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Ruling

Subject: Fuel tax credits - road user charge

Question 1:

Is the fuel tax credit for fuel used in your refrigeration units on your vehicles with a GVM of greater than 4.5 tonne travelling on a public road, reduced by the road user charge?

Answer:

Yes

Question 2:

Are you required to apportion between a use of fuel in your vehicles with a GVM greater than 4.5 tonnes that reduces your fuel tax credit amount by the RUC and one that does not?

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

2012 - 13 income year

The scheme commences on:

1 July 2008

Relevant facts and circumstances

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

You operate a business of wholesale trade in food distribution.

You use diesel fuel in vehicles travelling on public roads, delivering perishable goods to clients.

Your diesel trucks have a gross vehicle mass (GVM) of greater than 4.5 tonnes. These are rigid vehicles fitted with refrigeration units. Diesel purchased for the trucks is used for dual purposes i.e. both for the running of the truck as well as the refrigeration unit in the trucks.

You cannot calculate what proportion of fuel is used in the refrigeration unit.

You believe you are eligible to claim the full rate of fuel tax credit for all fuel used in your vehicles without the deduction of the road user charge.

Relevant legislative provisions

Fuel Tax Act 2006 .section 41-5

Fuel Tax Act 2006 subsection 43-10(3)

Fuel Tax Act 2006 section 60-5

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.

Subsection 43-10(3) of the FTA provides that, to the extent that you acquire fuel to use in a vehicle, for travelling on a public road, the amount of your fuel tax credit for the fuel is reduced by the amount of the road user charge for the fuel. It notes that only certain vehicles whose gross vehicle mass (GVM) is more than 4.5 tonnes are entitled to any credits.

Fuel used in refrigeration

In Linfox Australia Pty Ltd v Commissioner of Taxation [2012] AATA 517 the Administrative Appeals Tribunal (AAT) considered whether fuel used in refrigerated trailers was subject to the application of subsection 43-10(3) i.e. was the fuel tax credit reduced by the road user charge. The AAT found that the punctuation in the phrase "fuel to use, in a vehicle, for travelling on a public road" in subsection 43-10(3) means that, in order for the provision to apply, fuel must be acquired both:

· to use in a vehicle; and

· to use for travelling on a public road

Based on the ordinary meaning of the word "for", the AAT concluded that the only circumstance in which the second of these two conditions would be met is:

...where fuel is acquired to use for the purpose of travelling on a public road

The AAT found that the fuel in question was not acquired for this purpose, but was instead acquired and used for the "entirely different" purpose of refrigerating cargo inside the refrigerated trailer. It followed that the fuel did not satisfy the second condition of subsection 43 10(3) and was not, therefore, subject to the road user charge.

The ATO view of the decision is outlined in the Decision Impact Statement (DIS) found at http://law.ato.gov.au/atolaw/index.htm and provides that the AAT's reasoning leads to the conclusion that the phrase "fuel to use, in a vehicle, for travelling on a public road" in subsection 43-10(3) only covers fuel that is used in a vehicle:

· for the purpose of propelling that vehicle on a public road; or

· for a purpose that can properly be regarded as incidental to propelling that vehicle on a public road (i.e. air conditioning for the comfort of the driver).

You use fuel in your trucks for both propulsion of the trucks as well as refrigeration purposes. Accordingly, the fuel used in your refrigeration units on your vehicles with a GVM greater than 4.5 tonnes travelling on a public road is not reduced by the road user charge.

Apportionment

The use of the phrase 'to the extent that' in the FTA contemplates apportionment in the case of subsection 43-10(3) between a use that reduces your fuel tax credit amount by the road user charge and one that does not.

Section 60-5 of the FTA provides that in working out your net fuel amount your total fuel tax credits is the sum of all fuel tax credits to which you are entitled that are attributable to the period.

In working out your net fuel amount, section 60-5 requires the sum of all fuel tax credits to which you are entitled that are attributable to the period to be calculated.

You are generally required to perform separate calculations so that you are applying a fair and reasonable basis of apportionment where there is:

· one type of taxable fuel for use in multiple activities that either attract no fuel tax credit, a full fuel tax credit, or the amount of your fuel tax credit entitlement may be reduced by a cleaner fuel grant or the road user charge;

You have trucks that use fuel for travelling on a public road and fuel used in refrigeration. Fuel used in a vehicle for refrigeration is not subject to the road user charge. Therefore you have a use of fuel that is reduced by the road user charge and a use of fuel that is not reduced. Accordingly, it is necessary to apportion the fuel.

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.