Edited version of your private ruling

Authorisation Number: 1012264986014

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Ruling

Subject: Fuel tax credits - calculation methodology

Question 1:

Is the method you have proposed for calculating your entitlement to fuel tax credits for the generators that you own, considered a fair and reasonable method of apportionment for the purposes of section 60-5 of the Fuel Tax Act 2006 (FTA)?

Answer:

No.

Question 2:

Is the method you have proposed for calculating your entitlement to fuel tax credits for generators and plant and equipment that you hire, considered a fair and reasonable method of apportionment for the purposes of section 60-5 of the FTA?

Answer:

No.

Question 3:

Can you claim the same amount of fuel tax credits for hired generators, plant and equipment for the 2008-09 and 2009-10 financial years based on your calculations for the 2010-11 financial year?

Answer:

No.

This ruling applies for the following periods:

2008-09 income year

2009-10 income year

2010-11 income year

The scheme commences on:

1 January 2009

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You acquire and use petrol and diesel in activities conducted in the course of your carrying on your enterprise. This includes fuel used in generators, plant and equipment (P&E) and vehicles with a gross vehicle mass (GVM) of both greater and less than 4.5 tonnes.

In addition to generators and P&E that you own, you also hire generators and various P&E from various hire companies to meet your resourcing demands.

You state that only P&E and generators hired under 'dry hire arrangements' have been considered by you as eligible for fuel tax credits as you procure and purchase the fuel and are not reimbursed, although you state that in some circumstances, you may be charged a 'top-up' fuel cost on a per litre basis where for example a piece of equipment is returned with les than a full tank of fuel.

You have not claimed for fuel used in hired P&E subject to 'dry hire arrangements'.

You reviewed invoices for the 2010-11 financial year and limited your analysis so that only invoices for major companies have been considered. You state there may be other hire companies by which you have hire arrangements with but that you have not considered these on a cost benefit analysis. Further, only hired P&E where diesel is used has been considered, again, on a cost benefit analysis.

The P&E is utilised by you for off-road activities such as earthworks and construction which is carried out at various 'work sites' which you have stated can include building sites and mining areas.

The P&E you hire is delivered direct to the work site by the relevant hire company and for this reason you state there is no possibility of on-road use of such equipment. Some of the P&E (i.e. vehicles) you hire may be used on-road as well as off-road.

The generators are used to power work sites including providing power to toilets, cabins and general work areas. You state these are generally switched on every morning and switched off at night after work is complete. Occasionally, they may be kept running throughout the night and operate on a 24x7 basis.

You state the majority of sites in which you operate are unpowered and require generators to be running while the site is active to provide power for all uses. However where sites are otherwise powered you state the generators are used to power things such as ablution and moveable office blocks. It is your view the generators would not be on site if they were not being used.

Fuel used in light vehicles with a GVM of less than 4.5 tonnes has been excluded from your analysis as they are not entitled to fuel tax credits. You state most light vehicles are fuelled by use of a fuel card and therefore fuel costs associated with such ineligible use can easily be excluded from the claim.

You do not keep log books or any information other than the fuel invoices you retain and state you cannot rely on fuel invoices alone to determine the extent of fuel used in eligible equipment such as generators and hired P&E as the invoices do not provide any details in regards to the fuel used per asset/vehicle. Further, you have work sites in different locations and procure fuel from different suppliers.

In regards to the hired P&E, you state your accounting system does not record details regarding the nature of hired P&E and period of hire and that this information is to be sourced directly from the invoices issued by the hire company.

Your policy is to only hire equipment for the actual number of days the hire equipment is to be fully utilised on the worksite.

You state generally bulk fuel is delivered and kept on site. You state you are unable to split the fuel between the various assets, that is, you keep no detailed logs in regards to the use of the bulk fuel.

Other than the generators you state you have claimed the fuel tax credit rate of 19.0715 cents per litre (cpl) in regards to all eligible uses, which you state is lower than the rate applicable had you been using the fuel 'in mining operations', that is 38.143 cpl.

Further, there are some instances when the P&E you hire are used for both on and off-road. You have stated that in these cases you have considered only the on-road rate to calculate fuel tax credit entitlement, that is, you do not currently apportion between your on and off-road use.

You state that in general, you do not have reimbursement arrangements with third parties for any fuel costs but refer to one project where there is some sharing/reallocation of fuel costs. You state that a discussion has taken place in regards to fuel tax credit entitlement and that it has been determined you have the entitlement.

Current calculation methodology

You state you have only claimed fuel tax credits for generators and P&E you own. The fuel tax credit claims in regards to P&E and your heavy vehicles is to date calculated on the quarterly meter reading for distance travelled. Fuel tax credits in respect of fuel used in generators is calculated on what you state is a conservative estimate of the number of days worked per week and hours of operation (per day) on the generator.

Proposed calculation methodology

You propose using an 'estimate use method' for the purposes of calculating your fuel tax credit entitlement for your generators, hired generators and hired P&E and seek the Commissioners view on your proposed methodology and whether this would be considered fair and reasonable.

Further, you seek the Commissioners view on whether you can adopt and claim the same amount of fuel tax credit calculated for the financial year 2010-11 for hired generators and hired P&E on your assertion the level of activity for the 2008-09 and 2009-10 financial years was greater than 2010-11.

The questions at issue for this private ruling only relate to the use of taxable fuel in the generators you own and the generators and P&E you hire and the methodology proposed for calculating your entitlement.

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

Your contentions and proposed methodologies are outlined below.

Contentions:

Your Generators

As your generators are generally used to power sites all day, that is they are switched on when someone first enters the site and switched off when the last person leaves the site, you state that it is reasonable to assume the generators are consuming fuel for at least the period of time staff are present and work is being carried out on the site.

You currently calculate the fuel used for your generators based on eligible litres calculated (on a weekly basis) using the following method:

Quarterly eligible litres =

13 weeks per quarter X days per week X hours per day X machine hourly burn rate

Based on estimates you have made, you base your calculations on 5 days per week and 8 hours per day. Your data for the burn or consumption rate is based on estimates from product/manufacturer specifications where you state you compare assets of similar nature for which there are manufacturer specifications and then select the lowest average fuel consumption or burn rate that applies to the relevant asset. Burn rates can vary based on the size and capacity of the generators.

You state that in order to determine a more accurate and reflective estimate of 'days per week' and 'hours per day', a sample of timesheets covering three different 'sample' projects over a 3 month period were analysed.

You state the projects and timesheets you used were considered to be a representative sample of the nature of the projects undertaken and indicative of the extent of activities undertaken on a work site.

The 3 sample projects chosen included 1 major project and 2 small-medium projects, a mix you believed to be representative of your overall yearly operations. You analysed the 3 projects and are of the belief that there was a degree of consistency across the results for the individual projects as well as for the combined projects and as such you determined a larger sample size was not required.

Days per week

The project timesheets record the number of hours worked each day by each individual employee. You state by using this information you could establish a range of information including the date, total hours worked each day and days worked each week for each employee.

For the three representative projects you obtained the dates on which time was recorded against a project for a sample period of 3 months. The information was grouped into calendar 'weeks' to obtain the number of days worked per week for each of the weeks in the sample 3 month period.

Using this information you determined a median number of days per week as this was considered to be a representative method. You accounted separately for those weeks with a public holiday and those without. You determined the days worked for weeks with public holidays was 4 days per week and days worked for weeks with no public holidays was 6 days per week.

Hours per day

From the same timesheet data for the sample project jobs, over the same 3 month period, the number of hours worked by each employee on a particular date was compared and the highest number of hours worked per day by any one employee was determined. As the generators operate whilst the site is active, you considered this to represent the minimum number of hours that the generators would need to operate on a site.

Using this information you determined a median number of hours worked per day. That is, 10 hours per day.

You propose that the 'days per week' and the 'hours per day' will be revised and applied both prospectively and retrospectively as follows:

You state that you will adopt the median number of days and hours on an annual basis to ensure that the number of days used in the calculation is reflective of actual use and revise where required and would calculate your entitlement based on:

Total eligible fuel used X fuel tax credit rate

Hired Generators & P&E

A similar methodology to that above is proposed for the generators and P&E you hire, that is the total eligible fuel used is calculated based on:

Number of days of hire X average hours of use per day X machine hourly burn rate.

You have identified major suppliers/hire companies with whom you contract for hire of P&E and generators on a 'dry hire' basis. Further, you have considered only hired P&E where diesel fuel has been used.

For the purposes of the proposed methodology, you have not considered any other arrangements for the purpose of calculating fuel tax credits on the basis you do not consider they give you an entitlement to claim fuel tax credits.

Number of days of hire

You state your policy is to hire equipment only for the number of days the hire equipment is expected to be fully utilised for on the worksite. Your invoices identify the hire period in either days, weeks or both days and weeks.

You are charged for the actual number of days the P&E will be utilised and therefore you contend that the 'days' documented in the invoice are the actual days the P&E was used on the worksite.

The median number of days derived from the 3 representative projects above, (that is 6 days per week and 4 days per week for weeks with public holidays) was considered by you to represent the number of days per week a site is active. You state the median number of days is also considered to be the representative number of days per week the equipment was hired on a weekly basis.

You provide an example that if the hire period is 4 weeks of which one week has a public holiday, the number of days you would calculate would be:

3 weeks X 6 days + 1 week X 4 days = 22 days.

However if the hire period is provided in weeks and days a combination of the above two methodologies will be applied. For example, if the hire period is 4 weeks and 3 days of which one of the 4 weeks has one public holiday, the number of days will be calculated as:

3 weeks X 6 days + 1 week X 4 days + 3 days = 25 days.

You state where you hire generators and the invoice indicates a basis of running 24x7 a day then rather than the default number of hours of operation per day being 10 hours as per day then you will default to 24 hours per day.

In the case of hired P&E you state the hours of use per day will vary from equipment to equipment. You state the average hours of use per day for P&E has been estimated for each asset by the plant support officer based on their depth of knowledge of each assets likely use.

The machine hourly burn rate will vary from equipment to equipment. Generally, the manufacturer's specifications will be used to determine the hourly burn rate. However you state that if this is not available your plant support officer will make an estimate, again based on their depth of knowledge and discussions with project managers and consideration of the burn rate of similar equipment (if known).

When asked if you undertook any testing to ascertain average fuel consumption or burn rates for the generators and P&E that you use to support any estimates you have made, you indicated that you compare assets of a similar nature for which there are manufacturer specifications and then select the lowest average fuel consumption or burn rate that applies to the relevant asset.

You state that based on the total eligible fuel used, your fuel tax credit entitlement will be calculated as:

Total eligible fuel used X fuel tax credit rate

You refer to the fuel tax credit rates applicable for each of the different activities, that is you state that for P&E applicable from 1 July 2008 the rate is 19.0715 cents per litre (cpl), the rate for eligible hired P&E (vehicles) is based on the full rate less road user charge and refer to the rate of 15.543 cpl for the 2010-11 financial year and the rate for fuel used in generators is 38.143 cpl.

Further, you state the level of activity undertaken during the 2008-09 and 2009-10 financial years when compared to 2010-11 was greater. On this basis, it is your view that your core business activities have remained consistent and that fuel consumed in your generators and hired P&E would be at least equal to the fuel consumed during the 2010-11 financial year.

On the basis that you expect your fuel tax credit claims for the 2008-09 and 2009-10 financial years to be greater than the financial year 2010-11, you wish to forgo the higher claim. You propose claiming the same amount of fuel tax credits for hired P&E and hired generators as calculated for the financial year 2010-11 for the 2008-09 and 2009-10 financial years.

You base this on comparisons you made of the dollar value of expenses incurred in respect of the projects, that is, hired equipment, fuel and material costs, and the amount of revenue derived from projects in the financial year 2010-11, with the project expenses and revenue for 2008-09 and 2009-10 financial years.

In your view the above methodology and quantification for the fuel tax credit claims for the use of fuel in generators you own, hired generators and hired P&E is fair and reasonable.

In summary

Based on the proposed methodology, you would be :

· estimating the number of hours that are worked at a site per day - your only source documents being timesheets for workers on three projects over a three month period.

· estimating the number of days per week that equipment was used.

· estimating the items of P&E you hired - based on invoices from major suppliers for the financial year 2010/11 on the basis that it is dry hire.

· estimating the consumption rate for the items of P&E based on staff expertise or estimates compiled on similar manufacturer's specifications, where these were available.

From these estimates you calculated an amount of litres for the 2010/11 year, which you think is reasonable to apply to the 2008/09 and 2009/10 financial years.

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

Energy Grants (Credits) Scheme Act 2003

Other references

FTD 2006/2 - Fuel tax - what records are required to be kept by taxpayers to substantiate a claim for a fuel tax credit?

FTD 2010/1 - Fuel tax - is apportionment used when determining total fuel tax credits in calculating the net fuel amount under section 60-5 of the Fuel Tax Act 2006?

PS LA 2010/3 - Apportionment for the purposes of the Fuel Tax Act 2006

FTR 2009/1 - Fuel Tax - entitlement to a fuel tax credit under section 41-5 of the Fuel Tax Act 2006 in a vehicle or equipment hire arrangement

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 to the extent that 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 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.

You have stated you have a number of activities that would qualify for an entitlement to fuel tax credits including use of fuel in generators you own and in hired generators and plant and equipment (P&E). Whilst entitlement is not at issue for the purposes of this ruling, you propose a methodology and quantification method for your fuel tax credit claims for these activities and wish the Commissioner to rule on whether this would be considered to be fair and reasonable.

Fuel Tax Determination FTD 2010/1 Fuel tax: is apportionment used when determining total fuel tax credits in calculating the net fuel amount under section 60-5 of the Fuel Tax Act 2006?, sets out the Commissioner's view.

The Commissioner considers that the use of the phrase 'to the extent that', in the context of determining fuel tax credit entitlements, contemplates apportionment in the case of section 41-5 of the FTA:

· between a use that entitles you to a fuel tax credit and one that does not, and

· between uses of fuel that give rise to different rates of fuel tax credit.

In FTD 2010/1, the Commissioner considers that an entity can use any apportionment method that is fair and reasonable in its circumstances to calculate its fuel tax credit entitlement.

Further guidance on whether a method of apportionment to calculate an entity's fuel tax credit entitlement is fair and reasonable in its circumstances is provided for in practice statement law administration (PSLA) 2010/3 - Apportionment for the purposes of the Fuel Tax Act 2006.

While the following commonly used methods are considered to be a fair and reasonable basis for apportionment, there may be other methods or variations to these methods which could prove to be a fair and reasonable basis for apportionment, depending on the entity's circumstances.

The methods are:

· the constructive methods (actual use or planned use)

· the deductive methods (actual use or planned use)

· the percentage use method, and

· the estimate use method.

As part of your business you acquire petrol and diesel fuel for use in light vehicles, heavy vehicles, generators and various plant and equipment. That is you need to account for a range of activities and fuel tax credit rates in order to accurately calculate your fuel tax credit entitlement.

You propose using an 'estimate use method' for the purposes of calculating your fuel tax credit entitlement for your generators, hired generators and hired P&E and seek the Commissioners view on your proposed methodology and whether this would be considered fair and reasonable.

Further, you seek the Commissioners view on whether you can adopt and claim the same amount of fuel tax credit calculated for the financial year 2010-11 for hired generators and hired P&E on your assertion the level of activity for the 2008-09 and 2009-10 financial years was greater than 2010-11.

Estimate use method

The estimate use method may provide a fair and reasonable basis for apportioning between eligible and ineligible purposes, and/or multiple eligible purposes that either attract a full fuel tax credit, half fuel tax credit, or where the amount of the fuel tax credit entitlement may be reduced by the cleaner fuel grant or the road user charge.

The estimate use method of working out the quantity of taxable fuel that an entity acquires for use in an eligible activity in a tax period requires the entity to make a fair and reasonable estimate of the quantity of taxable fuel it acquires for use or actually uses in a tax period.

The Commissioner also accepts that an entity can use any appropriate reliable measure as the basis for calculating the amount of taxable fuel that it acquires for use in an eligible activity.

Examples of known reliable measures include:

· odometer readings of kilometres actually travelled

· route distances if a vehicle operates on fixed routes

· kilowatt hours of electricity generated

· hours of operation of vehicle or equipment, or

· average hourly fuel consumption of vehicle or equipment.

Although these are commonly used measures, because of the diverse range of eligible activities, this is not an exhaustive list and there may be other measures that are appropriate in an entity's circumstances.

In considering reliable measures an entity may use manufacturer's specifications to calculate its fuel consumption, if it is suitable in its circumstances.

Where an entity's fuel consumption for a particular vehicle/equipment is greater than the manufacturer's figures, the entity may decide that a different measure is appropriate, but it will need to demonstrate the basis on which the variation occurs.

Similarly, it is accepted that in some cases an entity may choose to rely on the manufacturer specifications, notwithstanding that it may generate a lower fuel consumption (than its actual fuel consumption) in order to reduce its compliance costs.

Your Generators

You state that as your generators are switched on when someone first enters a work site at which you are operating and then switched off when the last person leaves the site, it is reasonable to assume the generators are consuming fuel for at least the period of time staff are present and work is being carried out on the site.

It is on this basis that you propose calculating your quarterly eligible litres by referring to employee timesheets to estimate the number of days per week and hours per day your generators are operating and implement this into the below formula, that is:

13 weeks per quarter X days per week X hours per day X machine hourly burn rate

To determine an estimate of 'days per week' and 'hours per day', you selected a sample of employee timesheets covering three different 'sample' projects in order to come up with a median 'days per week' your generators, plant and equipment operate and also the 'hours per day' they operate.

In analysing your timesheets and accounting separately for those weeks with a public holidays, you determined the days worked for weeks with public holidays was 4 days per week and days worked for weeks with no public holidays was 6 days per week.

Using the same timesheet data you assessed the number of hours worked by each employee on a particular date and compared this to the highest number of hours worked per day by any one employee. Using this information you determined a median number of hours worked per day. That is, 10 hours per day.

Further, your data for the burn or consumption rate is based on estimates from product/manufacturer specifications where you state you compare assets of similar nature for which there are manufacturer specifications and then select the lowest average fuel consumption or burn rate that applies to the relevant asset. You acknowledge burn rates can vary based on the size and capacity of the generators.

However you state that if this information is not available your plant support officer will make an estimate, based on their depth of knowledge and discussions with project managers and consideration of the burn rate of similar equipment (if known).

You do not keep log books or any information other than fuel invoices and have not undertaken any testing to ascertain average fuel consumption or burn rates for the generators that would support any estimates you have made.

Whilst you propose calculating your quarterly eligible litres by referring to employee timesheets and submit that your generators must be operating based on the times employees are on your work site you have not conducted any tests to ensure this reflects the true use of the fuel.

The method you suggest above provides a median of days per week and the hours per day employees are on site but does not correlate to how many litres of fuel are being used each day in particular equipment. You do not have any other records such as or kilowatt hours of electricity generated or logs recording hours of operation. Nor have you determined an average hourly fuel consumption of the equipment.

It is expected that you keep records that explain:

· all transactions and other acts you engage in to support the acquisition of fuel for which you are entitled to a fuel tax credit, and

· the basis on which, and the method by which, you make any estimation, determination or calculation of a fuel tax credit.

Therefore, in the absence of other evidence to support your calculations it is not considered the use of employee timesheets from 3 projects from one financial year provides a fair and reasonable approach to calculating eligible litres for fuel tax credits.

Whilst you have made reference to the machine hourly burn rates, in determining the appropriateness of using the manufacturer's specifications you must take into consideration a number of factors including whether the use of the vehicle/equipment aligns with the use of the vehicle/equipment on which the manufacturer has based the fuel consumption indications, the age of the vehicle/equipment with reference to the manufacturer's specifications and the maintenance history of the vehicle/equipment for example.

While you have compared assets of similar nature for which there are manufacturer specifications, you have then selected the lowest average fuel consumption or burn rate that applies to the relevant asset without undertaking any testing. Further, where this information is not available you have referred to staff members to make estimates based on their knowledge.

Your use of fuel would be better reflected by keeping records over a set period, using a representative sample of jobs/projects to reflect:

· the actual hours the different equipment operates to determine an average per job type i.e. large or small projects for example

· the hourly burn rates of different equipment used to determine an accurate figure to apply moving forward.

Accordingly, the method you have proposed for calculating your entitlement to fuel tax credits for the generators that you own is not considered a fair and reasonable method of apportionment for the purposes of section 60-5 of the FTA.

Hired generators, P&E

In regards to your hire arrangements you state you have identified major suppliers/hire companies with whom you contract for hire of P&E and generators on a 'dry hire' basis.

For the purposes of the proposed methodology, you have not considered any other arrangements for the purpose of calculating fuel tax credits on the basis you do not consider they give you an entitlement to claim fuel tax credits. That is, you have only considered:

· P&E hired under 'dry hire' arrangements

· invoices for the 2010-11 financial year

· invoices for major companies

· hired P&E where diesel is used.

You propose basing your calculations on the number of days of hire on invoices, which will identify the hire period in either days, weeks or both days and weeks.

You state that your policy is to hire equipment only for the number of days the hire equipment is expected to be fully utilised for on the worksite and that you are charged for the actual number of days the P&E will be utilised. Therefore, you contend that the 'days' documented in the invoice are the actual days the P&E was used on the worksite.

In the case of hired P&E you state the hours of use per day will vary from equipment to equipment. Similarly, the manufacturer's specifications will be used to determine the hourly burn rate but that the average hours of use per day for P&E has been estimated for each asset by the plant support officer based on their depth of knowledge of each assets likely use. Further, you state where you hire generators and the invoice indicates a basis of running 24x7 then you will default to 24 hours per day.

When asked if you undertook any testing to ascertain average fuel consumption or burn rates for the generators and P&E that you use to support any estimates you have made, you indicated that you compare assets of similar nature for which there are manufacturer specifications and then select the lowest average fuel consumption or burn rate that applies to the relevant asset.

Similar to above, it is not considered that you have been able to reasonably reflect the various uses of the taxable fuels you acquired. Without other evidence, including log books or machine operating hours you cannot state that the generators and P&E operate each and every day they are site. Further, you cannot base your claims for fuel tax credits on staff estimates of average hours of use per day for each asset without further documentation to support this.

As suggested above, your use of fuel would be better reflected by keeping records over a set period and using a representative sample of jobs/projects to reflect:

· the actual hours the different equipment operates to determine an average per job type i.e. large or small projects for example

· the hourly burn rates of different equipment used to determine an accurate estimate to apply moving forward.

In the absence of other records in which to cross reference your findings or your proposed methodology i.e. from other business records, we have no way of ascertaining whether your proposed methodology reflects your actual use of fuel.

Furthermore, you intend on referring to the calculations determined from your use of employee timesheets, As stated above, in the absence of other evidence to support your calculations it is not considered the use of employee timesheets from 3 projects from one financial year provides a fair and reasonable approach to calculating eligible litres for fuel tax credits.

Accordingly, the method you have proposed for calculating your entitlement to fuel tax credits for the generators and plant and equipment you hire is not considered a fair and reasonable method of apportionment for the purposes of section 60-5 of the FTA.

Retrospective claims

You state the level of activity undertaken during the 2008-09 and 2009-10 financial years when compared to 2010-11 was greater. It is your view that your core business activities have remained consistent and that fuel consumed in your generators and hired P&E would be at least equal to the fuel consumed during the 2010-11 financial year.

You expect your fuel tax credit claims for the 2008-09 and 2009-10 financial years to be greater than the financial year 2010-11 but that you wish to forgo the higher claim. You propose claiming the same amount of fuel tax credits for hired P&E and hired generators as calculated for the financial year 2010-11 for the 2008-09 and 2009-10 financial years.

You base this on comparisons you made of the dollar value of expenses incurred in respect of the projects, that is, hired equipment, fuel and material costs, and the amount of revenue derived from projects in the financial year 2010-11, with the project expenses and revenue for 2008-09 and 2009-10 financial years.

However, a comparison of your expenses (which includes material costs as well as fuel costs) with the amount of revenue for each of the financial years does not reflect the quantities of fuel acquired for use in eligible activities over the course of the 3 financial years.

Further, we have not accepted that your calculation methodologies for your generators and the hired generators, plant and equipment is a fair and reasonable basis on which to claim your fuel tax credits on the basis that you have indicated that you do not have other evidence/business records to support the quantities of fuel acquired for use in eligible activities.

Furthermore, it is your view that your core business activities have remained consistent but that the level of activity undertaken during the 2008-09 and 2009-10 financial years was greater than when compared to 2010-11 and that you expect your claims for these years to be higher. This indicates that you do not have a regular pattern of fuel usage, that is, it fluctuates depending on the number of jobs/projects you are undertaking and the size of those jobs.

Accordingly, you cannot claim the same amount of fuel tax credits for hired generators, plant and equipment for the 2008-09 and 2009-10 financial years based on your calculations for the 2010-11 financial year.

Other issues for you to consider

You have stated fuel is generally delivered in bulk and kept on site but that you are unable to split the fuel between the various assets, that is you keep no detailed logs in regards to the use of the bulk fuel meaning there would be no records regarding any potential loss of fuel for which an entitlement to fuel tax credits would not arise.

For the purpose of fuel tax credits you must apportion between a use that entitles you to a fuel tax credit and one that does not but also between uses of fuel that give rise to different rates of fuel tax credit.

You have mentioned there are some instances when the P&E you hire are used for both on and off-road but that in these cases you have considered only the on-road rate to calculate fuel tax credit entitlement, that is you do not currently apportion between your on and off-road use.

Further, you have also stated that other than the generators, you have claimed the half rate of 19.0715 cents per litre (cpl) in regards to all eligible uses, which you state is lower than the rate applicable had you been using the fuel 'in mining operations' for example. Again, this suggests that you do not currently apportion between the different uses of fuel at this stage.

Furthermore, you have also indicated that in regards to your P&E subject to 'dry hire arrangements' you may in some circumstances be charged a 'top-up' fuel cost on a per litre basis where for example a piece of equipment is returned with less than a full tank of fuel.

Fuel Tax Ruling (FTR) 2009/1 provides for entitlement to a fuel tax credit under section 41-5 of the FTA in a vehicle or equipment hire arrangements and details a number of common arrangements to explain which entity has the fuel tax credit entitlement.

Consistent with Arrangement C as outlined in FTR 2009/1, you will have no entitlement to any top-up' fuel costs as you will not be taken to have acquired and or used that portion of the fuel for fuel tax credit purposes. Again, this requires that you apportion between those uses of fuel that give rise to a fuel tax credit and those that do not.

Lastly, you state that in general, you do not have reimbursement arrangements with third parties for any fuel costs but refer to one project where there is some sharing/reallocation of fuel costs. You state that a discussion has taken place in regards to fuel tax credit entitlement and that it has been determined you have the entitlement. Note, that it is only the entity that is "acquires" the fuel that is entitled to a credit. Entitlement cannot be transferred from one entity to another.