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Authorisation Number: 1012158985872

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Ruling

Subject: Fuel tax credits - road transport/fishing operations

Issue 1

Question 1:

Are you entitled to a fuel tax credit at the partial rate (full rate less road user charge) for the use of diesel fuel in vehicles with a gross vehicle mass (GVM) exceeding 4.5 tonnes travelling on public roads and for diesel fuel used to power auxiliary equipment on those vehicles for the period 1 July 2008 to 30 June 2012?

Answer:

Yes.

Question 2:

Are you entitled to a fuel tax credit at the full rate (38.143 cents per litre) for the use of diesel fuel in vehicles with a GVM exceeding 4.5 tonnes travelling on public roads for the period 1 July 2008 to 30 June 2012, that is, is this activity 'fishing operations'?

Answer:

No.

This ruling applies for the following period/s:

2008-09 income year

2009-10 income year

2010-11 income year

2011-12 income year

The scheme commences on:

1 July 2008

Relevant legislative provisions

Fuel Tax Act 2006 section 41-5

Fuel Tax Act 2006 section 43-10

Fuel Tax Act 2006 subsection 43-10(3)

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 subitem 11(5) of Schedule 3

Energy Grants (Credits) Scheme Act 2003 section 8

Energy Grants (Credits) Scheme Act 2003 subsection 8(a)

Energy Grants (Credits) Scheme Act 2003 paragraph 8(a)(i)

Energy Grants (Credits) Scheme Act 2003 paragraph 8(a)(ii)

Energy Grants (Credits) Scheme Act 2003 paragraph 8(a)(iii)

Energy Grants (Credits) Scheme Act 2003 subsection 8(b)

Energy Grants (Credits) Scheme Act 2003 section 21

Energy Grants (Credits) Scheme Act 2003 paragraph 21(b)

Energy Grants (Credits) Scheme Act 2003 section 34

Energy Grants (Credits) Scheme Act 2003 subsection 34(1)

Energy Grants (Credits) Scheme Act 2003 paragraph 34(1)(a)

Energy Grants (Credits) Scheme Act 2003 paragraph 34(1)(b)

Energy Grants (Credits) Scheme Act 2003 paragraph 34(1)(h)

Energy Grants (Credits) Scheme Act 2003 subsection 34(2)

Energy Grants (Credits) Scheme Act 2003 section 53

Energy Grants (Credits) Scheme Act 2003 subsection 53(2)

Issue 2

Question 1:

Are you entitled to a fuel tax credit for the use of diesel fuel in vehicles with a gross vehicle mass (GVM) exceeding 4.5 tonnes travelling on public roads for the period 1 July 2012 to 30 June 2014, that is, is this activity 'fishing operations'?

Answer:

No

Question 2:

Are you entitled to a fuel tax credit at the partial rate (full rate less road user charge) for the use of diesel fuel in vehicles with a GVM exceeding 4.5 tonnes travelling on public roads and for diesel fuel used to power auxiliary equipment on those vehicles for the period 1 July 2012 to 30 June 2014?

Answer:

Yes.

Question 3:

Are you required to reduce the fuel tax credit entitlements for your eligible activities, (that is the use of diesel fuel in vehicles with a GVM exceeding 4.5 tonnes travelling on public roads) from 1 July 2012 by the amount of the carbon reduction?

Answer:

No.

This ruling applies for the following period/s:

2012-13 income year

2013-14 income year

The scheme commences on:

1 July 2012

Relevant legislative provisions

Fuel Tax Act 2006 section 41-5

Fuel Tax Act 2006 subdivision 41-B

Fuel Tax Act 2006 section 43-5

Fuel Tax Act 2006 subsection 43-5(1)

Fuel Tax Act 2006 section 43-8

Fuel Tax Act 2006 subsection 43-8(4)

Fuel Tax Act 2006 paragraph 43-8(4)(b)

Fuel Tax Act 2006 subparagraph 43-8(4)(b)(ii)

Fuel Tax Act 2006 paragraph 43-8(4)(c)

Fuel Tax Act 2006 section 43-10

Fuel Tax Act 2006 subsection 43-10(3)

Fuel Tax Act 2006 section 43-70

Fuel Tax Act 2006 subsection 43-70(1)

Fuel Tax Act 2006 paragraph 43-70(1)(a)

Fuel Tax Act 2006 paragraph 43-70(1)(b)

Fuel Tax Act 2006 paragraph 43-70(1)(h)

Fuel Tax Act 2006 subsection 43-70(2)

Energy Grants (Credits) Scheme Act 2003 section 34

Clean Energy (Fuel Tax Legislation Amendment ) Act 2011

Relevant facts and circumstances

You are registered for both fuel tax credits and goods and services tax (GST) and are the GST group representative.

You state your operations involve fishing operations.

As part of your services you also transport fish from a fishery depot (which captures and stores the fish) to a facility owned and operated by you, which comprises of large tanks used to store the live fish.

Most of the fish are kept at the facility for a few days but sometimes longer. Some of the fish are processed whilst others are kept alive for export.

You use vehicles with a gross vehicle mass exceeding 4.5 tonne for transporting the fish. They have one fuel tank that powers the vehicles, including auxiliary equipment which are used to maintain the required temperature within the vehicles. In addition, one of the trucks has been fitted out with a different system to maintain the health of the fish during transportation so that they are stronger for keeping in the tanks and for export.

You acquire diesel fuel for use in these vehicles.

You refer to fishing operations as defined in section 34 of the EGCSA. You believe the facility owned and operated by you comprising of tanks containing live fish, satisfies the Commissioners view of a fish farm.

You state there is no clear articulated requirement outlined within FTR 2006/4 that the transportation must not involve vehicles travelling on a public road. You therefore seek clarification as to whether or not the transportation and related activities undertaken in heavy vehicles travelling on a public road would meet the definition of 'eligible fishing operations' and be eligible for a full fuel tax credit (38.143 cents per litre) for the period 1 July 2008 to 30 June 2012.

Further, you refer to changes to the Fuel Tax Act 2006 from 1 July 2012 resulting from the Clean Energy (Fuel Tax Legislation Amendment) Act 2011 (Clean Energy Act) and contend that if the Commissioner agrees with your view and the consistency of the definitions of 'eligible fishing operations' by both the EGCSA and the FTA, that you will not be required to reduce your fuel tax credit entitlements from 1 July 2012.

Reasons for decision

Issue 1 - period 1 July 2008 to 30 June 2012

Detailed reasoning

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 relevant provisions for travel on a public road are contained in sub item 11(1) of Schedule 3 of the FTCTPA.

Travel on a public road and incidental use.

The heavy vehicles you use have a gross vehicle mass (GVM) greater than 4.5 tonnes and travel on public roads in transporting live fish between the collection point (fishery depot) and your facility.

These vehicles also contain auxiliary equipment which is used to maintain the required temperature for the live fish whilst they are being transported. In addition, one of the trucks has been fitted out with a different system to maintain the health of the fish during transportation so that they are stronger for keeping in the tanks and for export.

Subparagraph's 11(1)(b)(i) and (ii) of Schedule 3 of Part 3 of the FTCTPA relevantly 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 or incidental use in relation to that vehicle.

The meaning of 'incidental use' is provided for at section 8 of the EGCSA which states that each of the following, whether or not it takes place on a road, is an incidental use in relation to a vehicle:

powering the vehicle, or auxiliary equipment in or on the vehicle, while:

(i) goods to be transported in or on the vehicle are loaded or goods that have been so transported are unloaded; or

(ii) passengers who are to be transported in or on the vehicle board or passengers who have been so transported alight; or

(iii) the vehicle is moved to a place where anything in subparagraph (i) or is to happen or from a place where any such thing has happened;

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

The Commissioner considers that 'incidental use' that occurs while the vehicle is travelling on a public road is integral to and an ordinary incident of a journey undertaken by a vehicle travelling on a public road.

The functions of your vehicles are to transport and maintain the quality of temperature sensitive goods (fish) from their point of collection until delivery. This is provided and maintained using auxiliary equipment on the vehicles.

Each of your vehicles have one fuel tank and one fuel source, they cannot reach their destination without the transport function of the vehicle itself, nor can the quality of the goods be maintained without the auxiliary equipment, therefore, fuel acquired to power this equipment is also fuel acquired 'to use, in a vehicle, for travelling on a public road'.

As such, section 43-10 of the FTA applies. Subsection 43-10(3) provides that where fuel is acquired for use in a vehicle for travelling on a public road, the amount of your fuel tax credit is reduced by the amount of the road user charge.

Accordingly, you are entitled to a fuel tax credit at the partial rate (full rate less road user charge) for the use of diesel fuel in vehicles exceeding 4.5 tonnes travelling on public roads and for diesel fuel used to power auxiliary equipment on those vehicles for the period 1 July 2008 to 30 June 2012.

Where an entitlement has already arisen under section 41-5 of the FTA by virtue of sub item 11(1) of the FTCTPA, we would not normally consider sub item 11(5) which provides that you are entitled to a fuel tax credit under the FTA if you would have been entitled to an off-road credit under the Energy Grants (Credits) Scheme Act 2003 (EGCSA).

However, for the purposes of addressing your contention, that your activities may otherwise be considered 'fishing operations' as defined in section 34 of the EGCSA, we consider this position below.

Fishing Operations

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.

Subsection 53(2) of the EGCSA provides that use in primary production (otherwise than for the purposes of propelling a road vehicle on a pubic road), is a use that qualifies.

Section 21 of the EGCSA provides the expression 'primary production' means:

(b) fishing operations; or

…

Therefore, an entitlement to an off-road credit will arise under the EGCSA where activities are considered to be 'fishing operations', other than for the purposes of propelling a vehicle on a public road.

However, you use diesel fuel in vehicles with a GVM exceeding 4.5 tonnes that travel on public roads for the purposes of transporting fish from the fishery depot to your facility.

It is considered that your activity is the propulsion of a road vehicle on a public road and as such subsection 53(2) of the EGCSA would apply. As such, no entitlement would arise to an off-road credit under the EGCSA. It would then follow, that no entitlement to a fuel tax credit would arise under the FTA by virtue of subitem 11(5) of the FTCTPA.

Your contentions

However, it is your view that there is no clear articulated requirement outlined within FTR 2006/4 - Fuel tax - fuel tax credits for taxable fuel acquired or manufactured in, or imported into Australia for use in carrying on an enterprise involving 'fishing operations' as defined in section 34 of the EGCSA that the transportation must not involve vehicles travelling on a public road.

Therefore, for the purposes of addressing this view, we discuss this further below:

The term 'fishing operations' is relevantly defined in subsection 34(1) of the EGCSA and includes, among other things:

…

the taking, catching or capturing of fish; or

the farming of fish; or

…

but does not include any activity referred to in any of the proceeding paragraphs that is conducted, in whole or in part:

(h) otherwise than for the purposes of a business;

…

Transport of live fish

The Commissioner considers that the catching and transporting of live fish from the wild for stocking fish farms is an activity that falls within paragraph 34(1)(a) of the EGCSA. There is no requirement that a fish farm be located in a particular place. It can be located in the sea, a river, a lake, a dam, or comprise artificially constructed ponds, tanks or other structures containing fish.

In paragraph 34(1)(b) of the EGCSA, the phrase 'farming of fish' means the propagating or raising of stocks of fish for the purpose of a business, otherwise than for business purposes connected with recreation, sport or tourism.

However, the farming of fish ceases when the fish are finally removed from the seawater or fresh water or the pond, tank or other structures containing fish at the farm for processing or sale. Therefore, further processing of fish on a farm is not 'fishing operations under paragraph 34(1)(b).

You collect live fish from a fishery depot, which captures and stores the fish, and you collect and transport these with vehicles with a GVM of greater than 4.5 tonnes, by road, to a facility owned and operated by you. This facility comprises of large tanks used to store the live fish.

You state most of the fish are kept at the facility for a few days and that some are processed on site at the facility whilst others are kept alive for export.

It is your view that that the facility owned and operated by you satisfies the Commissioner's view of a fish farm. This is not a question at issue for the purpose of this ruling.

Taking, catching or capturing of fish

Whilst your facility comprises of large tanks to stock and store the fish, the fish you collect and transport in your heavy vehicles are not live fish caught from the wild by you [emphasis added], but live fish collected from a fishery depot. Therefore, your activities would not be considered to be the taking, catching or capturing of fish as per paragraph 34(1)(a) of the EGCSA.

Farming of fish

Your activities of collecting live fish for transport are not activities that are an integral part of the taking of the fish, nor are they activities that occurring immediately after the nets have been pulled for example.

Whilst your broader business activities may be more generally considered to be engaged in the 'farming of fish', the specific activities to which your transport operations take place would not be considered in this context to be 'fishing operations'. In this context you collect fish already stored for processing and sale by a third party. That is, your activities are at a point after the 'farming of fish' in this context has ceased. As such, you are not undertaking 'fishing operations'.

Accordingly, had subsection 53(2) of the EGCSA not applied, we would still be of the view that you are not entitled to a fuel tax credit at the full rate (38.143 cents per litre) for the use of diesel fuel in vehicles with a GVM exceeding 4.5 tonnes travelling on public roads for transporting live lobsters, that is this activity is not considered 'fishing operations' for the period 1 July 2008 to 30 June 2012.

Issue 2 - period 1 July 2012 to 30 June 2014

Detailed reasoning

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, entitlement to fuel tax credits is still subject to the disentitlement rules under subdivision 41-B of the FTA, amongst other requirements. This provides that you are not entitled;

· if another entity has previously been entitled to a fuel tax credit, or

· for fuel used in vehicles with a gross vehicle mass (GVM) of 4.5 tonnes, or less, travelling on a public road, or

· for fuel used in motor vehicles that do not meet the environmental criteria.

However, subsection 43-5(1) of the FTA provides that the amount of your fuel tax credit for taxable fuel is the amount worked out by reducing the amount of effective fuel tax by the amount of carbon reduction.

Further, subsection 43-8(4) of the FTA provides for circumstances where the amount of carbon reduction to apply to the fuel will be nil. Specifically, subparagraph 43-8(4)(b)(ii) of the FTA states that the carbon reduction does not apply to a use of fuel in 'fishing operations'. Further, subparagraph 43-8(4)(c) provides that the carbon reduction does not apply to a use of fuel in a vehicle with a GVM of more than 4.5 tonnes travelling on a public road.

It is your view that there is no clear articulated requirement outlined within the now repealed fuel tax ruling FTR 2006/4 - Fuel tax - fuel tax credits for taxable fuel acquired or manufactured in, or imported into Australia for use in carrying on an enterprise involving 'fishing operations' as defined in section 34 of the Energy Grants (Credits) Scheme Act 2003 (EGCSA) that the transportation must not involve vehicles travelling on a public road.

You contend that if the Commissioner agrees with your view and the consistency of the definitions of 'eligible fishing operations' by both the EGCSA and the FTA, that you will not be required to reduce your fuel tax credit entitlements from 1 July 2012.

Thus, we will first consider whether your activities fall within the concept of 'fishing operations' as defined in section 43-70 of the FTA.

Fishing Operations

The definition provided for within section 43-70 of the FTA mirrors the previous definition of fishing operations provided for within section 34 of the EGCSA (now repealed). Amongst other things, 'fishing operations' are:

…

the taking, catching or capturing of fish; or

the farming of fish; or

…

but does not include any activity referred to in any of the proceeding paragraphs that is conducted, in whole or in part:

(h) otherwise than for the purposes of a business;

…

Transport of live fish

It follows that for the period from 1 July 2012, the Commissioners view in FTR 2006/4 equally applies as the previous EGCSA definition of 'fishing operations' is mirrored in the FTA.

As such, it is considered that the catching and transporting of live fish from the wild for stocking fish farms is an activity that falls within paragraph 43-70(1)(a) of the FTA. There is no requirement that a fish farm be located in a particular place. It can be located in the sea, a river, a lake, a dam, or comprise artificially constructed ponds, tanks or other structures containing fish.

In paragraph 43-70(1)(b) of the FTA, the phrase 'farming of fish' means the propagating or raising of stocks of fish for the purpose of a business, otherwise than for business purposes connected with recreation, sport or tourism.

However, the farming of fish ceases when the fish are finally removed from the seawater or fresh water or the pond, tank or other structures containing fish at the farm for processing or sale. Therefore, further processing of fish on a farm is not 'fishing operations under paragraph 43-70(1)(b) of the FTA.

You collect live fish from a fishery depot, which captures and stores the fish, and you collect and transport these with vehicles with a GVM of greater than 4.5 tonnes, by road, to a facility owned and operated by you. This facility comprises of large tanks used to store the live fish.

You state most of the fish are kept at the facility for a few days and some are processed on site at the facility, whilst others are kept alive for export.

It is your view that the facility owned and operated by you satisfies the Commissioner's view of a fish farm. This is not a question at issue for the purpose of this ruling.

Taking, catching or capturing of fish

Whilst your facility comprises of large tanks to stock and store the fish, the fish you collect and transport in your heavy vehicles are not live fish caught from the wild by you [emphasis added], but live fish collected from a fishery depot. Therefore, your activities are not considered to be the taking, catching or capturing of fish as per paragraph 43-70(1)(a) of the FTA.

Farming of fish

Your activities of collecting live fish for transport are not activities that are an integral part of the taking of the fish, nor are they activities that occurring immediately after the nets have been pulled for example.

Whilst your broader business activities may be more generally considered to be engaged in the 'farming of fish', the specific activities to which your transport operations take place would not be considered in this context to be 'fishing operations'. In this context you collect fish already stored for processing and sale by a third party. That is, your activities are at a point after the 'farming of fish' in this context has ceased. As such, you are not undertaking 'fishing operations'.

Accordingly, you are not entitled to a fuel tax credit for the use of diesel fuel in vehicles with a GVM exceeding 4.5 tonnes travelling on public roads for transporting live fish and for diesel fuel used to power auxiliary equipment on those vehicles for the period 1 July 2012 to 30 June 2014, that is, your activity is not considered 'fishing operations'.

Travel on a public road and road user charge

The heavy vehicles you use have a GVM of 4.5 tonnes and travel on public roads in transporting the live fish between the collection point (fishery depot) and your facility.

These vehicles also contain auxiliary equipment which are used to maintain the required temperature for the live fish whilst they are being transported. In addition, one of the trucks has been fitted out with a different system to maintain the health of the fish during transportation so that they are stronger for keeping in the tanks and for export.

As highlighted above, 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. However, subsection 43-10(3) of the FTA provides that your fuel tax credit for such a use will be reduced by the amount of the road user charge.

Each of your vehicles have one fuel tank and one fuel source, they cannot reach their destination without the transport function of the vehicle itself, nor can the quality of the goods be maintained without the auxiliary equipment, therefore, fuel acquired to power this equipment is also fuel acquired 'to use, in a vehicle, for travelling on a public road'.

Accordingly, you are entitled to a fuel tax credit at the partial rate (full rate less road user charge) for the use of diesel fuel in vehicles with a GVM exceeding 4.5 tonnes travelling on public roads and for diesel fuel used to power auxiliary equipment on those vehicles for the period 1 July 2012 to 30 June 2014.

Clean Energy Reduction

As highlighted above, subsection 43-8(4) of the FTA provides for the situations where the amount of the carbon reduction to apply to the fuel will be nil. Specifically, subparagraph 43-8(4)(c) of the FTA states that the carbon reduction does not apply to a use of fuel in a vehicle with a GVM of more than 4.5 tonnes travelling on a public road.

You have acquired fuel for use in a vehicle with a GVM of more than 4.5 tonnes travelling on a public road. Therefore, paragraph 43-8(4)(c) of the FTA applies. This provides that the amount of carbon reduction to apply to the fuel will be nil.

Accordingly, you are not required to reduce the fuel tax credit entitlements for your eligible activities (that is the use of diesel fuel in vehicles with a GVM exceeding 4.5 tonnes travelling on public roads) from 1 July 2012 by the amount of carbon reduction.