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Ruling
Subject: Fuel tax credits - Acquisition
Question
Are you entitled to claim fuel tax credits for taxable fuel used in dredging activities carried out by your contractor using their own equipment?
Answer
No.
This ruling applies for the following periods:
2012-13 year of income
The scheme commences on:
1 July 2012
Relevant facts and circumstances
You operate a number of ports in Australia.
You engage a contractor to carry out maintenance dredging periodically.
You purchase the fuel to be used in the dredging vessel.
The full cost of the fuel including GST is charged to the contractor via a tax invoice.
The vessel is owned by the contractor.
You advised that:
§ The contractor is responsible for the operation of the dredging vessel.
§ The contractor employs the master and crew of the vessel.
§ Any fuel remaining in the vessel on completion of the contract remains in the vessel.
You also provided an extract from the relevant contract which states:
As an alternative to the Contractor supplying the fuel, the Principal may be in a position to provide fuel at a lesser rate, than the Contractor. In such case, the Principal will purchase the fuel and the Contractor will reimburse the actual delivered amount of fuel at cost.
Relevant legislative provisions
Fuel Tax Act 2006 section 41-5
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, import or manufacture for use in carrying on your enterprise.
The term 'acquire' is not defined in the FTA. Furthermore, no guidance is provided by the Revised Explanatory Memorandum to the Fuel Tax Bill 2006 and the Fuel Tax (Consequential and Transitional Provisions) Bill 2006 on the meaning of 'acquire'.
Therefore it takes on its ordinary meaning. In the context of the FTA, the term 'acquire' has the ordinary meaning of to 'get as one's own'.
To 'get as one's own', implies getting ownership or proprietary rights in respect of the taxable fuel. This will mean either that property in the taxable fuel passes from one entity to another, or that proprietary rights or ownership is conferred by the act of obtaining the taxable fuel by other means.
Therefore, an entity typically 'acquires' taxable fuel upon a change in ownership of, or a transfer of proprietary rights in, the fuel from one entity to another.
You acquire taxable fuel if:
§ you purchase the fuel;
§ the fuel is gifted to you; or
§ you get the fuel as your own by any other means (other than manufacture or import). This necessarily means that you get ownership of, or proprietary rights in respect of, the fuel.
Whether you get ownership of, or proprietary interest in, fuel will depend on all facts and circumstances of each case. It will be necessary to examine the surrounding circumstances, together with any relevant documentation, including any written agreement.
You purchase fuel which is then supplied to your Contractor. The contractor uses this fuel in its dredging vessel, which it operates to undertake the maintenance dredging. The vessel is operated by employees of the Contractor. Under the terms of the contract you are reimbursed for the full cost of the fuel and charge the Contractor for the cost of the fuel via a tax invoice.
As the control over the use of the fuel has passed to the Contractor and the Contractor pays you for that fuel, it is considered that the proprietary rights to the fuel have passed to the Contractor.
Therefore, you are not entitled to claim fuel tax credits for taxable fuel used in dredging activities carried out by your contractor using his own equipment.