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Ruling

Subject: Fuel tax credits - claiming back excise on aviation fuel

Question:

Are you entitled to claim fuel tax credits for the excise paid on aviation fuel when it has been entered into home consumption for a use in aircraft but is later used for the generation of electricity?

Answer:

No.

This ruling applies for the following periods:

2010-11 income year

2011-12 income year

2012-13 income year

2013-14 income year

The scheme commences on:

1 January 2011

Relevant facts and circumstances

You purchased aviation fuel for use in aircraft and acknowledge that this fuel is not entitled to a fuel tax credit. The fuel is classified to item 10.17 of the Schedule to the Excise Tariff Act 1921, (the Schedule) that is kerosene for use as fuel in aircraft.

You state that at some remote sites, there is the occasional use of this aviation fuel for electricity generation, rather than diesel fuel. All aviation fuel is stored in the one tank.

You also state that for electricity generation, if fuel had been purchased as item 10.16 of the Schedule, that is kerosene for use other than as fuel in aircraft, all of the excise duty paid per litre could be recouped as a fuel tax credit.

Presently the duty paid per litre on aviation fuel used to generate electricity is not recouped through the Fuel Tax Act 2006 (FTA) or any other legislative provisions.

You state that you wish to use a fuel tax adjustment to claim back the excise you have paid in respect of the aviation fuel.

You also believe that through using the net fuel amount formula in section 60-5 of the FTA, you can become eligible for aviation fuel used for electricity generation and not be out of pocket.

You contend that this approach accords with section 44-1 of the FTA, that being had you acquired the fuel as 10.16 (kerosene for use other than as fuel in aircraft), the excise paid would have been reimbursed.

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

Relevant legislative provisions

Fuel Tax Act 2006 section 41-5

Fuel Tax Act 2006 section 41-30

Fuel Tax Act 2006 subdivision 41-B

Fuel Tax Act 2006 Division 44

Fuel Tax Act 2006 subsection 44-5(1)

Fuel Tax Act 2006 section 60-5

Fuel Tax Act 2006 section 110-5

Excise Act 1901 section 59

Excise Act 1901 section 61

Excise Tariff Act 1921 The Schedule

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.

Taxable fuel is defined in section 110-5 of the FTA as fuel in respect of which duty is payable under the Excise Act 1901 and the Excise Tariff Act 1921 or the Customs Act 1901 or the Customs Tariff Act 1995.

Section 59 of the Excise Act 1901 provides that excise duty is payable at the time the excisable goods are entered for home consumption.

You have acquired fuel that has been entered into home consumption as aviation fuel which is classified to item 10.17 of the Schedule to the Excise Tariff Act 1921, and has attracted excise at the rate of $0.03556 per litre. That is, the fuel was entered as kerosene for use as fuel in aircraft.

Had the fuel been entered into home consumption under item 10.16 of the Schedule to the Excise Tariff Act 1921 (kerosene for use other than as fuel in aircraft) you would have paid excise at the rate of $0.38143 per litre.

Entitlement to fuel tax credits is subject to the disentitlement rules under subdivision 41-B of the FTA. 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 to be used in motor vehicles that do not meet the environmental criteria; or

· for fuel to be used in aircraft;

You acquired aviation fuel for use in your aircraft and entered the fuel for this purpose. However, you state at some of your remote sites this fuel has been used for electricity generation.

You wish to use a fuel tax adjustment to claim back the excise you have paid in respect of the aviation fuel, which is the $0.03556 per litre.

Section 41-30 of the FTA specifically provides that;

You are not entitled to a fuel tax credit for taxable fuel that you acquire, manufacture or import for use as fuel in aircraft if the fuel was entered for home consumption for that use (within the meaning of the Excise Act 1901 or the Customs Act 1901, as the case requires).

Therefore, the disentitlement provision of section 41-30 of the FTA is on the basis of fact, that is, where fuel you acquire has been entered into home consumption for use as a fuel in aircraft no entitlement to a fuel tax credit will arise.

This view is supported by the Explanatory Memorandum to the Fuel Tax Bill 2006 and Fuel Tax (Consequential and Transitional Provisions) Bill 2006 (EM) which provides background to section 41-30:

If a taxpayer acquires or manufactures in, or imports fuel into Australia that is classified in the Schedule to the Excise Tariff Act 1921 or the Schedule to the Customs Tariff Act 1995 as fuel for use in aircraft, they will not be entitled to a fuel tax credit.

Fuel tax imposed on these fuels used in aviation is not imposed for general revenue- raising reasons but rather as a method of cost recovery for various services and oversight of the aviation industry.

Division 44 of the FTA provides for an increasing or decreasing fuel tax adjustment in circumstances where you acquire, manufacture or import taxable fuel with the intention of using it for a particular purpose but subsequently use it for a different purpose.

Subsection 44-5(1) provides that;

You have a fuel tax adjustment if you use fuel, or make a taxable supply of fuel, in circumstances where, if you had originally acquired, manufactured or imported the fuel to use or make a taxable supply in those circumstances, the amount of the fuel tax credit to which you would have been entitled would have been different from the amount to which you are or were entitled.

Therefore you have a fuel tax adjustment where there is a difference between what you are entitled to and the amount you would have been entitled to.

That is, you only are entitled to a fuel tax adjustment if you would have had an entitlement to a fuel tax credit in respect of your fuel use. As determined above, the use of fuel that has been entered into home consumption as aviation fuel for use in aircraft is subject to the disentitlement provisions of section 41-30 of the FTA i.e: you are not, and were not, entitled to fuel tax credits.

Therefore, you are not entitled to claim back the excise paid on aviation fuel when it has been entered into home consumption for a use in aircraft but is later used for the generation of electricity.

You also believe that through using the net fuel amount formula in section 60-5 of the FTA, you can become eligible to claim for aviation fuel used to generate electricity.

Section 60-5 states that your net fuel amount is worked out using the following formula:

Total fuel tax - total fuel tax credits + Total increasing fuel tax adjustments - Total decreasing fuel tax adjustments

However, whilst you are liable for fuel tax of $0.03556 per litre in respect of aviation fuel, you do not have a fuel tax credit entitlement, nor do you have any increasing or decreasing fuel tax adjustments.

Accordingly, this section of the FTA cannot be utilised to provide you with any entitlement to fuel tax credits.