EDITED VERSION OF NOTICE OF PRIVATE RULING

Authorisation Number: 34396

This Ruling is a 'Private Ruling' for the purposes of Part IVAA of the Taxation Administration Act 1953.

YEAR(S) OF INCOME TO WHICH THIS RULING APPLIES:

Other/Substituted Accounting Period 1 July 2003 to 30 June 2004

TAX LAW:

Energy Grants (Credits) Scheme Act 2003 Section 56.

Energy Grants (Credits) Scheme Act 2003 Section 42.

Energy Grants (Credits) Scheme Act 2003 Paragraph 8(a).

WHAT THIS RULING IS ABOUT:

Are you entitled to an on-road credit under section 42 of the Energy Grants (Credits) Scheme Act 2003 for the purchase of diesel fuel for use in a prime mover to operate auxiliary equipment on a tanker hitched to the prime mover, to load milk into the tanker?

THE SUBJECT OF THE RULING:

The claimant owns a fleet of milk tankers which travel from their depots, collect milk from farms and deliver the milk to their factories.

An auxiliary pump on the tanker is used to pump the milk from the farm vat into the tanker. A hydraulic motor (which is driven by a hydraulic pump located on the prime mover engine) drives this auxiliary pump. As the hydraulic pump is driven directly by the prime mover engine, the hydraulic motor and milk pump will only operate while the prime mover engine is running.

The gross vehicle mass of the vehicles is over 20 tonnes.

The vehicles are: prime mover and a bulk milk collection tanker.

COMMENCEMENT OF ARRANGEMENT:

1 July 2003

RULING:

Yes, you are entitled to an on-road credit under section 42 of the Energy Grants (Credits) Scheme Act 2003 for the purchase of diesel fuel for use in a prime mover to operate auxiliary equipment on a tanker hitched to the prime mover, to load milk into the tanker.

EXPLANATION: (This does not form part of the Notice of Private Ruling)

Subsection 56(1) of the Energy Grants Credits Scheme Act 2003 (the EGCSA) provides that if you are entitled to an on-road credit or an off-road credit, you are entitled to an energy grant.

Section 42 of the EGCSA deals with the entitlement to an on-road credit for vehicles with a gross vehicle mass (GVM) of 20 tonnes or more.

Subsection 42(1) of the EGCSA provides that a claimant is entitled to an on-road credit if they purchase on-road diesel fuel or on-road alternative fuel for:

(a) use in a registered vehicle that has a gross vehicle mass of 20 tonnes or more; or

(b) incidental use in relation to such a vehicle.

'Incidental use' is defined in section 8 of the EGCSA which states in part:

Each of the following, whether or not it takes place on a road, is an incidental use in relation to a vehicle:

(a) powering the vehicle, or auxiliary equipment in or on the vehicle, while:

(i) goods to be transported in or on the vehicle are loaded or goods that have been so transported are unloaded …

The claimant has an auxiliary pump on the tanker which is used to pump the milk from the farm vat into the tanker. A hydraulic motor (which is driven by a hydraulic pump located on the prime mover engine) drives this auxiliary pump. As the hydraulic pump is driven directly by the prime mover engine, the hydraulic motor and milk pump will only operate while the prime mover engine is running.

There is nothing in either subsection 42(1) of the EGCSA, or the definition of incidental use in section 8 of the EGCSA to require that the power source for the auxiliary equipment on the vehicle that is being loaded must come from that particular vehicle.

That is, there is no requirement that the fuel used to power the auxiliary equipment on the tanker must come from the tanker itself. It will be sufficient if a claimant has purchased diesel fuel for an incidental use in relation to a registered vehicle with a GVM of 20 tonnes or more.

In this instance, the claimant has purchased diesel fuel for use in powering auxiliary equipment on the tanker while goods to be transported in the tanker are loaded.

Therefore, the use of diesel fuel in a prime mover to operate auxiliary equipment on the tanker hitched to the prime mover and used to load goods into the tanker, is an incidental use in relation to the tanker as defined in section 8 of the EGCSA.

However, subsection 42(2) of the EGCSA states that for vehicles that are vehicles for transporting passengers or goods, you are only entitled to an on-road credit to the extent that the diesel fuel has been purchased for use in carrying on your enterprise:

(a) … in operating the vehicle on a road in Australia;…. or

(c) … an incidental use … of the vehicle that is integral to operating the vehicle as mentioned in paragraph (a) …

In this case:

i) The tanker is a vehicle for transporting passengers or goods;

ii) the diesel fuel has been purchased by the claimant for use in carrying on their enterprise; and


iii) the use of the equipment on the tanker is an incidental use in relation to the tanker.

Therefore, the claimant is entitled to an on-road credit for this fuel if this incidental use is considered 'integral' to operating the tanker on a road in Australia.

'Integral' is not defined in the legislation and therefore takes on its common meaning. It is defined in The Macquarie Dictionary (rev. 3^rd. ed.) 2001, Macquarie, Sydney as:

1. of or relating to a whole; belonging as a part of the whole; constituent or component: the integral parts of the human body


2. necessary to the completeness of the whole


3. made up of parts which together constitute a whole

Therefore an incidental use of the vehicle will be integral to operating the vehicle on a road in Australia where it is necessary to and forms a fundamental part of the operation of the registered vehicle on a road in Australia.

In this case, the tanker is operated to transport milk on roads in Australia to the dairy. The loading of the tanker with milk forms a fundamental part of the operation of the tanker on a road in Australia.

Therefore, the use of equipment on the tanker is an incidental use of the tanker that is integral to operating the tanker on a road in Australia.

Consequently, the claimant is entitled to an on-road credit under section 42 of the EGCSA in relation to this fuel.

That is, they are entitled to an energy grant under subsection 56(1) of the EGCSA for the purchase of diesel fuel for use in the prime mover in travelling on roads in Australia and whilst loading the milk into the tankers.

Disclaimer

The Register of Private Binding Advice is published as a public record of the binding advice issued by the ATO. Each piece of advice is based on a specific set of circumstances advised to the ATO and the law in force at the time of the advice, and is considered binding only in respect of the person/s or entity/ies on whose behalf the advice was sought. The Register is a historical record of advice provided, and is not updated to reflect changes in the law, withdrawal of advice or any other change in circumstance. Each piece of advice has been edited to avoid disclosing the identity of the person or entity on whose behalf advice was sought and published advice may therefore not disclose all the relevant facts or circumstances on which the advice was based. For these reasons, advice published in this Register cannot be relied upon as precedent for any other person or entity.