Edited version of private ruling

Authorisation Number: 1011659709097

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Ruling

Subject: Fuel tax credits - electricity generation - vessel

Question 1:

Is the use of taxable fuel in powering the main generator to generate electricity on board a vessel an eligible activity for fuel tax credits?

Answer:

Yes.

Question 2:

Is the use of taxable fuel in powering the two auxiliary generators and the emergency generator to generate electricity on board a vessel an eligible activity for fuel tax credits?

Answer:

Yes.

This ruling applies for the following periods:

2007 - 08 income year

2008 - 09 income year

2010 - 11 income year

2011 - 12 income year

The scheme commences on:

1 July 2007

Relevant facts and circumstances

You were engaged to provide dredging services.

The vessel is a non-self propelled dredger.

During the ruling period, it consumed taxable fuel in various engines, some of which are dedicated to driving electrical generators.

The vessel has the following equipment specifications:

· main engines. These engines are not concerned with electricity generation

· an engine used to drive hydraulics on the vessel.

· an engine that powers the main generator. This is fed via a switchboard to an electrical pump.

· auxiliary generators, each powered by their own engines; and

· an emergency generator powered by an engine.

The main generator has a dedicated engine to drive it. The engine is configured so that it may only drive the generator.

The auxiliary and emergency generators are stand alone generator sets. The electricity generated from the auxiliary and emergency generators is fed into the vessel's main electricity grid via a main switchboard.

The electricity grid powers various electrical components, including:

· lighting

· pumps

· control systems

· operator's desk and controls

· air compressors

· fire alarm system

· navigation lights

· communications

· fans

· sewage system, and

· other residential requirements

You have requested us to only consider the eligibility of taxable fuel used in electricity generation.

You are not seeking an opinion on the acquisition of taxable fuel or any other element which would need to be satisfied for a claimant to be entitled to a fuel tax credit.

You state that you understand changes which came into force on 1 July 2008 and how they apply to other uses of fuel on a dredging vessel and that you recognise the need for apportionment as discussed in Fuel Tax Determination FTD 2010/1.

You are registered for goods and services tax (GST).

Relevant legislative provisions

Fuel Tax Act 2006 section 41-5

Fuel Tax (Consequential and Transitional) Provisions Act 2006 Division 1 of Part 3 in Schedule 3

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

Fuel Tax (Consequential and Transitional) Provisions Act 2006 subparagraph 10(1)(b)(iii) of Schedule 3

Fuel Tax (Consequential and Transitional) Provisions Act 2006 subparagraph 11(1)(b)(iii) of Schedule 3

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 Divisions 1 and 2 of Part 3 in Schedule 3 to the Fuel Tax (Consequential and Transitional) Provisions Act 2006 (FTCTPA) which operate to restrict this entitlement to specific activities for fuel purchased between

1 July 2006 and 30 June 2012, whilst retaining entitlements under the Energy Grants (Credits) Scheme Act 2003 (EGCSA).

Subparagraphs 10(1)(b)(iii) and 11(1)(b)(iii) of Schedule 3 to the FTCTPA provide that an entitlement to a fuel tax credit arises under section 41-5 of the FTA if you acquire taxable fuel for a use by you in generating electricity.

Fuel is used for the purpose of generating electricity where the electricity is an end in itself and can in turn be used for any purpose for which electricity is required.

This includes fuel used in generating electricity when it is used in a generator to provide power to a business premises [or vessel] and/or a range of equipment.

Main generator

The vessel is a non-self propelled dredger. It has various engines, some of which are dedicated to driving the electrical generators.

An engine is dedicated to drive the main generator. The electricity generated by the main generator is fed into one of the vessel's switchboard. This switchboard then provides power to an electrical pump.

You use taxable fuel to power the engine that is dedicated to the main generator that generates electricity on board the dredging vessel. This meets the requirement that the fuel is for the purposes of electricity generation within subparagraphs 10(1)(b)(iii) and 11(1)(b)(iii) of Schedule 3 to the FTCTPA.

Accordingly, the use of taxable fuel in powering the main generator to generate electricity on board the vessel is an eligible activity for fuel tax credits.

Auxiliary and emergency generators

The vessel also has auxiliary generators, each powered by their own engines, and an emergency generator powered by its own engine.

The electricity generated by the generators is fed into the vessel's main electricity grid via a main switchboard. This electricity grid powers various electrical components on the vessel, including:

· lighting

· pumps

· control systems

· operator's desk and controls

· air compressors

· fire alarm system

· navigation lights

· communications

· fans

· sewage system, and

· other residential requirements

You use taxable fuel to power the engines, which power the electrical generators for the generation of electricity on board the vessel. This meets the requirement that the fuel is for the purposes of electricity generation within subparagraphs 10(1)(b)(iii) and 11(1)(b)(iii) of Schedule 3 to the FTCTPA.

Accordingly, the use of taxable fuel in powering the auxiliary generators and the emergency generator to generate electricity onboard the vessel is an eligible activity for fuel tax credits