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Ruling

Subject: fuel tax credits - mining rehabilitation

Question 1:

Are you are entitled to a fuel tax credit at the full rate (38.143 cents per litre) for the use of taxable fuel in your excavator for the removal of contaminated soil and vegetation, the compaction of contaminated soil, the removal of silt from dams and creeks and the extraction of structures such as the concrete slabs, piers and footings on the now defunct smelter site for the period of 1 June 2009 to 25 January 2012?

Answer: Yes

This ruling applies for the following periods:

2008-09 income year

2009-10 income year

2010-11 income year

2011-12 income year

The scheme commences on:

1 July 2008

Relevant facts and circumstances

You acquire diesel and fuel oil for use in your excavator.

You were subcontracted by the operators of a now defunct lead and zinc smelter to undertake the following activities:

· Rehabilitation of the land by removing contaminated soil/vegetation.

· Compaction of the contaminated soil to required specifications.

· Extraction of concrete slabs, piers and footings, which were also deemed contaminated.

· Removal of silt from dams and creeks

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

Relevant legislative provisions

Fuel Tax Act 2006 section 41-5

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(5) of Schedule 3

Energy Grants (Credits) Scheme Act 2003 section 53

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

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 subparagraph 11(1)(b)(ii)

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

Energy Grants (Credits) Scheme Act 2003 section 13

Energy Grants (Credits) Scheme Act 2003 paragraph 13(a)

Energy Grants (Credits) Scheme Act 2003 paragraph 13(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.

Subitem 11(5) of Schedule 3 of the FTCTPA 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 Energy Grants (Credits) Scheme Act 2003 (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. Use in mining operations (otherwise than for the purpose of propelling any vehicle on a public road) is a use that qualifies.

For the period 1 June 2009 to 25 January 2012 you were subcontracted by the operators of a now defunct lead and zinc smelter to undertake various activities at the smelter site using your excavator.

You acquired diesel and fuel oil for use in the excavator to undertake the works.

It is necessary to establish whether your activities are a use that qualifies under 'mining operations'.

Subsection 53(2) of the EGCSA provides that use in mining operations (otherwise than for the purpose of propelling any vehicle on a public road) is a use that qualifies.

'Mining operations' is defined in subsection 11(1) of the EGCSA and includes:

…

(a) exploration or prospecting for minerals, or 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:

…

(d) a mining rehabilitation activity; or

…

Your activities involve:

· Rehabilitation of the land by removing contaminated soil/vegetation.

· Compaction of the contaminated soil to required specifications.

· Extraction of concrete slabs, piers and footings, which were also deemed contaminated.

· Removal of silt from approximately five dams and creeks.

These are not activities under paragraphs 11(1)(a) or 11(1)(b) of the definition within the EGCSA of mining operations. Therefore it is necessary to consider whether you were undertaking a mining rehabilitation activity.

Mining Rehabilitation

Section 13 of the EGCSA defines a mining rehabilitation activity as:

... the rehabilitation of a place affected by a mining operation referred to in paragraph (a) or (b) of the definition of that expression in subsection 11(1) if the rehabilitation is carried out by:

(a) the person who carried on the mining operation; or

(b) a person contracted by that person to carry out the rehabilitation.

There are two requirements to be satisfied under section 13 of the EGCSA:

1. you must be contracted by a person who carried on the mining operation; and

2. you must be undertaking rehabilitation of a place affected by a mining operation.

Each requirement will be considered in turn.

Contracted by mining operator

As you were subcontracted by the operators of the now defunct smelter to undertake the rehabilitation of the smelter site you were therefore contracted by a person who carried on the mining operation and satisfy this requirement.

Rehabilitation of a place affected by a mining operation

The now defunct smelter was a lead and zinc smelter. Subparagraph 11(1)(b)(ii) of the EGCSA provides that a mining operation includes the beneficiation of minerals, or of ores bearing those minerals. As such, the smelter site is considered a place affected by a mining operation.

Rehabilitation means the act of restoration. In this context, it means the act of restoring a place (usually land) affected by a mining operation to a reasonable approximation of the condition it was in prior to that mining operation taking place, and/or to an agreed or acceptable environmental standard.

As your activities included the removal of contaminated soil/vegetation from the land, the compaction of this soil, the removal of silt, that is earthy matter, fine sand, or the like, and the extraction of concrete slabs, piers and footings that were deemed to be contaminated, it is accepted that you are rehabilitating a place affected by a mining operation.

As you meet both of the requirements for section 13 of the EGCSA it is accepted that for these activities you were conducting a mining rehabilitation activity and therefore a 'mining operation' and you would have been entitled to an off-road credit under section 53 of the EGCSA. Therefore, you satisfy subitem 11(5) of Schedule 3 of the FTCTPA.

Accordingly, you are entitled to a fuel tax credit at the full rate (38.143 cents per litre) for the use of diesel fuel in your excavator for the removal of contaminated soil and vegetation, the compaction of contaminated soil, the removal of silt from dams and creeks and the extraction of structures such as the concrete slabs, piers and footings on the now defunct smelter site for the period of 1 June 2009 to 25 January 2012.