
As noted, the parties agreed (and I accept that) the Tribunal in Linfox [2012] must be correct at [31] that there are two relevant conditions - "first, the fuel must be acquired to use in a vehicle; and secondly, the fuel must be acquired to use for travelling on a public road".
2)
I agree with the observations at [33]-[34] that the word "for" in the phrase "for travelling on a public road" means for the purpose of travelling on a public road.
3)
As to [36] of the Tribunal's reasons, I agree that there is a difference between fuel acquired to use "for travelling" on a public road from fuel acquired to use in, while or in the course of travelling on a public road, but it seems to me that the difference is that the first concept, "for travelling", is broader than and thus encompasses the other concepts of, "in, while or in the course of travelling on a public road". As a result, I am unable to agree with the Tribunal at [43] that comparing s 43-10(3) and s 41-20 (which says acquire fuel for use in a vehicle travelling on a public road) discloses an intention to "narrow the reach of" s 43-10(3) compared to s 41-20. I would reach the opposite conclusion that, if anything the reach of 'for travelling" in 43-10(3) is broader than "travelling" in s 41-20.
4)
Otherwise, for the reasons already given above I am unable to agree that a purpose, even a central purpose, of the road user charge, "to recover part of the cost of road construction and maintenance costs attributable to heavy vehicles" (at [49]) is a legitimate reason to confine the meaning of expressions used in the statute beyond that apparent from the text read in context.
5)
As a result, I am unable to agree with the Tribunal at [43] that "for travelling on a public road" is confined to the meaning of propelling a vehicle on a public road.
6)
I also would not confine "travelling on a public road" in s 41-20 to such a meaning.

37. The primary meaning of "travel" is "to go from one place to another; make a journey": Macquarie Dictionary, Online Edition. In the act of a heavy vehicle going from one place to another on a public road there is more than mere propulsion involved. The vehicle does not travel merely by the engine propelling the wheels. It travels, and can travel, because it has a driver controlling the steering, headlights, indicators, windscreen wipers, brakes, and air conditioning to ensure the driver can remain comfortable. In my view, fuel acquired for use in a vehicle for all these purposes is fuel "for travelling". As I do not accept the limitation of mere propulsion, I see nothing anomalous in the fact that two heavy vehicles may make the same journey and use the same amount of fuel for mere propulsion but different amounts of fuel due to the use of air conditioning by one driver and not the other. This is still fuel acquired "for travelling". To my mind, it is the applicant's approach which unjustifiably parses the statutory language by dividing the concept of fuel acquired to use in a vehicle for travelling on a public road into fuel used for propulsion in contrast to fuel used for other operations all of which are part of the going from one place to another.

38. I accept that the relevant qualification is "for travelling on a public road". The respondent made submissions directed to the question of acts preliminary to travelling on a public road, such as carrying out a safety check with the engine idling on a private road, for instance, within an industrial site or complex. I do not propose to say anything about this issue because it does not directly arise in this matter and could only be resolved on particular facts and circumstances. Any observations I make about preliminary activities on private roads or internal driveways would be liable to misuse. What does directly arise in the present case is whether fuel used in air conditioning the driver's cabin on the journey along a public road is within s 43-10(3) and in my view it is. Issue (2) should also be resolved in favour of the respondent.

Issue (3) - cessation of entitlement

39. Section 47-5(1), set out above, is repeated here for convenience:


You cease to be entitled to a fuel tax credit to the extent that it has not been taken into account, in an *assessment of a *net fuel amount of yours, during the period of 4 years after the day on which you were required to give to the Commissioner a return for the tax period or fuel tax return period to which the fuel tax credit would be attributable under subsection 65-5(1), (2) or (3).

40. The respondent's case is that the applicant has ceased to be entitled to fuel tax credits for each credit, in effect, not quantified in an assessment within the specified four year period. As the respondent put it at paras [163]-[164] of its submissions:


An "assessment" has, by s 110-5, the meaning given in the Income Tax Assessment Act 1997 (the 1997 Act ), which by s 995-1 relevantly provides that "assessment ... of an *assessable amount, means an ascertainment of the assessable amount".The term "assessable amount" is defined by s 995-1(1) of the 1997 Act and has the meaning given by s 155-5(2) of Schedule 1 to the Taxation Administration Act 1953, and includes "a *net fuel amount".

This means that s 47-5 of the Fuel Tax Act, in referring to an "*assessment of a *net fuel amount", requires there to have been an ascertainment of the entity's net fuel amount, which, given the formula set out above, includes ascertaining the fuel tax credits an entity is entitled to.

41. The contrary argument, proposed by the applicant, is that s 47-5 extinguishes only the capacity to claim an entitlement to a fuel tax credit, and does not affect the resolution of an existing dispute about the quantum of a claimed fuel tax credit. The respondent rejected that argument for a number of reasons including:

1)
Section 47-5(1) operates "to the extent that" the credit has not been taken into account which indicates that the part taken into account in an assessment survives and the part not taken into account in the assessment expires. The section apportions the continued substantive entitlement.
2)
The applicant's attempt to distinguish between the entitlement to the credit and the amount of the credit is false. The entitlement is to a particular amount.
3)
In its returns, which became deemed assessments, the applicant reduced its entitlement by applying the road user charge (excluding only diesel used to keep trailers refrigerated). As the respondent put it at para [170] of its submissions:

The result is that the part of the fuel tax credit that the taxpayer now says is available to it (namely, the amount of the road user charge which it did not take into account) was not taken into account in reaching the net fuel amount the taxpayer recorded in its activity statement (and which became a deemed assessment). It must follow that that part of the fuel tax credit was not "taken into account in an assessment of a net fuel amount" within s 47-5.
4)
In other words, the applicant did not "take into account" the fuel tax credits it now claims in its returns and thus did not do so in any assessment - which is why s 47-5 is engaged.
5)
This approach, the respondent said at para [171] of its submissions:

[i]s consistent with the purpose recorded in the explanatory memorandum for the introduction of s 47-5. Prior to the introduction of the provision there was "no effective limitation period for claiming ... fuel tax credits": paragraph [1.7], set out at AS [220]. While the former regime gave taxpayers flexibility and minimised the need for revisions to prior returns, it was seen to be "important to balance certainty and consistency generally for GST and fuel tax credits by limiting the time for revising liabilities and entitlements": memorandum at [1.8] (see AS [220]). Further, the memorandum for the Indirect Tax Laws Amendment (Assessment) Bill 2012, as a result of which s 47-5 was amended, explains that Division 47 was enacted "to provide finality": at [1.123].
6)
This approach does not give rise to an incontestable tax or absurd results as taxpayers have other options available to prevent the expiration of credits including lodging an objection to the deemed assessment under Pt IVC of the Taxation Administration Act 1953 (Cth) (the TAA 1953) or applying to amend the assessment: s 155-45 of Sch 1 to the TAA 1953. There is also the option of the Commissioner making a determination under s 60-10 of the FTA.

42. The applicant submitted that the respondent's approach read s 47-5 in isolation from its broader context. According to the applicant:

1)
The section operates against a background in which, but for the section, a taxpayer could claim an entitlement to a fuel tax credit for any historical acquisition of fuel indefinitely. The section is not concerned with the amount of any credit but the taking into account of any entitlement to a credit within the time limit specified.
2)
Read in the context of the tax law as a whole, including PT IVC of the TAA 1953, it is apparent that the section is not concerned with the quantification of fuel tax credits which have been taken into account in an assessment of a net fuel amount. If it were otherwise the substantive entitlement might be extinguished before an objection or appeal as to quantum has been determined. There is no justification for this interpretation of the provision which provides finality in respect of claiming fuel tax credits for historical acquisitions of fuel, not finality by extinguishing an entitlement which has been claimed.
3)
In the applicant's words at para [232] of its submissions:

there is nothing in the text, context or purpose of s 47-5 of the FTA to suggest that, where a taxpayer has engaged their rights under Part IVC of the TAA to challenge an assessment of net fuel amount, the section operates so as to deprive a taxpayer of those rights and to override the important constitutional protection accorded by Part IVC, including the provisions ins 14ZZL and 14ZZQ. Indeed, it would lead to absurd results if s 47-5 of the FTA operated to deny a taxpayer any relief in the nature of a refund after a four-year period had elapsed, notwithstanding Part IVC proceedings being on foot. If the legislation applied in that way, a taxpayer would be faced with the invidious decision as to whether to:

a.
lodge their return such as to claim a particular net fuel amount on the basis of the correctness of an argument that remained untested in the courts, and in that event risk being exposed to penalties and interest lest that argument ultimately be rejected by the courts; or
b.
lodge their return on a more conservative basis, that is predicated on a lesser entitlement than that which is claimed by them under Part IVC, and in that event risk that any ultimate vindication of their claimed entitlement by an appellate court will be illusory by reason of the passage of time, barring them from obtaining any practical relief.

43. These competing submissions involve an issue of both construction and fact. One of the construction issues is, what does a "fuel tax credit" which has "not been taken into account in an assessment of a net fuel amount of yours" mean? The respondent would have it that, having regard to the terms of ss 47-5 and 60-5, this means the net fuel amount has not been quantified in an assessment. In the scheme of the FTA as a whole, which permits adjustments (Div 44) and attributions to tax periods (Div 65), I find this prospect unlikely. It may be accepted that in its returns the applicant applied the whole of the road user charge to its fuel tax credits excluding the fuel used to refrigerate trailers, but I do not see how this means the fuel tax credit for the net fuel amount was not "taken into account" in the deemed assessments. It was taken into account as a relevant integer. And it is against that taking into account which the applicant objected.

44. On this basis, the applicant's construction is to be preferred. Provided the historical acquisition of fuel and a claimed associated fuel tax credit is taken into account in the assessment, whether or not the net fuel amount is itself quantified in the assessment, s 47-5(1) is not engaged. An acquisition may be "taken into account" in a variety of ways. The way the applicant in the present case took the claimed associated fuel tax credit into account was to deduct from it the road user charge assuming that only the fuel used to air condition trailers was not to be included in that charge. The assessment nevertheless took into account the fuel tax credits, enabling the applicant to adopt the path it did - to lodge an objection to the assessment.

45. For these reasons issue (3) should be resolved in the applicant's favour.

Issue (4) - valid objection?

46. As the applicant explained at paras [234]-[235] of its submissions:


Pursuant to s 14ZW(l)(bg) and s 155-35(2)(a) of Schedule 1 to the TAA, any objection to the assessment of net fuel amount for the tax period ended 31 July 2012 was to be lodged within 4 years of the date of the assessment concerned; that is, by 21 August 2016 (noting that the Applicant's 31 July 2012 BAS/fuel tax return was lodged on 21 August 2012, which was the date of the deemed assessment of net fuel amount under s 155-15 of Schedule 1 to the TAA).101

The Commissioner accepts that a valid objection was lodged on 7 September 2016, in relation to the tax periods in issue ranging from l August 2012 to 30 June 2016, when the supplementary submission in support of its objection at T5-62 as provided: Respondent's SFIC at [29.2].However, the Commissioner contends that there was no valid objection lodged within time, for the tax period ended 31 July 2012, as the grounds stated in the Objection dated 19 August 2016 did not meet the requirements of s 14ZU(c) of the TAA

47. Section 14ZU of the TAA 1953 provides that:


A person making a taxation objection must:

(a)
make it in the approved form; and
(b)
lodge it with the Commissioner within the period set out in section 14ZW; and
(c)
state in it, fully and in detail, the grounds that the person relies on.

48. The basic requirement is that the Commissioner's attention must be directed to the respects in which the taxpayer contends the assessment is erroneous and the reasons for this contention: Cajkusic and Others v Commissioner of Taxation [2006] FCAFC 164; (2006) 155 FCR 430 at [17] citing HR Lancey Shipping Co Pty Ltd v Commissioner of Taxation (1951) 9 ATD 267 at 273. Whether an objection is sufficient for this purpose is to be decided in the particular factual context including by reference to information otherwise available to the Commissioner: Szajntop v Commissioner of Taxation (1993) 42 FCR 318.

49. From the objection lodged on 19 August 2016 it was apparent that the applicant claimed that it was entitled to a fuel tax credit under s 41-5 of the FTA greater than that disclosed in the fuel tax return for the period and to the extent the fuel tax credit for the period has been reduced by the amount of the road user charge that reduction should be eliminated in full or reduced. In other words, the Commissioner's attention was being directed to the applicant's view that its application of the road user charge to everything except for fuel used to refrigerate trailers was wrong. The objection itself did not specify why this was wrong but the objection was not made in a vacuum. As between the Commissioner and the legal and accounting representatives for the applicant and numerous others in this industry there was a long history of discussions including the scope of Linfox [2012]. From 30 October 2012, on behalf of the applicant and many others in in the industry, the Commissioner had been informed that there was an issue about "fuel used for purposes other than travelling on a public road". This was in the context of the focus on fuel which was used to propel a vehicle along a public road alone being fuel to use, in a vehicle, for travelling on a public road in Linfox [2012]. It is apparent the Commissioner understood the nature of this issue as relating to fuel used for purposes other than travelling on a public road not being reduced by the amount of the road user charge: see the Commissioner's letter dated 9 November 2012 which, although for a different purpose, discloses the Commissioner's understanding of the industry-wide issue.

50. By 27 February 2015 it was clear to the Commissioner that fuel used to power cabin air conditioning was claimed to be used for a purpose other than travelling on a public road on behalf of numerous industry participants including the applicant. The fact that potential other uses were also referred to does not change the fact that by 2015 the Commissioner knew fuel used to power air conditioning in the cabin was one reason many in the industry, including the applicant, considered the fuel tax credits claimed in returns to be wrong. Later in July 2015 the issue was expanded upon in a submission sent on behalf of numerous industry participants again including the applicant. The proposition remained that all fuel beyond that necessary to move the vehicle lawfully on a public road was not subject to the road user charge which meant that fuel used to power air conditioning was not so subject. The same submission also noted that there was another issue about the status of certain roads as public roads which would be dealt with separately. A further submission in September 2015 provided yet more information including that fuel used in travelling on a toll road, T-way or similar road should not be the subject of the road user charge because if the toll operator pays for maintenance this would involve "double dipping by the ATO".

51. It may be accepted that on 7 September 2016 the applicant lodged a submission in support of the objection which referred only to the issue of fuel used to power the air conditioning in the cabins. However, no doubt given the extensive earlier communications, when the Commissioner came to request further information about the objection on 9 September 2016, having received the submission on 7 September 2016, the Commissioner referred to "your objection application dated 19 August 2016, about your assessments of net fuel amount with respect to reductions in fuel tax credits by the amount of the road user charge in relation to fuel used for the purpose of cabin air conditioning and toll roads".

52. In the overall context, the Commissioner must have known the reason why the applicant objected to the assessment - because the applicant was one of numerous industry participants who had been involved in an extensive discussion and submission process with the Commissioner to the effect that only fuel acquired to propel a vehicle along a public road (not a toll road where the toll operator had to pay for maintenance) was subject to the road user charge. The further information the Commissioner sought on 9 September 2016 involved a request for the detailed arguments to be made and clarification as to whether any issues other than air conditioning of cabins and toll roads was involved in the objection. The Commissioner must be taken to have known that those issues were involved in the objection.

53. In these circumstances, I am unable to accept any of the respondent's arguments to the effect that the objection failed to comply with s 14ZU(c) of the TAA 1953. It is not to the point that the applicant was one of hundreds of industry participants represented by the same legal and accounting firm in the extensive discussion and submission process with the Commissioner. Nor is it to the point that those discussions canvassed issues (such as engine idling) which were not pursued. The point is that against the background of the discussions the Commissioner must have known on receipt of the objection that the applicant's case was precisely as had been identified - the road user charge did not apply to fuel used for cabin air conditioning and on travelling on toll roads which were maintained by the toll operator. The evidence discloses that the Commissioner understood this to be the substance of the objection as at 9 September 2016 despite only having received a submission on 7 September 2016 dealing with the cabin air conditioning issue. The fact that the Commissioner subsequently dealt with the objection on the more limited basis of cabin air conditioning does not alter the fact that the objection, considered in the circumstances in which it was lodged, directed the Commissioner's attention to the assessment of fuel tax credits being erroneous and the reasons for that error, being the application of the road user charge to fuel acquired to power air conditioning in cabins and to travel on toll roads maintained by the toll operators which was claimed to involve "double dipping".

54. For these reasons issue (4) should be resolved in the applicant's favour.

CONCLUSIONS

55. As set out in attachment 1, given the above conclusions, it appears to me that the only appropriate order is that the objection decision be affirmed. The parties may have seven days to consider these reasons and notify me whether different or additional orders are required.

ATTACHMENTS

This judgment and attachments can be downloaded here.

 

 


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