Edited version of private ruling

Authorisation Number: 1011713958070

This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Subject: Fuel tax credits - road transport and mining operations

Question 1

Are you entitled to the full rate of fuel tax credits for fuel used in your geographical activities?

Answer

No.

Question 2

Are you entitled to the half rate of fuel tax credits for fuel used in your geographical activities when not operating on a public road for the period 1 July 2008 to 30 June 2012?

Answer

Yes.

Periods the ruling applies to:

2006-07 income year

2007-08 income year

2008-09 income year

2009-10 income year

2010-11 income year

2011-12 income year

Commencement date of scheme:

1 July 2006

Relevant facts and circumstances:

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

You contract with various companies including mining companies.

Across your sites you have numerous vehicles all of which have a gross vehicle mass (GVM) of 1.5 tonnes or less, are standard commercial vehicles and have not been modified for use underground.

You acquire and use unleaded petrol in these vehicles.

The majority of the services provided by you are in major cities and suburbs these services are predominantly provided on public roads and typically entail the use of equipment on vehicles or the delivery of staff/equipment to site.

You understand that these activities are not eligible for fuel tax credits.

You have also been providing geographical services in relation to mining activities. You have a number of vehicles that undertake this work.

These vehicles traverse private lands and do not travel on public roads and use various pieces of on-board and off-board equipment to collect data and information to:

· determine suitable routes for future private roads for various construction equipment access

· determine suitable routes for public roads where appropriate

· determine routes and easements

· other infrastructure to connect sites to processing facilities, and

· provide geographical services for various facilities.

Relevant legislative provisions

Fuel Tax Act 2006 section 41-5

Fuel Tax Act 2006 section 41-20

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

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

Fuel Tax (Consequential and Transitional Provisions) Act 2006 subitem 10(1) of Schedule 3

Fuel Tax (Consequential and Transitional Provisions) Act 2006 subitem 10(5) of Schedule 3

Fuel Tax (Consequential and Transitional Provisions) Act 2006 subitem 11(1) 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 subsection 11(1)

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

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

Energy Grants (Credits) Scheme Act 2003 subitem 11(1)(b)(i)

Energy Grants (Credits) Scheme Act 2003 subitem 11(1)(b)(ii)

Energy Grants (Credits) Scheme Act 2003 subitem 11(1)(f)

Energy Grants (Credits) Scheme Act 2003 subsection 11(2)

Energy Grants (Credits) Scheme Act 2003 paragraph 11(2)(a)

Energy Grants (Credits) Scheme Act 2003 section 15

Energy Grants (Credits) Scheme Act 2003 paragraph 15(a)

Energy Grants (Credits) Scheme Act 2003 paragraph 15(b)

Energy Grants (Credits) Scheme Act 2003 paragraph 15(c)

Energy Grants (Credits) Scheme Act 2003 paragraph 15(d)

Energy Grants (Credits) Scheme Act 2003 section 53(1)

Energy Grants (Credits) Scheme Act 2003 section 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 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 of 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.

For the period 1 July 2006 to 30 June 2012, the specific activities for which an entitlement exists are relevantly listed within subitems 10(1) and 11(1) of Schedule 3 of the FTCTPA.

The items listed within subitems 10(1) and (11)(1) of Schedule 3 of the FTCTPA are:

(i) for use in a vehicle travelling on a public road

(ii) for incidental use in relation to a vehicle travelling on a public road

(iii) for use in generating electricity

(iv) for use other than as a fuel

(v) for use other than as a fuel in an internal combustion engine

(vi) for use as heating oil.

Travel on public roads

You use vehicles with a gross vehicle mass (GVM) of 1.5 tonnes or less for travel on public roads in undertaking a range of activities. The vehicles operating in cities and out of regional sites travelling on public roads.

Section 41-20 of the FTA provides that you will not be entitled to fuel tax credits for fuel acquired and used in vehicles with a GVM of 4.5 tonnes or less travelling on public roads.

Therefore, as you have stated in relation to the cities, the fuel you acquire and use in these vehicles with a GVM of less than 4.5 tonnes travelling on public roads would not be entitled to a fuel tax credit. Similarly, your vehicles operating out of your regional sites travelling on public roads would not be eligible for fuel tax credits.

Full rate of fuel tax credits

However, you also use fuel in your light vehicles undertaking a range of surveying and engineering activities on private roads and land. You state that these activities occur on land legally occupied by mining companies.

As this is not an eligible use of fuel under any of the items in subitems 10(1) and 11(1) of Schedule 3 of the FTCTPA, it is necessary to consider whether these activities qualify under any other provisions.

Subitems 10(5) and 11(5) of the FTCTPA provide that you are entitled to a fuel tax credit if you would have been entitled to an off-road credit under the Energy Grants (Credits) Scheme Act 2003 (EGCSA). This is known as the full rate of fuel tax credits and is currently 38.143 cents per litre.

Subsection 53(1) of the EGCSA provides that you are entitled to an off-road credit if you purchase off-road diesel fuel for a use by you that qualifies. Use in mining operations, (otherwise than for the purpose of propelling a road vehicle on a public road), is a use that qualifies (section 53(2) of the EGCSA).

You acquired unleaded petrol for use in your vehicles. Up to 30 June 2008, the use of petrol in previously eligible activities under the EGCSA, such as mining operations, was excluded because reference to fuel was under the EGCSA definitions and the EGCS Regulations of 'off-road diesel fuel.' Therefore, you would not have had an entitlement to claim fuel tax credits if your activities were considered a use in mining operations for the period up to 30 June 2008 because of the fuel type.

There are no other provisions within the legislation that would have provided an entitlement to fuel tax credits for this period in vehicles less than 4.5 tonnes travelling on mine sites. As such, you would not have been entitled to a fuel tax credit for unleaded petrol acquired for use in your vehicles to 30 June 2008.

From 1 July 2008, petrol was an eligible fuel in the specific activities such as mining operations due to the operation of subitem 11(5) of the FTCTPA which provided that references to 'off-road diesel fuel' under the EGCSA was a reference to 'fuel.' It is necessary to consider whether your activities would be 'mining operations' to determine if you would have had an entitlement to the full rate from 1 July 2008.

Mining

Mining operations are 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:

…

(f) a mining construction activity; or

…

The EGCSA goes on to define mining construction activity in section 15 as the construction of infrastructure such as:

· private access roads (paragraph 15(a));

· dams (paragraphs 15(b) and 15(c)); and

· buildings, plant or equipment (paragraph 15(d)).

However, subsection 11(2) of the EGCSA excludes certain other activities including:

· quarrying or dredging to obtain materials for use in building, construction or similar purposes; or

· the use of a vehicle (other than a fork-lift, front end loader, tractor or other similar vehicle that is specified in the regulations) not exceeding 3.5 tonnes GVM other than such a vehicle that is extensively modified for use underground while it is so used; or

· the transportation of people equipment or goods (with some exceptions).

In the phrase in mining operations, the preposition 'in' means in the course of or in the process or act of. Therefore, if an activity can be said to have taken place in the course of mining operations, it can be concluded that it also takes place in mining operations.

When considering whether an activity takes place in the course of a mining operation, the courts have applied the following three tests (see Federal Commissioner of Taxation v. Payne (2001) 202 CLR 93, (2001) 46 ATR 228, 2001 ATC 4027; Chief Executive Officer of Customs v. WMC Resources Ltd (as agent for East Spar Alliance) (1998) 87 FCR 482; Wandoo Alliance Pty Ltd v. CEO of Customs [2001] AATA 801):

· a causal link exists - in other words, a certain activity is functionally integrated with a mining operation, thereby forming an essential part of it.

· a spatial link exists - meaning that an activity takes place in an area set aside or occupied for a mining operation.

· a temporal link exists - the activity takes place in a timely fashion, not prior to, or after the completion of, the mining operation.

Your activities involve determining suitable routes for:

· future private roads to allow access for construction

· future public roads

· other infrastructure to connect sites to processing facilities, and

· provide geographical services for various facilities.

Since these activities are not an essential part of mining operations nor temporally linked with a mining operation, they can not be said to be mining activities.

Moreover, the vehicles you use in these activities are generic vehicles which are excluded under paragraph 11(2)(b) of the EGCSA. That is, the use of a vehicle (other than a fork-lift, front end loader, tractor or other similar vehicle that is specified in the regulations) not exceeding 3.5 tonnes GVM other than such a vehicle that is extensively modified for use underground while it is so used is excluded from mining operations.

Therefore, while the fuel you acquire for use in your business may be used on land legally occupied for the purposes of mining operations, these activities are excluded as being mining operations and you would not have been entitled to an off-road credit under subsection 53(1) of the EGCSA in respect to its use.

Accordingly, you do not satisfy subitem 11(5) of the FTCTPA and you are not entitled to the fuel tax credit at the full rate in respect of this fuel.

Half credit

However, subitem 11(6) of Schedule 3 of the FTCTPA provides that from 1 July 2008, an entitlement to a fuel tax credit arises under the FTA if you were not previously entitled to an on-road or off-road credit. 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 a fuel tax credit:

· if another entity was previously entitled to the credit;

· for fuel used in vehicles with a GVM of less than 4.5 tonnes travelling on public roads;

· for fuel used in motor vehicles that do not meet environmental criteria when travelling on a public road; or

· for fuel used in aircraft.

As it was determined above that you were not entitled to an on-road or off-road credit previously for the use of fuel in vehicles with a GVM of less than 3.5 and 4.5 tonnes used in your business not on public roads, you are therefore entitled to the half fuel tax credit rate for this fuel.

The half rate is currently 19.0715 cents per litre.

Note: your entitlements to fuel tax credits cease unless you include them in your net fuel amounts within 4 years. The period of ruling relates to a period in excess of 4 years. However, you were not entitled to fuel tax credits before 1 July 2008.