Edited version of your private ruling

Authorisation Number: 1012296993134

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Ruling

Subject: Fuel tax credits - mining

Question 1:

Are you entitled to claim fuel tax credits at the partial rate, (that is full rate less road user charge) for that portion of diesel you acquire for use in your trucks greater than 4.5 tonnes gross vehicle mass (GVM) for travelling on public roads?

Answer:

Yes.

Question 2:

Does the use of diesel in plant and equipment in undertaking the installation equipment through mining leases qualify as being involved in an activity within the meaning of mining operations under section 11, or rail transport under section 38, of the Energy Grants (Credits) Scheme Act 2003 (EGCSA)?

Answer:

No.

Question 3:

For the period 1 July 2010 to 30 June 2012, are you entitled to claim fuel tax credits at the half rate for diesel you acquire and use in plant and equipment in undertaking the installation equipment through mining leases?

Answer:

Yes.

Question 4:

From 1 July 2012, are you entitled to claim fuel tax credits at the full rate, less carbon charge for diesel you acquire and use in plant and equipment in undertaking the installation equipment through mining leases?

Answer:

Yes.

Question 5:

From 1 July 2012, is the amount of fuel tax credits you can claim for diesel that you acquire for use in your trucks greater than 4.5 tonnes travelling on public roads reduced by the carbon charge?

Answer:

No.

This ruling applies for the following period/s:

2010-11 income year

2011-12 income year

2012-13 income year

The scheme commences on:

1 July 2010

Relevant facts and circumstances

You are a proprietary company limited by shares and registered under the Corporations Act 2001 and have been allocated an Australian Company Number.

You are registered for goods and services tax (GST) as a construction business.

You have been contracted by another entity to install equipment mostly through mining leases.

You advise that the purpose of the equipment is to aid in the control and monitoring of the transport network.

You use the following plant and equipment on the project:

· heavy earthmoving equipment

· four wheel drive vehicles with a GVM of less than 4.5 tonnes, which are not subject of this private ruling, and

· truck mounted drills.

· You acquire diesel fuel for use in your plant on a back charge basis.

In March 2010 you applied for a private ruling from the Commissioner in relation to fuel tax credits for your business activities. Our response issued to you in April 2010.

During the year ended 30 June 2012 you changed your name with the Australian Securities and Investment Commission. Your Australian Company Number remains unchanged.

You now seek a private ruling under your new name for the tax periods 1 July 2010 to 30 June 2013.

Relevant legislative provisions

Fuel Tax Act 2006 section 41-5

Fuel Tax Act 2006 section 41-20

Fuel Tax Act 2006 subsection 43-5(1)

Fuel Tax Act 2006 subsection 43-10(3)

Fuel Tax Act 2006 section 110-5

A New Tax System (Goods and Services Tax) Act 1999 subsection 184-1

Fuel Tax (Consequential and Transitional Provisions) Act 2006 Division 2 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 subitem 11(5) of Schedule 3

Fuel Tax (Consequential and Transitional Provisions) Act 2006 subitem 11(6) of Schedule 3

Energy Grants (Credits) Scheme Act 2003 section 11

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)(i)

Energy Grants (Credits) Scheme Act 2003 subparagraph 11(1)(b)(ii)

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

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

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

Energy Grants (Credits) Scheme Act 2003 subsection 11(2)

Energy Grants (Credits) Scheme Act 2003 section 38

Energy Grants (Credits) Scheme Act 2003 section 39

Energy Grants (Credits) Scheme Act 2003 section 53

Energy Grants (Credits) Scheme Act 2003 subsection 53(1)

Corporations Act 2001

Clean Energy (Fuel Tax Legislation Amendment) Act 2011

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.

Activities undertaken between 1 July 2010 to 30 June 2012

For the period 1 July 2008 to 30 June 2012, entitlement is affected by Division 2 of Part 3 of Schedule 3 to the Fuel Tax (Consequential and Transitional Provisions) Act 2006 (FTCTPA) which operated to restrict this entitlement to specific activities and carried over the previous entitlement provisions of the Energy Grants (Credits) Scheme 2003 Act (EGCSA).

The items listed within subitem 11(1) of Division 2 of Schedule 3 of the FTCTPA are:

(i) for use in a vehicle travelling on a public road

(ii) for incidental use in relation to a vehicle travelling on a public road

(iii) for use in generating electricity

(iv) for use other than as a fuel

(v) for use other than as a fuel in an internal combustion engine

(vi) for use as heating oil.

In regards to preceding paragraphs, the FTA provides that the vehicle must have a gross vehicle mass (GVM) greater than 4.5 tonnes and comply with certain environmental criteria.

Vehicles travelling on a public road

As stated above, you are entitled to claim fuel tax credits under the FTA for taxable fuel acquired for use in heavy vehicles travelling on public roads.

Travel on a public road also includes any incidental use of the vehicle. Incidental use is defined in the EGCSA and would include the movement of trucks off road to and from the place where they will load or unload goods.

If you acquire and use taxable fuel in a heavy vehicle travelling on a public road, under the FTA the amount of fuel tax credit you can receive is reduced by the amount of road user charge (RUC). This is commonly referred to as the partial fuel tax credit rate, which is full rate less RUC. The amount of the RUC is determined by the Minister for Transport and Regional Services and is subject to change.

Accordingly, for that portion of diesel that you acquire for use in your trucks greater than 4.5 tonnes travelling on public roads you would be eligible for the partial fuel tax credit rate.

The amount of the fuel tax credit, after the reduction for the RUC, is:

Fuel used for installation of equipment through the mining leases

You use diesel fuel in your machinery installing equipment predominantly on mining leases.

This is not an eligible use of fuel under any of the items in subitem 11(1) of Schedule 3 of the FTCTPA. Therefore it is necessary to consider whether your activities qualify under any other provisions.

Subitem 11(5) of the FTCTPA provides that you are entitled to a fuel tax credit if you would have been entitled to an off-road credit under the EGCSA. This is known as the full fuel tax credit and is currently $0.38143 per litre.

Section 53(1) 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, or rail transport (otherwise than for the purpose of propelling a road vehicle on a public road), is a use that qualifies.

Mining

The term mining operations is defined in subsection 11(1) of the EGCSA as:

(a) exploration or prospecting for minerals, or the 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:

(c) a mining transport activity

…

(f) a mining construction activity; or

…

(i) a sundry mining activity.

Subsection 11(2) of the EGCSA goes on to exclude certain other activities including:

· quarrying or dredging to obtain materials for use in building, construction or similar purposes

· use in generic vehicles not exceeding 3.5 tonnes GVM

· the transportation of people equipment or goods (with some exceptions)

Mining operations therefore consists of three parts:

Paragraphs (a) and (b): mean exploration or prospecting, site preparation, mining for minerals, or the beneficiation of those minerals;

Paragraphs (c) to (i): includes a number of specific operations detailed in these paragraphs;

Subsection 11(2) of the EGCSA: which excludes the specific operations detailed in these paragraphs.

The use of the words "means", "includes" and "does not include" provide that paragraphs (a) and (b) of the definition contain the central features of mining operations, which is then expanded by the specific activities outlined in paragraphs (c) to (i).

All activities contained in paragraphs (a) to (i) are subject to the specific exclusions contained in subsection 11(2).

Unless an activity is within the scope of the definition, it will not be eligible for a grant.

The provisions of paragraphs (c) to (i) do not limit paragraphs (a) and (b) and nor do paragraphs (c) to (i) provide an exhaustive list of eligible activities, and an activity is not necessarily precluded from the grant if it is not specifically listed in them.

An activity that does not meet the specific requirements of any of paragraphs (c) to (i) may still be an activity that satisfies the requirements of either paragraph (a) or (b) of the definition of mining operations and, if not excluded by subsection 11(2), be eligible for the grant.

In your case, your activities are not considered to be a mining transport activity, a mining construction activity or a sundry mining activity. Furthermore, an activity does not have to be mentioned in subsection 11(2) to be excluded from the definition of mining operations. These paragraphs serve merely to point out specific exclusions, while other activities will be excluded because they simply do not fall within the meaning of mining operations.

The phrase "in mining operations" means in the course of or in the process or act of (see Chief Executive Officer of Customs v. WMC Resources Ltd (as agent for East Spar Alliance) (1998) 87 FCR 482 per Nicholson J). Therefore, if an activity can be said to have taken place in the course of mining operations, it can be concluded that it also takes place in mining operations.

 When considering whether an activity takes place in the course of a mining operation, the courts have applied the following three tests (see Federal Commissioner of Taxation v. Payne (2001) 202 CLR 93, (2001) 46 ATR 228, 2001 ATC 4027; Chief Executive Officer of Customs v. WMC Resources Ltd (as agent for East Spar Alliance) (1998) 87 FCR 482; Wandoo Alliance Pty Ltd v. CEO of Customs [2001] AATA 801): 

· a causal link exists - in other words, a certain activity is functionally integrated with a mining operation, thereby forming an essential part of it.

· a spatial link exists - meaning that an activity takes place in an area set aside or occupied for a mining operation.

· a temporal link exists - the activity takes place in a timely fashion, not prior to, or after the completion of, the mining operation.

The relevance or weighting afforded to these criteria will vary depending on the facts of each case.

 A causal link exists if the activity is functionally integrated with a mining operation. That is, the activity is so closely related to the mining operation that it is impossible to distinguish between the activity undertaken and the mining operation.

In your case, you purchase diesel fuel for use in your business for use in installing equipment through the mining leases. It can not be said that your activities are essential and indistinguishable from mining for minerals. Therefore no causal link exists.  

As some of your work takes place on mining sites, the existence of a spatial link is not denied. 

However, in your case, there is no temporal link evident between the service you provide and the exploration, prospecting for, recovery of or beneficiation of ore or mineral. Clearly your activities could be taking place prior to or after any actual mining. Therefore, no temporal link exists.

Consequently, your activities are not considered to be mining operations.

Rail transport

Section 38 of the EGCSA sets out the meaning of the expression 'use in rail transport', including a number of activities that amount to use in rail transport. However, a requirement common to all of the activities is that the fuel be used in a rail vehicle (or in some instances in equipment in or on a rail vehicle). Hence, determining whether the vehicle that the fuel is being used in is a 'rail vehicle' is a vital step in establishing whether the fuel is for use in rail transport.

Section 39 of the EGCSA states that:

The expression rail vehicle means a train, tram or any other vehicle operating on rails.

In this instance, you are using diesel fuel in your equipment, rather than using the diesel fuel in a rail vehicle. Therefore, your use of the fuel is not a use in rail transport.

Accordingly, the use of diesel fuel in plant and equipment undertaking the installation equipment through mining leases does not qualify as being involved in an activity within the meaning of mining operations under section 11, or rail transport under section 38 of the EGCSA.

Half rate

As we have explained, you may be entitled to a partial fuel tax credit for fuel used in heavy vehicles travelling on a public road (and any incidental use). Any other fuel uses may not meet the entitlement provisions for fuel tax credits.

From 1 July 2008, subitem 11(6) of the FTCTPA provides that an entitlement to a fuel tax credit will arise under section 41-5 of the FTA if you would not have been entitled to a credit previously.

In your circumstances, this would apply to the diesel you use in various vehicles and equipment you use to install equipment through mine leases. The amount of the credit is half of the amount of the full fuel tax credit. That is, 19.0715 cents per litre (cpl).

Therefore, for the period 1 July 2010 to 30 June 2012 you are entitled to claim the half rate for diesel used in plant and equipment in undertaking the installation equipment through mining leases.

Activities undertaken between 1 July 2012 to 30 June 2013

From 1 July 2012, entitlement for fuel tax credits is still provided for under section 41-5 of the FTA however, the previous entitlement provisions of the EGCSA provided for under Part 3 of Schedule 3 to the FTCTPA have been repealed. Further, entitlement to fuel tax credits under the FTA is no longer affected by the FTCTPA.

These changes mean that the fuel tax credit rate increased for liquid fuels such as diesel used in those off-road activities eligible since 1 July 2008 (previously the half rate).

However, also applicable from 1 July 2012, are changes to the FTA resulting from the Clean Energy (Fuel Tax Legislation Amendment) Act 2011,some of which include:

· how the amount of your fuel tax credit for the taxable fuel is calculated, taking into account the amount of carbon reduction

· the inclusion of circumstances where the amount of carbon reduction to apply to fuels will be nil.

Subsection 43-5(1) of the FTA (as amended) 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.

The carbon charge reduces the fuel tax credit rates for some fuel types and activities, however there are some exceptions where the carbon charge, will not apply. This includes use of taxable fuels in heavy vehicles travelling on a public road, specified off-road activities in agriculture, fishing and forestry and where fuel has been acquired for a use otherwise than by combustion.

Carbon charge amounts will increase annually, further reducing fuel tax credit rates until 30 June 2015.

Consequently, from 1 July 2012, you are entitled to claim fuel tax credits at the full rate, less carbon charge for the diesel you acquire and use in plant and equipment in undertaking the installation of equipment through mining leases. That is, the rate you can claim is 31.933 cpl.

Further, as noted above, from 1 July 2012, is the amount of fuel tax credits you can claim for fuel that you acquire for use in your trucks greater than 4.5 tonnes travelling on public roads will not reduced by the carbon charge. The rate you can claim is 12.643 cpl, although this may be subject to change.

Entities

Section 110-5 of the FTA provides that 'entity' has the same meaning given by section 184-1 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) which defines an entity as (among other things) a body corporate.

As 'body corporate' is not a defined term, it takes it meaning from the general law. 'Body corporate' is a general term to describe an artificial entity having a separate legal existence. A body corporate has the ability to continue in existence indefinitely and to keep its identity regardless of changes to its membership. It also has the power to act, hold property, enter into legal contracts, sue and be sued in its own name, just as a natural person can.

Most bodies corporate are established under an Act of Parliament or under a statutory procedure of registration, such as the Corporations Act 2001, or incorporated under a specific Act.

As you are registered under the Corporations Act 2001 and have been allocated an ACN, you are an entity entitled to a fuel tax credit under the auspices of the FTA and your change of registered name does not effect your entitlements.