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Ruling

Subject: Fuel tax credits

Question 1:

Are you entitled to a fuel tax credit at the rate of 12.643 cents per litre for diesel fuel you acquire and use in your specified truck with a gross vehicle mass (GVM) of greater than 4.5 tonnes, for travelling on public roads, during the period 1 July 2012 to 30 June 2013?

Answer:

Yes.

Question 2:

Are you entitled to a fuel tax credit at the rate of 38.143 cents per litre for the portion of diesel fuel you acquire and use in the specified agitator fitted to your truck while it is travelling on public roads, during the period 1 July 2012 to 30 June 2013?

Answer:

Yes.

Question 3:

Are you entitled to a fuel tax credit at the rate of 31.933 cents per litre for diesel fuel you acquire and use in your heavy vehicles when they are not travelling on public roads during the period 1 July 2012 to 30 June 2013?

Answer:

Yes.

Question 4:

Are you required to apportion between uses of fuel that give rise to different fuel rates of fuel tax credits?

Answer:

Yes.

This ruling applies for the following income years:

2012-13 income year

The scheme commences on:

1 January 2012

Relevant facts and circumstances

You operate a truck (with a gross vehicle mass exceeding 4.5 tonnes), with a specified agitator fitted for the delivery of product for construction.

The diesel motor operates the truck and the specified agitator.

You acquire the diesel fuel used in your heavy vehicles.

You also state that the majority of the work done by the truck is mixing the product at the batching plant and delivering to off-road sites, and in respect of this, you ask whether you also have an entitlement to fuel tax credits at the off-road rate or if you can claim a percentage of on-road use and a percentage for off-road use.

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

Relevant legislative provisions

Fuel Tax Act 2006 section 41-5

Fuel Tax Act 2006 section 43-5

Fuel Tax Act 2006 section 43-8

Fuel Tax Act 2006 subsection 43-8(4)

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 that you do so for use in carrying on your enterprise, if you are registered for GST.

Section 43-5 of the FTA provides the amount of the fuel tax credit to which you are entitled for taxable fuel is the amount of effective fuel tax that is payable on the fuel less amount of carbon reduction (if applicable).

However, your fuel tax credit entitlement can also be affected by:

· the amount of any applicable grant or subsidy; or

· the amount of the road user charge (RUC) in relation to use of taxable fuel in heavy vehicles for travelling on public roads.

Carbon reduction

Section 43-8 of the FTA sets out the rules for working out the amount of the carbon reduction to fuel tax credit calculations from 1 July 2012.

It provides that the amount of carbon reduction that applies to a particular quantity of taxable fuel is worked out by using the following formula:

Quantity of fuel x carbon price x carbon emission rate

However, subsection 43-8(4) of the FTA provides for those circumstances where no carbon reduction applies. That is, the amount of carbon reduction that applies to the fuel will be nil where the fuel is acquired for use in:

· specified activities within agriculture, fishing operations; or forestry; or

· vehicles with a gross vehicle mass (GVM) of more than 4.5 tonnes travelling on a public road; or

· if the fuel is not used for combustion.

The amount of carbon reduction that applies to the fuel will also be nil if covered by the Opt-in-Scheme from 1 July 2013.

Road user charge

Subsection 43-10(3) of the FTA provides that to the extent that you acquire taxable 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.

In Linfox Australia Pty Ltd v. Commissioner of Taxation [2012] AATA 517 (Linfox decision), the AAT considered whether fuel used in a refrigeration unit in a refrigerated trailer travelling on a public road 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 [our emphasis]

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 in response to the Linfox decision can be found in the Decision Impact Statement published on 19 September 2012 and provides that the Commissioner considers that the phrase "fuel to use, in a vehicle, for travelling on a public road" in subsection 43-10(3) of the FTA 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 be properly regarded as incidental to propelling that vehicle on a public road i.e. air conditioning for the comfort of the driver.

Further, the Decision Impact Statement provides that the AAT's reasoning differs from the view set out in Fuel Tax Ruling 2008/1 that the phrase "fuel to use, in a vehicle, for travelling on a public road" in subsection 43-10(3) covers both fuel used for propulsion and fuel used to power auxiliary equipment, such as a refrigeration unit, in (or affixed to) a vehicle while it is travelling on a public road.

For travel on a public road

You acquire diesel fuel for use in your truck with a GVM of greater than 4.5 tonnes. You travel on public roads for the delivery of your product for construction. You are entitled to claim a fuel tax credit for diesel fuel used in the truck for this purpose.

However, as mentioned above, subsection 43-10(3) of the FTA provides that the amount of your fuel tax credit is reduced by the amount of the road user charge for the fuel where you acquire taxable fuel to use, in a vehicle, for travelling on a public road. That is, fuel that is used in your vehicle for the purpose of propelling the vehicle on a public road; or for a purpose that can be properly regarded as incidental to propelling the vehicle on a public road i.e. air conditioning for the comfort of the driver.

For the period commencing 1 July 2012, the road user charge is 25.5 cents per litre.

Accordingly, you are entitled to a fuel tax credit at the rate of 12.643 cents per litre for diesel fuel you acquire and use in your heavy vehicles for travelling on public roads during the period 1 July 2012 to 30 June 2013.

Fuel used in specified agitators fitted to your truck

Your truck is also fitted with a specified agitator. That is you also use fuel in a vehicle travelling on a public road for a purpose other than the propulsion of that vehicle

The fuel being used in the specified agitators is not fuel to use, in a vehicle, for travelling on a public road" as described above. As such, subsection 43-10(3) does not apply and your fuel tax credit for the fuel used in the specified agitators will not be reduced by the road user charge.

Therefore, you are entitled to a fuel tax credit at the rate of 38.143 cents per litre for the portion of diesel fuel you acquire and use in the specified agitator fitted to your truck while it is travelling on public roads, during the period 1 July 2012 to 30 June 2013.

Off-road use of fuel

You state the majority of the work done by your truck is in mixing at the batching plant and for delivery to off-road construction sites. That is, diesel fuel is being used in your heavy vehicle when it is not travelling on a public road.

You have an entitlement to fuel tax credits in respect of these activities. However, this entitlement is subject to the carbon reduction.

Section 43-5 of the FTA provides that the amount of fuel tax credit is worked out using the formula:

Amount of effective fuel tax - Amount of carbon reduction

In relation to diesel fuel, the carbon reduction is equal to the quantity of diesel multiplied by the carbon emission rate of 0.0027, multiplied by the carbon price. The carbon price for the year starting on 1 July 2012 is 2,300 cents and this amount is subject to changes each year (fixed for the next two years).

Consequently, the amount of carbon reduction which applies to diesel fuel acquired during the year ended 30 June 2013 is 6.21 cents per litre.

As a result, the amount of fuel tax credit you can claim from 1 July 2012 is reduced.

Accordingly, you are entitled to a fuel tax credit at the rate of 31.933 cents per litre for diesel fuel you acquire and use in your heavy vehicles when they are not travelling on public roads during the period 1 July 2012 to 30 June 2013 that is when they are operating off-road.

Apportionment

Section 60-5 of the FTA provides that in working our 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.

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 provides that the use of the phrase 'to the extent that' in the FTA contemplates the apportionment of fuel between:

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

· uses that give rise to different fuel rates of fuel tax credits, as per your circumstances.

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.

Practice Statement Law Administration PS LA 2010/3 Apportionment for the purposes of the Fuel Tax Act 2006 provides guidance in determining whether a method of apportionment used to calculate a fuel tax credit entitlement is fair and reasonable in an entity's circumstances.

Whilst this practice statement discusses commonly used methods, you are not limited to the particular methods set out as you can use any apportionment method that is fair and reasonable in your circumstances to calculate your fuel tax credit entitlement.