Edited version of private ruling

Authorisation Number: 1012013794508

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Subject: fuel tax credits - use of petrol in aircraft

Question 1:

Are you entitled to fuel tax credits at the half rate for petrol you acquire and use in your aircraft at your flying school for the period 1 July 2008 to 31 December 2009?

Answer:

Yes.

This ruling applies for the following period/s:

2008-09 income year

2009-10 income year

2010-2011 income year

The scheme commences on:

1 July 2008

Relevant facts and circumstances

You operated a flying school as a sole trader for the period 1 July 20XX to 11 November 20XX when a business trust was formed.

You state there was an overlapping period where you operated also as a sole trader and fuel was purchased by you for the aircraft until 31 December 20XXwith none being purchased by the business trust until 1 January 20XX.

During this overlapping period, you have confirmed that the flying school was still being operated by you in your capacity as a sole trader and the fuel was thus purchased and used by you in this capacity.

You sought a private ruling for the business trust with authorisation number 1011884201728 and state that other than the above, all facts for that private ruling, equally apply for this private ruling and can be used accordingly. These are:

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

o You do not use aviation gasoline (avgas) in your aircraft but a product you refer to as motor vehicle fuel or mogas.

o You have stated that mogas is a term used in the aviation industry, but that the product that you acquire and purchase from service stations is unleaded petrol.

Relevant legislative provisions

Fuel Tax Act 2006 section 41-5

Fuel Tax Act 2006 subdivision 41-B

Fuel Tax Act 2006 section 41-30

Fuel Tax (Consequential and Transitional Provisions) Act 2006 Division 2 of Part 3 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 subparagraph 11(1)(b)(i) of Schedule 3

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

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

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

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

Fuel Tax (Consequential and Transitional Provisions) Act 2006 subparagraph 11(1)(b)(vi) 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 subparagraph 11(5)(b)(ii) of Schedule 3

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

Energy Grants (Credits) Scheme Act 2003 section 53

Ruling

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 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 fuel purchased between 1 July 2008 and 30 June 2012.

The specific activities are listed within subitem 11(1) of Schedule 3 of the FTCTPA.

Subitem11(1) of the FTCTPA will apply if you acquire taxable fuel for:

o use in a vehicle travelling on a public road

o incidental use in relation to a vehicle travelling on a public road

o use in generating electricity

o use other than as a fuel

o use other than as a fuel in an internal combustion engine

o use as heating oil.

Further, section 41-30 of the FTA provides that there will be no entitlement to fuel tax credits for any taxable fuel acquired for use as fuel in an aircraft if the fuel was entered for home consumption for that use.

You operate a flying school and for the period of 1 July 2008 to 31 December 2009 you operated in your capacity as a sole trader.

You utilise unleaded petrol in your aircraft. You commonly refer to this fuel as 'mogas'. Petrol is not a fuel entered for the purpose of operating aircraft and is hence not captured by section 41-30 of the FTA.

Paragraph 1.20 of the Revised Explanatory Memorandum to the Fuel Tax Bill 2006 (EM) provides that fuel tax continues to apply to aviation fuels as the tax is not imposed for general revenue raising reasons but as a method of cost recovery for various services and oversights of the aviation industry.

Acquiring petrol for use in aircraft is not a specific activity listed under subitem 11(1) of the FTCTPA as outlined above. Therefore, it is necessary to consider if an entitlement exists under subitem 11(5) of the FTCTPA.

Subitem 11(5) 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 'off-road diesel fuel' for a use by you that qualifies. Note that subparagraph 11(5)(b)(ii) of the FTCTPA states that references to 'off-road diesel fuel' in Part 4 of the EGCSA are now references to the fuel. This means any fuel that is classified as a taxable fuel, including petrol, from 1 July 2008.

A qualifying use under section 53 of the EGCSA includes using the fuel in certain activities in specific industries such as mining, agriculture or marine transport.

Using petrol in your aircraft as part of your flying school is not a use that qualifies under section 53 of the EGCSA.

Accordingly, you would not have been entitled to an off-road credit for petrol used in your aircraft as part of your flying school per section 53 of the EGCSA and subsequently are not entitled to a fuel tax credit as per subitem 11(5) of the FTCTPA.

However, subitem 11(6) of the FTCTPA provides that if you acquire taxable fuel for use in carrying on your enterprise between 1 July 2008 and 30 June 2012, you are entitled to half of the amount of the fuel tax credit if you would not have been entitled to a credit previously.

This provision is subject to the disentitlement rules of subdivision 41-B of the FTA which disallows a fuel tax credit:

o if another entity was previously entitled to a credit,

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

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

o aviation fuels used in aircraft.

It has been determined above that you were not entitled to an off-road credit previously for the use of petrol in your aircraft. Therefore, you are entitled to a fuel tax credit at the half rate for fuel you acquired for use in your aircraft in your flying school from 1 July 20XX to 31 December 20XX.

The half rate is currently 19.0715 cents per litre.