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Ruling

Subject: Fuel tax credits - duty paid LPG - burner application

Question:

Would the use of duty paid LPG for heating oil in a takeaway food shop be considered use in a "burner application" for fuel tax credit purposes?

Answer:

Yes.

This ruling applies for the following periods:

2011-12 income year

2012-13 income year

2013-14 income year

2014-15 income year

The scheme commences on:

1 January 2012

Relevant facts and circumstances

You operate a takeaway food shop.

You use liquefied petroleum gas (LPG) to heat the cookers that are used to cook the takeaway food.

You are seeking a private ruling to clarify whether such a use of LPG would be considered use in a "burner application" for fuel tax credit purposes.

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

Relevant legislative provisions

Fuel Tax Act 2006 section 41-5

Fuel Tax Act 2006 subsection 43-8(4)

Fuel Tax Act 2006 Subdivision 41-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, 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 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.

Fuel tax credit entitlement

Where an entitlement to a fuel tax credit arises, it is necessary to consider the amount of fuel tax credit to which you may be entitled. That is, taking into account if an amount of carbon reduction applies.

Subsection 43-8(4) of the FTA provides for circumstances where the amount of carbon reduction that applies to the fuel would be nil and includes where fuel is acquired for use otherwise than by combustion.

Use of LPG for the generation of heat would be considered to be a use of fuel by combustion, that is, a use in a "burner application". Therefore, the carbon reduction would apply for the use of LPG.

However, your entitlement to a fuel tax credit depends on whether or not the supplier of the LPG has already claimed a fuel tax credit in respect of that fuel. If you receive the LPG in containers not exceeding 210 kilograms, then your supplier is entitled to claim the fuel tax credit and subdivision 41-B of the FTA would apply to deny you a credit.

Furthermore, you state that you have paid duty in respect of the LPG used in your business activities. It is only where duty has been paid at the transport rate that an entitlement to a fuel tax credit arises. The rate at which duty has been paid should be indicated on the invoice you receive from your fuel supplier. If duty has not been paid at the transport rate, then your invoices will state the fuel is "Not to be used, or supplied, for transport use. Penalties apply".

Therefore, whilst your use of LPG would be considered use in a "burner application", a fuel tax credit entitlement would only apply where you have received a bulk supply of LPG that has been duty paid at the transport rate.