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Ruling

Subject: Fuel tax credits

Question 1

Are you entitled to fuel tax credits at the partial rate for the use of fuel in your light vehicle on public roads?

Answer

No

Question 2

Are you entitled to fuel tax credits at the full rate for the use of fuel in your light vehicle on the mine site?

Answer

No

Question 3

Are you entitled to fuel tax credits at the full rate for the use of fuel in your heavy vehicles on the mine site?

Answer

Yes

Question 4

Are you entitled to fuel tax credits at the full rate for the use of fuel in your rigs on the mine site?

Answer

Yes

Question 5

Are you entitled to fuel tax credits at the half rate for the use of fuel in your light vehicle travelling on the mine site?

Answer

Yes

Question 6

Are you entitled to fuel tax credits at the half rate for the use of fuel in your light vehicle travelling on public roads?

Answer

No

This ruling applies for the following periods:

1 July 2011 to 30 June 2012

The scheme commences on:

1 July 2011

Relevant facts and circumstances

You are a mineral exploration drilling service provider.

You are supplying your own fuel under your current contract with the mining company. You are not reimbursed for the fuel.

You are running diesel vehicles and equipment at the mine site, as follows:

1. Light vehicle (utility) < 4.5 tonnes gross vehicle mass (GVM) - used both on and off the site to transport crew, fuel and light equipment. That is, the vehicle is used on the mine site and on public roads to transport people and equipment from base to accommodation and around the mine site.

2. Heavy vehicle (truck) > 4.5 tonnes GVM - carries equipment - does not leave the mine site except for repairs, annual maintenance or transferred to an alternative location.

3. Heavy vehicle (truck) > 4.5 tonnes GVM - carries various equipment - does not leave the mine site except for repairs, annual maintenance or transferred to an alternative location.

4. Heavy vehicle (truck) > 4.5 tonnes GVM - carries equipment - does not leave the mine site except for repairs, annual maintenance or transferred to an alternative location.

5. Equipment - attached to a heavy vehicle. The equipment has its own independent fuel supply. This is the main fuel use, not much fuel is used in the actual vehicle in travelling to the drill site.

6. Equipment - rig - attached to a heavy vehicle. The drill rig has its own independent fuel supply. This is the main fuel use, not much fuel is used in the actual vehicle in travelling to the drill site.

Relevant legislative provisions

Fuel Tax Act 2006 section 41-5

Fuel Tax Act 2006 subdivision 41-B

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 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 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 Part 3

Energy Grants (Credits) Scheme Act 2003 section 53

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(2)(c)

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

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 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 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.

On-road - light vehicle - partial rate

Subparagraph 11(1)(b)(i) of Schedule 3 of the FTCTPA provides that an entitlement to a fuel tax credit arises under section 41-5 of the FTA if you acquire taxable fuel between 1 July 2008 and 30 June 2012 for use in a vehicle travelling on a public road.

However, section 41-20 of the FTA provides that you are not entitled to a fuel tax credit if the fuel is for use in a vehicle with a gross vehicle mass (GVM) of 4.5 tonnes or less travelling on a public road.

The term 'gross vehicle mass' takes its ordinary meaning as the gross vehicle mass accepted by the authority that registered the vehicle.

Since your light vehicle has a GVM of less than 4.5 tonnes, you do not meet the requirements of section 41-20 and as such subitem 11(1) of Schedule 3 of the FTCTPA does not apply.

Subitems 11(3) and 11(5) of the FTCTPA relevantly provide that you are entitled to a fuel tax credit under the FTA if you would have been entitled to an on-road credit or an off-road credit under the Energy Grants (Credits) Scheme Act 2003 (EGCSA).

Part 3 of the EGCSA allows for an on-road credit for the use of fuel in vehicles travelling on roads in Australia, provided the GVM of the vehicle is 4.5 tonnes or more, among other requirements.

Since your light vehicle has a GVM of less than 4.5 tonnes, you would not have been entitled to an on-road credit.

Therefore, you are not entitled to an on-road credit under Part 3 of the EGCSA.

Consequently, as you are not entitled to an on road credit under the EGCSA and you are not entitled under subitem 11(1) of Schedule 3 of the FTCTPA, you are not entitled to a fuel tax credit at the partial rate for the use of fuel in your light vehicle.

Off-road - full rate

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. Use in mining operations (otherwise than for the purpose of propelling any vehicle on a public road) is a use that qualifies.

The term 'mining operations' is relevantly defined in subsection 11(1) of the EGCSA as:

(b) exploration or prospecting for minerals…; or

The terms 'exploration' and 'prospecting' are not defined in the EGCSA. They, therefore, take their ordinary meaning. The phrase 'exploration or prospecting' means the systematic search for mineral deposits, and the subsequent determination of the extent of those deposits as part of establishing the commercial viability of mining.

Activities that are considered to be exploration or prospecting include:

§ geological, geophysical and geochemical mapping and surveys;

§ systematic search for minerals by drives, shafts, cross-cuts, winzes and drilling;

§ magnetometry;

§ construction and maintenance of trial pits, surface headings, underground headings, drifts or tunnels;

§ construction and maintenance of access roads used in exploration or prospecting;

§ construction and maintenance of infrastructure integral to the undertaking of exploration or prospecting; and

§ repositioning or relocation of equipment engaged in a systematic search at a designated exploration site or place within an area covered by an exploration permit, lease or licence. However, the transportation of equipment between areas covered by different exploration permits, leases or licences would not be regarded as activities in exploration or prospecting.

You undertake mineral exploration on behalf of the mine operator by providing drilling services. Drilling is considered to be 'exploration or prospecting for minerals' and therefore a mining operation as per paragraph 11(1)(a) of the EGCSA.

You use fuel to pump water necessary and for drilling. Fuel use in the rigs is use of fuel in 'exploration or prospecting' and therefore use of fuel in a mining operation.

Accordingly, you would have been entitled to an off-road credit for the use of fuel in your compressor and drill rig on the mine site.

Therefore, you are entitled to a fuel tax credit at the full rate for the use of fuel in your compressor and drill rig on the mine site.

However, it is also necessary to look at the vehicles used in your activities.

Heavy vehicles

You use your heavy vehicles on the mine site to carry various equipment around the mine site.

Paragraph 11(2)(c) of the EGCSA provides that mining operations does not include:

…the transport, by any means, of people, equipment or goods to or from a place where a mining operation referred to in any of the paragraphs in subsection (1) is, or is to be, carried on, or to or from a place adjacent to that place, other than such transport to the extent that it constitutes the activity described in…

However, this paragraph does not exclude operating eligible vehicles, vessels or other transport infrastructure for the transport of people, equipment or goods 'within' a place where a mining operation is carried on. Since your heavy vehicles transport equipment within the mine site to various drilling locations, the use of your heavy vehicles is not excluded from mining operations.

Therefore, you would have been entitled to an off-road credit for the use of fuel in your heavy vehicles travelling on the mine site.

Accordingly, you are entitled to a fuel tax credit at the full rate for the use of fuel in your heavy vehicles travelling on the mine site.

Off-road - Light vehicle

You use your light vehicle on public roads and on the mine site. Use of vehicles on a public road is excluded from 'mining operations'.

Furthermore, paragraph 11(2)(b) of the EGCSA states that 'mining operations' does not include:

…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 gross vehicle mass, other than such a vehicle that is extensively modified for use underground while it is so used; or

Since your light vehicle is a utility and has a gross vehicle mass not exceeding 3.5 tonnes, the use of the vehicle is not 'mining operations'. Therefore, you would not have been entitled to an off-road credit for the use of fuel in your light vehicle.

Accordingly, you are not entitled to a fuel tax credit at the full rate for the use of fuel in your light vehicle.

Half credit

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 section
41-5 the FTA. The amount of the credit is half of the amount of the full rate.

However, 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 on-road or an off-road credit under the EGCSA for fuel you acquired for use in your light vehicle in travelling on public roads or on the mine site.

Therefore, you are entitled to a fuel tax credit at the half rate for the portion of fuel you acquired for use in your light vehicle in travelling on the mine site.

However, subdivision 41-B provides that you are not entitled to a fuel tax credit at the half rate if the fuel is used in light vehicles travelling on public roads.

Therefore, you are not entitled to a fuel tax credit at the half rate for the portion of fuel you acquired for use in your light vehicle travelling on public roads.