Edited version of private ruling

Authorisation Number: 1011723881848

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Ruling

Subject: Fuel tax credits - street sweepers - eligibility of separate engines

Question 1

Does the use of diesel fuel in the main engine of a street sweeper that travels on a public road and maintains the road need to be apportioned between eligible and ineligible use for the period X?

Answer

Yes.

Question 2

Does the use of diesel fuel in the main engine of a street sweeper that travels on a public road and maintains the road need to be apportioned for the period Y?

Answer

Yes.

Question 3

Are you entitled to a fuel tax credit at the half rate for diesel fuel used in the auxiliary engine of a street sweeper to maintain the road for the period Y?

Answer

Yes.

Period 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

The scheme commences on:

1 July 2006

Relevant facts and circumstances

You are a metropolitan local government council which operates a street sweeper as part of your local government operations.

The street sweeper in question has two engines that are fed with diesel fuel from separate fuel tanks. A main engine propels the vehicle and an auxiliary engine operates the brushes.

You acquire diesel fuel for use in your street sweeper.

The street sweeper has a gross vehicle mass (GVM) of between 4.5 tonnes and 20 tonnes.

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

Relevant legislative provisions

Energy Grants (Credits) Scheme Act 2003 section 8

Energy Grants (Credits) Scheme Act 2003 section 43

Fuel Tax Act 2006 section 41-5

Fuel Tax Act 2006 subsection 43-10(3)

Fuel Tax Act 2006 subsection 47-5

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

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

Fuel Tax (Consequential and Transitional Provisions) Act 2006 subparagraph 10(1)(b)(ii) 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 11(1) 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 subparagraph 11(1)(b)(i) of Schedule 3

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

Taxation Administration Act 1953 section 105-55

Taxation Administration Act 1953 subsection 105-55(1)

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 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 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 whilst retaining entitlements under the Energy Grants (Credits) Scheme Act 2003 (EGCSA).

Subparagraphs 10(1)(b)(i) and 11(1)(b)(i) 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 use in a vehicle travelling on a public road.

Travel on a public road

The Commissioner's view on when a vehicle is travelling on a public road is expressed in Fuel Tax Ruling FTR 2008/1 Fuel Tax: vehicles travel on a public road that is incidental to the vehicles main use and the road user charge. As discussed in the ruling, 'travelling' and 'travel' mean to go from one place to another place or to move from one point to another point. Travel includes all the ordinary incidents of a journey undertaken by a vehicle. This includes fuel used whilst the vehicle is stationary in the course of travelling, and the fuel used in the vehicle to power auxiliary equipment on the vehicles, for example, air-conditioning and agitators.

A vehicle's travel begins when it commences to move and ends when it arrives at a destination i.e. moving to and from a site at which it is to operate is travel. However, travelling does not include the movement or standing of a vehicle on a public road or portion of a public road where the vehicle is engaged in the construction, repair or maintenance of the road.

When operating your street sweeper, it is travelling when it leaves a site, up to the point where it commences its maintenance activity. Its travel recommences when it ceases its maintenance activities and goes to another site, or returns to its depot.

Therefore, as a portion of the fuel used in the main engine of the street sweeper is used for travelling on a public road you satisfy subparagraphs 10(1)(b)(i) and 11(1)(b)(i) of Schedule 3 to the FTCTPA.

Subsection 43-10(3) of the FTA provides that the amount of fuel tax credit for a vehicle travelling on a public road is reduced by the road user charge (RUC).

As such, you would be entitled to a fuel tax credit less the RUC for fuel used in the main engine in travelling on a public road.

However, as the activity of maintaining the road is not considered 'travel' we must now consider the fuel used in maintaining the road.

Incidental use

Fuel for use in a vehicle that is an incidental use in relation to a vehicle travelling on a public road is a specific activity listed in subparagraphs 10(1)(b)(ii) and 11(1)(b)(ii) of Schedule 3 to the FTCTPA. Incidental use is defined in section 8 of the EGCSA as:

(a) powering the vehicle, or auxiliary equipment, while goods to be transported are loaded or while goods that have been transported are unloaded;

(b) powering the vehicle, or auxiliary equipment, in order to maintain the quality of goods transported or to be transported;

(c) powering the vehicle, or auxiliary equipment, in order to clean or otherwise maintain the vehicle;

(d) using the vehicle for training operators of vehicles.

This includes, for example, movement of a street sweeper within a waste collection site for fuel used in the operation of unloading transported goods.

Under the FTA, incidental use is in relation to a vehicle travelling on a public road. As it has been determined that a street sweeper is not travelling on the road when it is maintaining the road, the fuel used in the street sweeper when maintaining the road, is not considered to be incidental use.

Energy grants credits scheme

As it has been determined that your street sweeper is not travelling on a public road when undertaking the maintenance of the road, and that it is not an incidental use it is necessary to consider whether you would have been entitled to an on-road credit under the EGCSA.

Subitems 10(3) and 11(3) of Schedule 3 to the FTCTPA provide that you are entitled to a fuel tax credit if you would have been entitled to an on-road credit under the EGCSA.

To have an entitlement to an on-road credit under the EGCSA vehicles must be registered with the relevant road transport authority, be a vehicle for transporting passengers or goods, meet the gross vehicle mass requirements and where relevant be undertaking a journey on a road in Australia.

Vehicle for transporting passengers or goods

Whether a vehicle is a 'vehicle for transporting passengers or goods' comes down to whether they were designed to undertake this function. In ATO Interpretative Decision ATOID 2005/267 Energy Grants (Credits) Scheme: on-road credits - vehicle for transporting passengers or goods - street sweeper it was determined that for the purposes of the EGCSA a street sweeper gathering waste matter into its hopper for later disposal was a vehicle for transporting passengers or goods.

You use a street sweeper as part of your local government operations for maintaining the roads. The street sweeper has two engines. The main engine propels the vehicle and the auxiliary engine operates the brushes. It is considered that your street sweeper is a vehicle for transporting passengers or goods.

Vehicles with a GVM of 4.5 tonnes or more, but less than 20 tonnes

Under section 43 of the EGCSA you are entitled to an on-road credit for the use of fuel in a vehicle with a GVM of 4.5 tonnes or more, but less than 20 tonnes. The vehicle must be a vehicle for carrying passengers or goods and the vehicle must be undertaking a 'journey'.

Journey

A journey includes:

(i) travel starting at a point outside a metropolitan area to another point outside the metropolitan area; or

(ii) travel starting at a point outside a metropolitan area to a point inside a metropolitan area and vice versa; or

(iii) travel between different metropolitan areas.

A journey does not include travel within a metropolitan area.

You are a metropolitan local government council and your street sweeper operates solely within a metropolitan area, therefore, it is not undertaking a journey for the purposes of the EGCSA. Accordingly, you would not meet the requirements under section 43 of the EGCSA and you would not be entitled to an on-road credit under the EGCSA.

As such, you would not be entitled to a fuel tax credit under subitems 10(3) or 11(3) of Schedule 3 to the FTCTPA, for the fuel used in the vehicle in undertaking maintenance of the road.

Accordingly, the use of diesel fuel in the main engine of a street sweeper that travels on a public road and maintains the road needs to be apportioned between eligible and ineligible use for the period X.

For the period Y, subitem 11(6) of Schedule 3 to the FTCTPA provides entitlement to a half credit if you would not have been entitled previously.

Subitem 11(6) of Schedule 3 to the FTCTPA states that you are entitled to a [fuel tax] credit under section 41-5 of the FTA even if you do not meet the conditions of subitem 11(3) of Schedule 3 to the FTCTPA.

As the 'movement' of a street sweeper was not an activity that was previously eligible, you are entitled to claim the half credit for taxable fuel used in the main engine when undertaking maintenance for the period Y.

Given that different rates apply for both 'travel' and 'movement' of the street sweeper on the public road from 1 July 2008, you would have to apportion your claim and calculate the amount of eligible litres used in each activity.

Accordingly, the use of diesel fuel in the main engine of a street sweeper that travels on a public road and maintains the road needs to be apportioned during the period Y.

Auxiliary engine - start of the period Y onwards

Diesel fuel is used in the auxiliary engine to operate the brushes of the street sweeper whilst the roads are being maintained.

As discussed above, subitem 11(6) of Schedule 3 to the FTCTPA provides that if you acquire taxable fuel for use in carrying on your enterprise you are entitled to half of the amount of the fuel tax credit if you would not have been entitled to a credit previously.

Therefore, you are entitled to a fuel tax credit at the half rate for diesel fuel used in the auxiliary engine of a street sweeper to maintain the road for the period 1 July 2008 onwards.

Application of the four year rule

It is noted that you have requested that the period of your ruling apply from the start of period X. While a private ruling sets out the Commissioner's opinion about the way a tax law applies, or would apply in relation to a specified scheme or circumstance, it is important to note that the four year rule time limit for claiming fuel tax credits still applies.

Subsection 47-5 of the FTA states that you cease to be entitled to a fuel tax credit to the extent that you have not taken it into account in working out your net fuel amount for:

(a) the tax period of fuel tax return period to which the fuel tax credit would be attributable under subsection 65-5(1), (2) or (3); or

(b) any other tax period or fuel tax return period, for which you give to the Commissioner a return under section 61-15 during the period of 4 years after the day on which you were required to give to the Commissioner such a return for the tax period or fuel tax return period referred to in paragraph (a).

Further, section 105-55 of Schedule 1 to the Taxation Administration Act 1953 (TAA) places a time limit to refunds and credits to which subsection 105-55(1) applies.

Subsection 105-55(1) of Schedule 1 to the TAA applies to entities that are registered for GST. These entities are not entitled to a refund or fuel tax credit in respect of a tax period unless, within four years after the end of the tax period, or importation;

· the entity notifies the Commissioner of their entitlement to the refund or credit; or

· the Commissioner notifies the entity that they are entitled to the refund or credit.

Please be aware that as at the date of this ruling due to the application of the four year rule you will be unable to claim fuel tax credits for the first two months of the period X.