Edited version of private ruling

Authorisation Number: 1011473146103

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Subject: Fuel tax credits

Question 1:

Are you entitled to claim a fuel tax credit at the full rate for diesel you acquire and use in prime movers to transport iron ore from a stockpile to a railway point, when travelling on a private road?

Answer:

No.

Question 2:

Are you entitled to claim a fuel tax credit, at the full rate less road user charge (RUC), for diesel you acquire and use in prime movers to transport iron ore from a stockpile to a railway point, when travelling on a private road?

Answer:

Yes.

Question 3:

Are you entitled to claim a fuel tax credit at the half rate for diesel you acquire and use in prime movers to transport iron ore from a stockpile to a railway point, when travelling on a private road?

Answer:

No.

This ruling applies for the following period(s):

2010-11 income year

The scheme commences on:

1 July 2010

Relevant facts and circumstances

You are registered for goods and services tax (GST), and are the representative member for a GST group.

A member of your GST group obtained a contract with a mining company to cart iron ore.

The member will haul the iron ore from a stockpile to a railway point via a private road.

You advised that the iron ore will be hauled by prime movers that will have a gross vehicle mass (GVM) of greater than 4.5 tonnes. I

You state the prime movers will be road registered.

You approved the use of information located on your website which indicated your prime movers will have a gross mass when loaded or over 20 tonnes.

Diesel fuel will be used in the prime movers.

You have stated that you will acquire the fuel and that you will not be reimbursed for the fuel costs.

You advised that the iron ore is not subject to beneficiation after it has been transported from the stockpile to the railway point.

You are registered for fuel tax credits.

Relevant legislative provisions

Fuel Tax Act 2006 section 41-5

Fuel Tax Act 2006 section 43-10

Fuel Tax Act 2006 subsection 43-10(3)

Fuel Tax Act 2006 section 70-5

Fuel Tax (Consequential and Transitional Provisions) Act 2006 Division 2 of Schedule 3

Fuel Tax (Consequential and Transitional Provisions) Act 2006 subitem 11(3) of Schedule 3

Fuel Tax (Consequential and Transitional Provisions) Act 2006 subitem 11(4) of Schedule 3

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

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

Energy Grants (Credits) Scheme Act 2003 section 8

Energy Grants (Credits) Scheme Act 2003 paragraph 8(a)

Energy Grants (Credits) Scheme Act 2003 subparagraph 8(a)(i)

Energy Grants (Credits) Scheme Act 2003 subparagraph 8(a)(ii)

Energy Grants (Credits) Scheme Act 2003 subparagraph 8(a)(iii)

Energy Grants (Credits) Scheme Act 2003 subsection 11(1)

Energy Grants (Credits) Scheme Act 2003 subparagraph 11(1)(a)

Energy Grants (Credits) Scheme Act 2003 subparagraph 11(1)(b)

Energy Grants (Credits) Scheme Act 2003 subparagraph 11(1)(c)

Energy Grants (Credits) Scheme Act 2003 paragraph 11(3)(a)

Energy Grants (Credits) Scheme Act 2003 section 12

Energy Grants (Credits) Scheme Act 2003 paragraph 12(a)

Energy Grants (Credits) Scheme Act 2003 subparagraph 12(a)(i)

Energy Grants (Credits) Scheme Act 2003 subparagraph 12(a)(ii)

Energy Grants (Credits) Scheme Act 2003 section 42

Energy Grants (Credits) Scheme Act 2003 subsection 42(1)

Energy Grants (Credits) Scheme Act 2003 paragraph 42(1)(a)

Energy Grants (Credits) Scheme Act 2003 paragraph 42(1)(b)

Energy Grants (Credits) Scheme Act 2003 subsection 42(2)

Energy Grants (Credits) Scheme Act 2003 paragraph 42(2)(a)

Energy Grants (Credits) Scheme Act 2003 paragraph 42(2)(c)

Energy Grants (Credits) Scheme Act 2003 section 53

Energy Grants (Credits) Scheme Act 2003 subsection 53(2)

Reasons for decision

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 in Australia to the extent that you do so for use in carrying on your enterprise if you are registered for GST. However, this entitlement is affected by Division 2 of Schedule 3 to the Fuel Tax (Consequential and Transitional Provisions) Act 2006 (FTCTPA) which operates to restrict this entitlement to specific activities for fuel purchased between 1 July 2008 and 30 June 2012, whilst retaining entitlements under the Energy Grant (Credits) Scheme Act 2003 (EGCSA).

Full rate

Subitem 11(5) of the FTCTPA provides that you are entitled to a fuel tax credit under section 41-5 of the FTA if you would have been entitled to an off-road credit under the EGCSA.

Section 53 of the EGCSA provides that you are entitled to an off-road credit if you purchase diesel fuel for a use by you that qualifies. Use in mining operations (otherwise than for the purpose of propelling any vehicle on a public road), is a use that qualifies under subsection 53(2) of the EGCSA.

'Mining operations' is defined in subsection 11(1) of the EGCSA as:

(a) exploration or prospecting for minerals, or the removal of overburden and other activities undertaken in the preparation of a site to enable mining for minerals to commence; or

(b) operations for the recovery of minerals, being:

(i) mining for those minerals including the recovery of salts by evaporation; or

(ii) the beneficiation of those minerals, or of ores bearing those minerals;

and includes:

a mining transport activity

…

Paragraph 11(3)(a) of the EGCSA states that operations for the recovery of a mineral cease when the process of beneficiation ceases.

The term 'mining transport activity' is defined in paragraph 12(a) of the EGCSA as:

(a) if minerals, or ores bearing minerals, are beneficiated at a place other than the mining site as an integral part of operations for their recovery:

(i)   the journey undertaken for the purpose of transporting the minerals or ores from the mining site to that place; and

(ii)  the return journey of a vehicle, a locomotive or other equipment from that place to the mining site or any part of that journey if it is undertaken for the purpose of repeating a journey referred to in subparagraph (i)

…

Therefore, if the beneficiation of minerals or ores bearing minerals occurs at a place other than the mining site, the off-public road transportation of the minerals or ores bearing minerals from the mine site to the place of beneficiation is a mining transport activity under subparagraph 12(a)(i) of the EGCSA.

You advised that the iron ore that you will haul would not be subject to beneficiation after it is transported from the stockpile to the railway point. As such, the transportation of the iron ore from the stockpile to the railway point is not a 'mining transport activity' under paragraph 12(a) of the EGCSA and therefore, not mining operations.

As your activities are not considered 'mining operations', you are not entitled to an off-road credit under section 53 of the EGCSA.

As such, you do not satisfy subitem 11(5) of Schedule 3 to the FTCTPA and therefore are not entitled to a fuel tax credit at the full rate for diesel you acquire and use in prime movers to transport iron ore from a stockpile to a railway point, when travelling on a private road.

Full rate less road user charge (RUC)

Subitem 11(3) of Schedule 3 to the FTCTPA provides that you are entitled to a fuel tax credit under section 41-5 of the FTA if you would have been entitled to an on-road credit under the EGCSA.

Subsection 42(1) of the EGCSA provides that you are entitled to an on-road credit if you purchase on-road diesel for:

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

· incidental use in relation to such a vehicle

Your prime movers will have a gross vehicle mass when loaded of over 20 tonne and are road registered vehicles and as such you satisfy these two requirements.

However, the extent of your entitlement is limited by subsection 42(2) of the EGCSA which requires that fuel is for use in the carrying on your enterprise. As you will be transporting the iron ore as part of carrying on your enterprise, this requirement is satisfied.

Your prime movers will operate on roads in Australia transporting iron ore. You are transporting goods, therefore you satisfy the requirements of paragraph 42(2)(a) of the EGCSA for the use of the on-road diesel you acquire for the operation of the vehicle.

Further, paragraph 42(2)(c) of the EGCSA extends the use of fuel to include incidental use, or any other use of the vehicle that is integral to operating the vehicle on a road in Australia, as mentioned in paragraph 42(2)(a) of the EGCSA (above).

Incidental use is defined in section 8 of the EGCSA as:

· powering the vehicle, or auxiliary equipment in or on the vehicle, while:

· goods to be transported in or on the vehicle are loaded or goods that have been so transported are unloaded; or

…

· the vehicle is moved to a place where anything in subparagraph (i) or (ii) is to happen or from a place where any such thing has happened;

…

Your prime movers will haul iron ore from a stockpile to a railway point on a private road. Therefore, the use of diesel in your prime movers for this purpose is an eligible use of fuel under subsection 42(1) of the EGCSA. As such, you are entitled to a fuel tax credit as you have satisfied the requirements of subitem 11(3) of Schedule 3 to the FTCTPA.

However, subitem 11(4) of Schedule 3 to the FTCTPA states that if subitem 11(3) applies to you, you are taken for the purposes of section 43-10 of the FTA to have acquired, manufactured or imported fuel to use, in a vehicle, for travelling on a public road.

Subsection 43-10(3) of the FTA states that to the extent that you acquire 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.

As such, you are entitled to a full tax credit at the full rate less RUC for the diesel you acquire and use in prime movers to transport iron ore from a stockpile to a railway point, when travelling on a private road.

The RUC is subject to change. For fuel tax credit rates, refer to www.ato.gov.au

Half credit

Subitem 11(6) of Schedule 3 to the FTCTPA provides that from 1 July 2008, an entitlement to a fuel tax credit will arise under section 41-5 of the FTA if you would not have been entitled to a fuel tax credit under subitems 11(3) or 11(5) of Schedule 3 to the FTCTPA. The amount of the credit, is half the amount of the full rate.

As determined above, you were entitled to claim a fuel tax credit at the full rate less RUC under subitem 11(3) of Schedule 3 to the FTCTPA.

Accordingly, you are not entitled to claim a fuel tax credit at the half rate, for diesel you acquire and use in your prime movers when they transport the iron ore from a stockpile to a railway point when travelling on a private road.

Application of fuel tax law to GST Groups

Section 70-5 of the FTA provides for the application of fuel tax law to GST Groups and joint ventures. Item 1 of column 1 to the table under section 70-5 of the FTA states that the members of a GST Group are treated as a single entity for the purposes of fuel tax law.

Further, item 1 of column 2 to the table under section 70-5 of the FTA provides that the representative member of the group is that entity which has all the rights, powers and obligations of the single entity under the fuel tax law.

Therefore, as you and the member entity are members of a GST Group you are considered a single entity for the purposes of the fuel tax law. Further, as the representative member of the group, you are the entity which has all the rights, powers and obligations of the single entity under the fuel tax law.