Edited version of private ruling

Authorisation Number: 1011831926685

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Ruling

Subject: Fuel tax credits - equipment sales, repair and hire

Question 1

Are you entitled to a fuel tax credit for diesel fuel acquired by you for use in generators and lighting towers:

· supplied to customers to use in their enterprise;

· used in testing and load banking at your workshop or customer's site

under a full hire arrangement (where you supply the equipment and fuel at a flat rate)?

Answer

Yes.

Question 2

Are you entitled to a fuel tax credit for diesel fuel acquired by you but subsequently sold to your customers as a cost in generators and lighting towers?

Answer

No.

Question 3

In respect to the period 1 June 2005 to 30 June 2006, are you entitled to a fuel tax credit for diesel fuel you acquired and used in your hot wash/steam cleaner?

Answer

No.

Question 4

In respect to the period 1 June 2005 to 30 June 2006, are you entitled to a fuel tax credit for diesel fuel you acquired and used for electricity generation?

Answer

No.

Question 5

In respect to the period 1 July 2006 to 30 June 2012, are you entitled to a fuel tax credit for diesel fuel you acquired and used in your hot wash/steam cleaner?

Answer

Yes.

Question 6

In respect to the period 1 July 2006 to 30 June 2012, are you entitled to a fuel tax credit for diesel fuel you acquired and used in electricity generation?

Answer

Yes.

Question 7

In respect to the period 1 June 2005 to 30 June 2008, are you entitled to a fuel tax credit for diesel fuel you acquire and use in your vehicles with a gross vehicle mass of less than 4.5 tonnes while servicing equipment for mining entities on mining leases?

Answer

No.

Question 8

In respect to the period 1 July 2008 to 30 June 2012, are you entitled to a fuel tax credit for diesel fuel you acquire and use in your vehicles with a gross vehicle mass of less than 4.5 tonnes while servicing equipment for mining entities on mining leases?

Answer

Yes.

This ruling applies for the following period/s:

1 June 2005 to 30 June 2012

The scheme commences on:

1 June 2005

Relevant facts and circumstances

You are registered for goods and services tax (GST) in the transport and storage industry.

Your business has operated since June 2005 and involves the selling, hire and maintenance of diesel equipment.

Some of your operations are conducted on your own premises and some are conducted on the premises of your customers and other third parties.

You acquire and use diesel fuel to burn in a steam generator for cleaning purposes in the workshop.

Some of your operations are conducted on mining sites where you have contracted directly with mining companies involved in the extraction of minerals.

You advise that your equipment is crucial to the effective extraction of minerals at the mine sites.

The light vehicles you use in this work have a gross vehicle mass of less than 1.5 tonnes and have all the signage and safety accessories needed to operate on mine sites but have not been modified to work underground.

You have acquired and used diesel fuel in a number of ways:

1. preparing equipment for sale on your premises

2. in the servicing and repair of equipment on your premises

3. in the servicing and repair of equipment on the sites of your customers and other third parties

4. in your road vehicles of less than 4.5 tonnes gross vehicle mass (GVM) on mining properties while servicing your mining customers and on public roads.

The way you charge for the services you provide varies between customers. Some customers contract you to supply and service equipment at a flat rate. Your invoices in these cases will not itemise the service and material costs.

Some of your other customers, will contract with you on a variable rate where you will issue them with an itemised invoice for services and materials (including fuel) when they are supplied. You acknowledge that some of the fuel for which your customers are charged will be used on their premises in their enterprise.

Relevant legislative provisions

Fuel Tax Act 2006 Subdivision 41B

Fuel Tax Act 2006 Section 41-5

Fuel Tax Act 2006 Section 41-20

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 subparagraph 10(1)(b)(iii) 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 subparagraph 11(1)(b)(i) 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(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 paragraph 11(1)(h)

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

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

Energy Grants (Credits) Scheme Act 2003 Section 42

Energy Grants (Credits) Scheme Act 2003 Section 43

Energy Grants (Credits) Scheme Act 2003 Section 53

Energy Grants (Credits) Scheme Act 2003 subsection 53(4)

Energy Grants (Credits) Scheme Act 2003 subsection 53(7)

Energy Grants (Credits) Scheme Act 2003 paragraph 53(7)(b)

Energy Grants (Credits) Scheme regulations 2003 Subregulation 10(3)

Energy Grants (Credits) Scheme regulations 2003 paragraph 9(1)(c)

Product Grants and Benefits Act 2000 Section 15

Product Grants and Benefits Act 2000 paragraph 15(2)(e)

Reasons for decision

During the period of your ruling request there were two pieces of legislation that applied. For the period 1 June 2005 to 30 June 2006 entitlement to a credit was governed by the Energy Grants (Credits) Scheme Act 2003 (EGCSA) and for the period 1July 2006 to 30 June 2006 entitlement arose under the Fuel Tax Act 2006 (FTA). Each period will be considered in turn.

1 June 2005 to 30 June 2006

Under the EGCSA you are entitled to a credit for diesel fuel used in certain specific activities. The activities considered to be relevant to carrying on your enterprise are considered below.

Mining

Section 53 of the EGCSA provides that you are entitled to an off-road credit if you purchase fuel for a use by you that qualifies. Uses that qualify include use of fuel in mining operations, primary production (including agriculture, forestry, fishing), marine transport, rail transport, electricity generation, use at certain premises and various other uses.

The term '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:

(h) a mining vehicle activity; or

(i) a sundry mining activity.

However, subsection 11(2) of the EGCSA goes on to exclude certain activities from mining operations, including:

1. quarrying or dredging to obtain materials for use in building, construction or similar purposes

2. use in generic vehicles not exceeding 3.5 tonnes GVM

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

Therefore, while the light vehicles you use to service your mining customers have been signed and accessorised for operations on a mine site, they are nevertheless generic and have a GVM of less than 3.5 tonnes. Consequently any fuel you acquire and use in those vehicles is not a use in mining operations.

Mining operations therefore consists of three parts:

1. Paragraphs (a) and (b) mean exploration or prospecting, site preparation, mining for minerals, or the beneficiation of those minerals;

2. Paragraphs (c) to (i) include a number of specific operations detailed in these paragraphs;

3. Subsection 11(2) of the EGCSA which excludes the specific operations detailed in these paragraphs.

The use of the words "means", "includes" and "does not include" provide that paragraphs (a) and (b) of the definition contain the central features of mining operations, which is then expanded by the specific activities outlined in paragraphs (c) to (i).

All activities contained in paragraphs (a) to (i) are subject to the specific exclusions contained in subsection 11(2).

Unless an activity is within the scope of the definition, it will not be eligible for an off-road credit.

The provisions of paragraphs (c) to (i) do not limit paragraphs (a) and (b), nor do paragraphs (c) to (i) provide an exhaustive list of eligible activities, and an activity is not necessarily precluded if it is not specifically listed.

An activity that does not meet the specific requirements of any of paragraphs (c) to (i) may still be an activity that satisfies the requirements of either paragraph (a) or (b) of the definition of mining operations and, if not excluded by subsection 11(2), be eligible for the off-road credit.

Similarly, an activity does not have to be mentioned in subsection 11(2) to be excluded from the definition of mining operations. These paragraphs serve merely to point out specific exclusions, while other activities will be excluded because they simply do not fall within the meaning of mining operations.

The phrase "in mining operations" means in the course of or in the process or act of (see Chief Executive Officer of Customs v. WMC Resources Ltd (as agent for East Spar Alliance) (1998) 87 FCR 482 per Nicholson J). 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.

The relevance or weighting afforded to these criteria will vary depending on the facts of each case.

A causal link exists if the activity is functionally integrated with a mining operation. That is, the activity is so closely related to the mining operation that it is impossible to distinguish between the activity undertaken and the mining operation.

In your case, you purchase diesel fuel for use in your equipment sales, hire and servicing business and some of that fuel is used in services for which you contract directly with mining companies. You provide services at the site where minerals are being extracted. As the use of your light towers and generators are essential and indistinguishable from mining minerals, a causal link is established.

A spatial link is also evident in respect of the work you undertake on mining sites.

Additionally, there is temporal link evident between the service you provide and the exploration, prospecting for, recovery of or beneficiation of ore or minerals. It can be concluded that, in many instances, no minerals can be extracted without the equipment you provide.

Apart from the diesel fuel you acquire and use in your generic, light road vehicles, the above activities are considered to be mining operations under paragraphs 11(1)(a) or (b) of the EGCSA, and also fall within the specific paragraphs of 11(1)(c)(i), therefore your use of diesel fuel in those activities is a use in mining operations.

Accordingly, you were entitled to an off-road credit under the EGCSA for that fuel and, in accordance with item 9 of Schedule 3 to the FTCTPA, a fuel tax credit at the full rate may be claimed in respect of fuel used in your other equipment on a mine site.

Non fuel use

Subsection 53(7) of the EGCSA relevantly provides that you are entitled to an off-road credit if you purchase off-road diesel fuel for a use by you where: 

(a) the use is not in an internal combustion engine; and

(b) the off-road diesel fuel is of a kind specified in the regulations.

Each of these requirements will be considered.

You used diesel in a burner in order to generate steam. It is accepted that a burner is not an internal combustion engine and you therefore, you satisfy paragraph 53(7)(a) of the EGCSA.

Subregulation 10(3) of the Energy Grants (Credits) Scheme Regulations 2003 (EGCS Regs) states:

For paragraph 53(7)(b) of the Act, the kind of off-road diesel fuel mentioned in paragraph 9(1)(c) of these Regulations is specified.

Therefore, the only kind of off-road diesel fuel that qualifies under paragraph 53(7)(b) of the EGCSA is that specified in paragraph 9(1)(c) of the EGCS Regs.

Paragraph 9(1)(c) of the EGCS Regs specifies off-road diesel fuel to be a petroleum product which:

(i)     that has a density:

(A) equal to or exceeding 0.900 at 15 Celsius as determined by ASTM 1298; or

(B) less than 0.900 at 15 Celsius as determined by ASTM 1298 and:

(I) a maximum cetane index of 35 as determined by ASTM D976; or

(II) in respect of the heaviest 10% of a particular volume of fuel tested, a minimum value of 0.35% mass of carbon residue on 10% distillation residue as determined by ASTM D189 or D524; or

(III) a minimum pour point of 15 Celsius as determined by ASTM D97; or

(IV) a minimum sulphur content of 1.5% mass as determined by ASTM D129; or

(V) a minimum kinematic viscosity of 10 centistokes (millimetres squared per second) at 40 Celsius as determined by ASTM D445; and

(ii)    on which duty has been paid at a rate that is applicable to diesel fuel; and

(iii)   that is capable of being used as a fuel otherwise than in an internal combustion engine;

Regular diesel does not meet these specifications.

Consequently the diesel you use in your steam generator is not off-road diesel fuel for the purposes of paragraph 53(7)(b

 ) of the EGCSA.

Since you do not satisfy all requirements of subsection 53(7) of the EGCSA, you are not entitled to an off-road credit under this provision for the use of diesel in the burner to run your steam generator.

Electricity generation

There were limited opportunities to claim credits for fuel used in the generation of electricity under the EGCSA. Eligibility was governed by section 53(4) of the EGCSA, which provided entitlements for an off-road credit if a taxpayer purchased or imported into Australia off-road diesel fuel for use in certain activities, as detailed below.

53 Off-road credit in respect of off-road diesel fuel for use for certain purposes

(1) Subject to such conditions and restrictions as are specified in the regulations, you are entitled to an off-road credit if you purchase or import into Australia off-road diesel fuel for use by you that qualifies (see the following subsections).

Use at certain premises

(4) Each of the following is a use that qualifies:

(a) use at particular premises to generate electricity for use in the course of carrying on, at those premises, an enterprise that:

(i) has, as its principal purpose, the retail sale of goods or services (other than electricity) or the provision of hospitality; and

(ii) does not have, at those premises, ready access to a commercial supply of electricity;

(b) use at residential premises to generate electricity for use in:

(i) providing food or drink for; or

(ii) providing lighting, heating, air-conditioning, hot water or similar amenities for; or (iii) meeting other domestic requirements of residents of the premises;

(c) use at a hospital or nursing home or at any other institution providing medical or nursing care;

(d) use at a home for aged persons.

Therefore only power generation at certain premises was eligible under the EGCS scheme.

No other provisions of the EGSCA are applicable to your activities and there is no discretion in the legislation to allow an off-road credit where the requirements are not satisfied.

Claiming for the period 1 July 2005 to 30 June 2006

The administrative provisions of the EGCSA are contained in the Product Grants and Benefits Act 2000 (PGBAA). Paragraph 15(2)(e) of the PGBAA states that EGCS claims had to be given to the Commissioner within 3 years of the claim period start date.

Consequently, we cannot accept any further EGCS claims at this time and there is no legislative provision or discretion by which the Commissioner can alter or disregard the requirements of the EGCS.

However, item 9 of Schedule 3 to the FTCTPA provides a method for you to claim an entitlement to an on-road or an off-road credit under the EGCSA for diesel fuel purchased or imported between 1 July 2003 and 30 June 2006.

Where you have not made a claim for payment of an energy grant in relation to the credit under section 15 of the PGBAA, you are able to claim the amount of the credit as a decreasing fuel tax adjustment under the fuel tax regime pursuant to item 9 of Schedule 3 of the FTCTPA.

In respect of eligible diesel fuel purchased during the period 1 July 2003 to 30 June 2006, subitem 9(3) of the FTCTPA states that the amount of the adjustment is attributable to any tax period that ends before 1 July 2009. You can therefore claim eligible fuel purchased during this period by revising your BAS for a tax period ending prior to 1 July 2009.

1 July 2006 to 30 June 2008

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 Division 2 of Part 3 of Schedule 3 to the Fuel Tax (Consequential and Transitional Provisions) Act 2006 (FTCTPA) which operates to restrict this entitlement to specific activities and continues the previous entitlement provisions of the Energy Grants (Credits) Scheme Act 2003 (EGCSA) for the period 1 July 2008 to 30 June 2012.

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

Additionally, 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 EGCSA. This is known as the full rate of fuel tax credits and is currently $0.38143 per litre.

However, fuel acquired for use in a vehicle with a gross vehicle mass (GVM) of 4.5 tonnes or less travelling on a public road is explicitly disentitled to fuel tax credits under section 41-20 of the FTA.

As we have discussed, the diesel fuel you acquire and use in your business for mining operations is eligible for an off-road credit under the EGCSA. Consequently, this fuel would also be eligible for fuel tax credits.

The introduction of the fuel tax credits system on 1 July 2006 also resulted in a broadening of eligibility requirements to include all fuels consumed for any commercial, private or retail generation of electricity. Consequently, under the electricity generation provisions of subparagraph 10(1)(b)(iii) of Schedule 3 to the FTCTPA, you are entitled to a fuel tax credit for that portion of the diesel fuel you acquire and use in your business for the generation of electricity at the full rate.

As we have discussed, a burner is not an internal combustion engine. Therefore any taxable fuel you acquire and use in your business for this use would also be eligible for fuel tax credits.

As the diesel fuel you acquired and used for this purpose is a taxable fuel, you are entitled to a fuel tax credit for that fuel under section 41-5 of the FTA.

1 July 2008 to 30 June 2012

However, if you would not have been entitled to an on-road or an off-road credit under the EGCSA for a quantity of fuel you acquire and use in your business, 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. 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 a credit,

· for fuel used in light vehicles travelling on public roads,

· for fuel used in motor vehicles that do not meet environmental criteria, or

· for fuel used in aircraft.

It has been determined above that you were not entitled to an off-road credit previously for the use of diesel fuel in your light road vehicles operating off-road on mine. Therefore, you are entitled to a fuel tax credit at the half rate for that portion of the fuel you acquired for use in that equipment from 1 July 2008.

Light vehicles

Note that subitem 11(6) of Schedule 3 of the FTCTPA does not apply to your use of fuel in any vehicles with a GVM of less than 4.5 tonnes travelling on public roads as they are subject to the disentitlement rules of subdivision 41-B of the FTA.

Fuel sold to customers

However, to be entitled to a fuel tax credit, section 41-5 of the FTA requires that you acquire taxable fuel and use it in your enterprise and, under section 53 the EGCSA you must purchase off-road diesel for use in your enterprise. Given the similar nature of these terms the reasons set out below apply to any entitlement under both schemes.

As the term 'acquire' is not defined in the FTA, it therefore takes its ordinary meaning.

The Macquarie Dictionary defines 'acquire' as:

1 . to come into possession of; get as one's own:* You must acquire property at once

2 . to gain for oneself through one's actions or efforts...

In Fuel Taxation Ruling FTR 2007/1, Fuel tax: the meaning of 'acquire', 'manufacture' and 'import' in the expression 'taxable fuel that you acquire or manufacture in, or import into, Australia to the extent that you do so for use in carrying on your enterprise' in the Fuel Tax Act 2006 the Commissioner discusses the meaning of 'acquire', 'manufacture', and 'import'.

In Fuel Tax Ruling FTR 2009/1, Fuel tax: entitlement to a fuel tax credit under section 41-5 of the Fuel Tax Act 2006 in a vehicle or equipment hire arrangement the Commissioner explains which entity is entitled to a fuel tax credit under section 41 5 of the FTA in a vehicle or equipment hire arrangement. FTR 2009/1 also sets out the principles which can be used in determining whether fuel has been disposed of by the hire company to the hirer, and consequently acquired by the hirer, and which entity has fuel tax credit entitlements under section 41 5 of the FTA.

At paragraphs 14 and 15 of FTR 2009/1 the Commissioner states that when determining which entity in a hire arrangement acquires and uses the fuel, it is necessary to take into account the facts and circumstances in each case.

This is because ownership and use are not always readily apparent. For example where a hire company acquires fuel and does not dispose of the fuel to the hirer, the hire company will be entitled to a fuel tax credit for fuel used in the hire vehicle or equipment in carrying on their enterprise (subject to the disentitling provisions). However, where the hire company acquires a quantity of fuel but disposes of the fuel to the hirer, the hire company will not be entitled to a fuel tax credit.

Conversely, where a hirer acquires a quantity of fuel and does not dispose of the fuel, the hirer will retain entitlement to a fuel tax credit for fuel used in the hire vehicle or equipment in carrying on their enterprise.

Therefore, an entity must establish whether it has first acquired fuel prior to determining if it has used the fuel in carrying on its enterprise. The meaning of 'acquire' and 'use' is discussed in both FTR 2007/1 and FTR 2009/1.

At paragraph 143 of FTR 2007/1 the Commissioner states that, for the purposes of the FTA, the relevant meaning of acquire is to 'get as one's own' from someone else or through one's actions or efforts. 'Acquire' does not mean merely 'to come into possession of'.

The Commissioner considers that to 'get as one's own', implies getting ownership or proprietary rights in respect of the taxable fuel. This will mean either that property in the taxable fuel passes from one entity to another or that proprietary rights or ownership is conferred by the act of obtaining the taxable fuel by other means.

Therefore, the Commissioner takes the view that an entity typically 'acquires' taxable fuel upon a change in ownership of, or a transfer of proprietary rights in, the fuel from one entity to another.

To 'get as one's own' requires property in or ownership of the relevant taxable fuel to pass from one entity to another entity, or alternatively, that ownership is conferred because the fuel has been obtained by an entity as its own.

You acquire taxable fuel if:

· you purchase the fuel;

· the fuel is gifted to you; or

· you get the fuel as your own by any other means (other than manufacture or import). This necessarily means that you get ownership of, or proprietary rights in respect of, the fuel.

Conversely, if an entity simply acquires a right or a licence to use another entity's fuel in their plant or equipment in performing work for that entity, the second entity has not acquired that fuel for the purposes of the FTA as the mere grant of a right or licence to use the fuel does not result in you obtaining a proprietary interest in, or ownership of, the fuel.

Use

In the context of section 41-5 of the FTA, the term 'use' means 'expend or consume in use', which in turn requires that the fuel be expended or consumed, such that it no longer exists as fuel, by putting it into service in carrying on your enterprise.

The Revised Explanatory Memorandum to the Fuel Tax Bill 2006 (Revised EM) provides guidance regarding the meaning of 'use' for the purposes of section 41-5 of the FTA, as follows:

2.33 The term 'use' is intended to take on its ordinary meaning and apply it in a broad sense, as long as the use of fuel is within the confines of the conduct of carrying on an enterprise. For example, 'use' will include use of fuel that is acquired or manufactured in, or imported into Australia by a taxpayer, but actually used by a contractor in carrying on the taxpayer's enterprise as long as the taxpayer is not taken to have sold the fuel to the contractor as part of their contract.

2.34 Fuel is 'used' if it ceases to exist after an action to use it, either as a fuel or in the production of another thing. As such, a sale of fuel is not a use of fuel and a taxpayer will not be considered to have used fuel is they sell the fuel to another entity…

Therefore, taxable fuel will not be used by you in your enterprise under section 41-5 of the FTA where it is acquired from you by another entity.

In your case, you hire equipment to third parties. You have advised that in some instances, the hire is done on a flat rate inclusive of fuel. This is similar to the example given by the Commissioner in paragraphs 24 to 27 of FTR 2007/1. In these cases your customers may not even know the quantity of fuel used in this machinery as the fuel used is not itemised on invoices. On balance, the Commissioner would consider that ownership of the fuel in these wet hire type arrangements has not passed to your customers and entitlement to fuel tax credits for this fuel remains with you.

At paragraph 24 of FTR 2009/7 the Commissioner points out that under vehicle or equipment hire arrangements, a hire company:

• disposes of fuel when it sells the fuel or the fuel is the subject of mutuum; and
• does not dispose of fuel where it merely grants another entity a licence to use its fuel, or uses the fuel in a wet hire arrangement.

While you may initially acquire diesel fuel for use in the equipment you sell, hire and service, any fuel left in this equipment and subsequently sold to your customers will be acquired and used by them.

You charge some of your customers a flat fee inclusive of fuel and your invoices do not itemise the service and material costs. In this situation we do not consider that you have sold the fuel to you customer and you are using the fuel in the carrying on of your enterprise.

Other customers are charged at a variable rate and you issue them an itemised invoice setting out the service and material costs (including fuel).

Consequently, the fuel you initially acquire and put into your equipment but which is ultimately acquired and used by your customers is not eligible for fuel tax credits in your case.