Edited version of your private ruling

Authorisation Number: 1012444206966

Ruling

Subject: Fuel tax credits - road maintenance vehicle - road user charge (RUC) and carbon reduction

Question 1:

Are you entitled to a fuel tax credit at the full rate less the road user charge (RUC) for the portion of taxable fuel acquired for use in operating your street sweepers while the brushes are down, in sweeping rubbish from the street and gutters for the period 1 December 2008 to 30 June 2012?

Answer:

Yes.

Question 2:

Is the amount of your fuel tax credit for the portion of taxable fuel acquired for use in operating your street sweepers while the brushes are down, in sweeping rubbish from the street and gutters on public roads reduced by the RUC for the period from 1 July 2012?

Answer:

No.

Question 3:

Is the amount of your fuel tax credit for the portion of taxable fuel you acquire and use in operating your street sweepers, while the brushes are down, in sweeping rubbish from the street and gutters on public roads, subject to the carbon reduction for the period 1 July 2012 to 30 November 2012?

Answer:

Yes.

Question 4:

Can you claim fuel tax credits retrospectively back to the tax period commencing 1 December 2008 to correct RUC errors in fuel tax credit entitlements made in an earlier tax period in accordance with Fuel Tax Act 2006 - Correcting fuel tax errors Determination (No1) 2012?

Answer:

Yes.

This ruling applies for the following periods:

1 July 2008 30 June 2009

1 July 2009 30 June 2010

1 July 2010 to 30 June 2011

1 July 2011 to 30 June 2012

1 July 2012 to 30 June 2013

The scheme commences on:

1 July 2008

Relevant facts and circumstances

You are a government entity registered for goods and services tax (GST) and fuel tax credits. You lodge your business activity statements (BAS) on a monthly basis.

You conduct certain public services including the sweeping of streets within the boundaries of your local government area.

You acquire diesel fuel for use in two street sweepers with a gross vehicle mass (GVM) exceeding 4.5 tonnes but less than 20 tonnes.

You state that your street sweepers travel from the depot with the brushes up to the point at which they commence moving along the road in the performance of sweeping (maintaining) the road with the brushes down.

You have previously claimed fuel tax credits for these vehicles at the road transport rate for the period. That is, 38.143 cents per litre less the applicable road user charge (RUC).

On 6 December 2012 we received an application for private ruling from you in relation to the rate of fuel tax credit applying to the fuel used in your street sweepers. You have asked us to treat this application as a notification of entitlement to fuel tax credits under section 105-55 of the Taxation Administration Act 1953.

You accept that whilst the street sweepers are travelling to and from their depot to the place where they commence sweeping of the road (i.e. maintaining the road), this is travel on a public road and your fuel tax credit for the fuel used in the street sweepers for this purpose, is subject to the RUC.

However, it is your opinion that the portion of the road on which the vehicles are moving is closed to the public for the provision of the maintenance by sweeping away rubbish and should be considered to be 'off-road' and your fuel tax credit for the fuel not be reduced by the RUC.

Furthermore, you reference FTR 2008/1 at paragraph's 117 and 119 which state in reference to movement by a vehicle engaged in road construction, repair or maintenance:

…

117. However, not every movement of a vehicle on a road is travel. Where a vehicle is engaged in road construction, repair or maintenance and moves on the road or portion of the road that is under construction, repair or maintenance in the course of carrying out this work, the vehicle does not 'travel' on the road in the sense contemplated by subsections 43-10(3) and (4). The purpose of this movement is to benefit the road, not to use the road to relocate the vehicle.

…

119. The Commissioner considers that, having regard to the policy context of subsection 43-10(3), it would be inconsistent with that policy intent to impose the road user charge on a vehicle in the course of undertaking road construction, repair or maintenance, as the vehicle is not contributing to wear and tear on the road.

…

As such, you seek to confirm if the street sweepers are considered to be maintaining the road, and as such, not travelling when the brushes are down.

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 subsection 43-10(4)

Fuel Tax Act 2006 subsection 47-5

Fuel Tax Act 2006 subsection 47-10

Fuel Tax Act 2006 subsection 60-5

Fuel Tax Act 2006 subsection 60-10

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

Fuel Tax (Consequential and Transitional Provisions) Act 2006 subitem 11(1) to Schedule 3

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

Fuel Tax (Consequential and Transitional Provisions) Act 2006 subitem 11(4) to Schedule 3

Energy Grants (Credits) Scheme Act 2003 section 43

Taxation Administration Act 1953 section 105-55

Taxation Administration Act 1953 paragraph 105-55(1)

Taxation Administration Act 1953 subparagraph 105-55(1)(a)

Reasons for decision

1 December 2008 to 30 June 2012

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 for use in carrying on your enterprise if you are registered for GST.

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

Having regard to the FTCTPA and EGCSA, entitlement to a fuel tax credit for a vehicle undertaking road construction, repair or maintenance is intended to be phased in up until 30 June 2012.

Subitem 11(1) of the FTCTPA provides that you are entitled to fuel tax credits for taxable fuel you acquire for use in a vehicle travelling on a public road.

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 (RUC) for the fuel.

In Linfox Australia Pty Ltd v Commissioner of Taxation [2012] AATA 517 (Linfox), the Australian Administrative Tribunal (AAT) considered whether fuel used in operating a refrigeration unit in a refrigerated vehicle travelling on public roads was subject to the application of subsection 43-10(3) of the FTA and therefore if the fuel tax credit reduced by the RUC.

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) of the FTA meant that, in order for the provision to apply, the 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 vehicle. It followed that the fuel did not satisfy the second condition of subsection 43-10(3) of the FTA and was not, therefore, subject to the road user charge.

The ATO response to Linfox 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 states that the AAT's reasoning differs from the view set out in Fuel Tax Ruling FTR 2008/1 Fuel Tax: vehicle's travel on a public road that is incidental to the vehicle's main use and the road user charge which stated that the phrase "fuel to use, in a vehicle, for travelling on a public road" in subsection 43-10(3) of the FTA covers both fuel to propel the vehicle and fuel used to power auxiliary equipment, such as a refrigeration unit, in, or affixed to the vehicle. The view has now been incorporated into FTR 2008/1 under FTR 2008/1DA4 - Draft Addendum.

FTR 2008/1DA4 - Draft Addendum provides fuel to use 'for travelling', in the context of 43-10(3) of the FTA, encompasses fuel for propulsion but also fuel for aspects of the vehicle's function and operation that are for the purpose of travelling on a public road.

Fuel for travelling would include fuel used for stopping and idling while stationary in the course of a journey as well as the use of lights, brakes, power steering etc. Determining whether an aspect of the vehicle's function or operation has this character requires a practical assessment of its connection with travelling, as distinct from some other function of the vehicle. The expression 'for travelling' does not include fuel used for a purpose unrelated to a vehicle's movement on a public road.

The draft addendum will amend FTR 2008/1, when finalised. The changes outlined in FTR 2008/1DA4 have been incorporated into the draft consolidation version of FTR 2008/1DAC1 (referenced henceforth).

Travel on a public road

You use diesel fuel in operating two street sweepers to clean the roads within your council boundaries. You have stated the street sweepers "travel" from the depot with the brushes up to the point where they commence "moving" along the road in undertaking maintenance of the roads. It follows they also travel on public roads upon their return journey to the depot.

FTR 2008/1DAC1 provides that the Commissioner considers that the meaning of the terms 'travel' and 'travelling' in subsections 43-10(3) and (4) of the FTA mean to go from one place to another place or to move from one point to another point.

A vehicle's travel is considered to begin when it commences to move and ends when it arrives at a destination, regardless of the distance. You state that your street sweepers "travel" from the depot with the brushes up to the point where they commence the activity of maintaining the roads. You state that this activity is only undertaken within council boundaries. As such, subitem 11(1) of the FTCTPA would apply.

You accept that fuel tax credits for fuel used in this travel to and from the depot is reduced by the amount of the road user charge.

Fuel used in street sweepers - maintaining the roads

The Commissioner considers that the movement of a street sweeper whilst engaged in road maintenance is not 'travelling' on a public road.

At paragraph 22 of FTR 2008/1DAC1, the Commissioner explains that certain movement along a public road does not constitute 'travel' for the purposes of subsection 43-10(3) of the FTA. Specifically, it states that:

…

However, 'travelling' in the sense contemplated by subsection 43-10(3) does not include the movement of a vehicle on a public road or portion of a public road where:


· the vehicle is engaged in the construction, repair or maintenance of the road; and

· that road or portion of that road is under construction, repair or maintenance.

Example 6 at paragraph's 35 and 36 of FTR 2008/1DAC1 is of a street sweeper which is involved in maintenance of a road. The example states:

Example 6: movement that does not constitute travel - street sweeper when maintaining the road

Following on from Example 5, the street sweeper carries out maintenance work on the public road by swashing and vacuuming the road.

The street sweeper's movement on the public road when it is washing and vacuuming the road does not constitute travel as contemplated by subsections 43-10(3) and 43-10(4). The street sweeper is engaged in the maintenance of the road.

As discussed above, FTR 2008/1 is currently under review as a result of the decision by the AAT in Linfox. On 9 January 2013 the Commissioner published draft addendum FTR 2008/1DA4 in response to the decision and these changes have been incorporated into the draft consolidated version FTR 2008/1DAC1, referenced above.

However, the changes made do not amend the Commissioner's view on the meaning of 'travel' and the treatment of street sweepers included in FTR 2008/1 as described above.

Public roads

Furthermore, in paragraphs 44 and 45 of FTR 2008/1DAC1the Commissioner states:

For the purposes of subsections 43-10(3) and 43-10(4) a road is a public road if:

· it is opened, declared or dedicated as a public road under a statute;

· it is vested in a government authority having statutory responsibility for the control and management of public road infrastructure; or

· it is dedicated as a public road at common law.

For the purposes of subsections 43-10(3) and (4) a public road encompasses any shoulder of the road and auxiliary lanes, for example emergency lanes.

Therefore, whether or not a road is closed to the public from time to time has no bearing on its status as a public road.

Consequently, as movement of a vehicle on a public road or portion of a public road is not considered 'travel' on a public road when the vehicle is engaged in the construction, repair or maintenance of the road, subitem 11(1) of the FTCTPA would not apply.

On-road credit under EGCSA

However, subitem 11(3) of the FTCTPA provides that if you would have been entitled an on-road credit under the EGCSA then you will be entitled to a fuel tax credit under section 41-5 of the FTA.

Section 43 of the EGCSA provided that you were entitled to an on-road credit for fuel used in operating a vehicle on a road with a GVM of 4.5 tonnes or more, but less than 20 tonnes, if the vehicle was a vehicle for transporting passengers or goods, and is undertaking a journey across a metropolitan boundary or wholly outside a metropolitan boundary.

The Commissioner accepts that a street sweeper is a vehicle for transporting passengers or goods.

The meaning of 'metropolitan areas' was defined in section 6 of the EGCSA and did not include your local government area. As you operate the street sweepers within your boundaries, the street sweepers are travelling outside the metropolitan area for the purposes of section 43 of the EGCSA.

Accordingly, you would have been entitled to an on-road credit in operating a street sweeper within the boundaries of your local government area. This would include when the vehicle is maintaining the street. As you were entitled to an on-road credit under the EGCSA, subitem 11(3) of the FTCTPA applies.

However, subitem 11(4) of the FTCTPA provided that if subitem 11(3) applied, you are taken, for the purpose of subsection 43-10(3) of the FTA to have acquired the fuel ' to use, in a vehicle, for travelling on a public road'.

Therefore, as the street sweepers would have been entitled to an on-road credit under the EGCSA, subitem 11(3) of the FTCTPA allows for a fuel tax credit and subitem 11(4) of the FTCTPA applies to reduce the amount of fuel tax credit by the RUC.

Accordingly, you are entitled to a fuel tax credit at the full rate of 38.143 cents per litre less the road user charge for the portion of taxable fuel acquired for use in your street sweepers, while the brushes are down, in sweeping rubbish from the street and gutters for the period 1 December 2008 to 30 June 2012.

You have referred to FTR 2008/1 at paragraph 119 which states in reference to movement by a vehicle engaged in road construction, repair or maintenance:

…

119. The Commissioner considers that, having regard to the policy context of subsection 43-10(3), it would be inconsistent with that policy intent to impose the road user charge on a vehicle in the course of undertaking road construction, repair or maintenance, as the vehicle is not contributing to wear and tear on the road.

…

However, paragraph 120 of FTR 2008/1DAC1 provides that having regard to the Transitional Act [FTCTPA] and Energy Grants Act [EGCSA], entitlement to a fuel tax credit for a vehicle undertaking road construction, repair or maintenance is intended to be phased in up until 30 June 2012 and will not be subject to the road user charge, when fully implemented.

1 July 2012 to 30 November 2012

Section 41-5 of the FTA provides that you are entitled to a fuel tax credit for taxable fuel that you acquire for use in carrying on your enterprise if you are registered for GST.

Section 43-5 of the FTA provides that from 1 July 2012, 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).

Further, subsection 43-10(3) of the FTA provides that your fuel tax credit entitlement can also be affected by the amount of the RUC in relation to taxable fuel acquired to use, in a heavy vehicle, for travelling on a public road.

Road user charge

As highlighted above the changes incorporated into FTR 2008/1 per FTR 2008/1DA4 - Draft Addendum and incorporated into FTR 2008/1DAC1 do not amend the Commissioner's view on the treatment of street sweepers. However, from 1 July 2012, entitlement is no longer affected by Division 2 of Part 3 of Schedule 3 to the FTCTPA or the EGCSA.

That is, from 1 July 2012:

· the journey on a public road to and from the point of sweeping the road is considered 'travelling' and fuel used for travelling on a public road for the purposes of subsection 43-10(3) of the FTA. As such, fuel tax credits are reduced by the RUC, and

· movement along the road while sweeping the road with brushes down (i.e. maintaining the road) does not constitute 'travelling' or fuel used for travelling on a public road for the purpose of subsection 43-10(3) of the FTA and as such, fuel tax credits are not reduced by the RUC.

Carbon reduction from 1 July 2012

As discussed above, from 1 July 2012 section 43-5 of the FTA now provides the amount of your fuel tax credit is worked out by the amount of effective fuel tax less amount of carbon reduction (if applicable).

Therefore, whilst the RUC does not apply to the portion of taxable fuel you acquired for use in operating your street sweepers while the brushes are down, in sweeping rubbish from the street and gutters on public roads, we must determine if the amount of your fuel tax credit for the fuel is reduced by an amount of carbon reduction.

In certain circumstances, the amount of carbon reduction will be nil. Paragraph 43-8(4)(c) of the FTA provides that:

The *amount of carbon reduction that applies to the fuel is nil to the extent that:

…

(c) you acquire, manufacture or import the fuel for use in a vehicle with a gross vehicle mass of more than 4.5 tonnes travelling on a public road; or

…

The wording of paragraph 43-8(4)(c) of the FTA focuses on whether fuel is for use in a vehicle travelling on a public road.

The discussion of the meaning of the term 'travel' in FTR 2008/1DAC1 is focused on its significance in determining whether a road user charge is applicable under subsection 43-10(3) for the FTA, and the possible effect of subsection 43-10(4) of the FTA.

However, given the test in 43-8(4)(c) of the FTA also contains the phrase 'travelling on a public road', the discussion in FTR 2008/1DAC1 is equally applicable to the determination of whether the carbon reduction is applicable to the use of fuel in a vehicle with a GVM greater than 4.5 tonnes is nil.

Consequently, while your street sweepers are engaged in constructing, maintaining or repairing a public road, they are not travelling on that road. It follows that the fuel tax credit otherwise available is reduced by the relevant carbon reduction for the fuel calculated in accordance with section 43-8 of the FTA.

As such, the rate of fuel tax credits you can claim for the portion of diesel you acquired for use in operating your street sweepers while the brushes are down, in sweeping rubbish from the street and gutters on public roads for the period from 1 July 2012 until 30 November 2012 is 31.933 cents per litre.

Note: As discussed in FTR 2008/1DAC1 a vehicle is only considered not to be travelling while it is engaged in road maintenance. The movement on the public road to and from the point where road maintenance occurs is nevertheless 'travelling' for the purposes of 43-10(3) FTA and similarly for paragraph 43-8(4)(c) FTA.

Retrospective fuel tax credit claims

Section 47-5 of the FTA imposes a time limit on entitlement to a fuel tax credit. You will cease to be entitled to a fuel tax credit unless you claim within 4 years of when your business activity statement (BAS) was due.

Section 47-10 of the FTA provides exceptions to the time limit and states that you do not cease to be entitled under section 47-5 where paragraph 105-55(1) in Schedule 1 to the TAA applies. Relevantly, subparagraph 105-55(1)(a) of Schedule 1 to the TAA states:

You are not entitled to a refund, other payment or credit to which this subsection applies in respect of a tax period or importation unless:

(a) within 4 years after:

i. the end of the tax period; or

ii. the importation;

as the case required, you notify the Commissioner (in a GST return or otherwise) that you are entitled to the refund, other payment or credit;

This may be done in a notice that is given to the Commissioner detailing the entitlement or by revising the return for the relevant tax period. You must advise the Commissioner of any additional amount of fuel tax credit entitlement within four years of the end of the relevant tax period.

As you notified the Commissioner of the entitlement to an additional amount of fuel tax credit entitlement in your request for this private ruling received by us on 6 December 2012 the relevant tax period is the period ending 31 December 2008.

RUC Errors in fuel tax credit entitlements, made in an earlier tax period

The Commissioner has made under section 60-10 of the FTA, Fuel Tax Act 2006 - Correcting fuel tax errors Determination (No. 1) 2012. By relying on the Determination you can correct an error made in working out the net fuel amount for an earlier tax period, including periods that ended before 1 July 2012, by taking an amount that relates to the error into account in working out your net fuel amount for a tax period that commenced on or after 1 July 2012. The following circumstances must be met:

1.  you had reduced your fuel tax credit for the earlier tax period by the road user charge for fuel you acquired, imported or manufactured to use in a vehicle travelling on a public road but the fuel was not for travelling on a public road; and

2.  you are registered for goods and services tax; and

3.  your entitlement to the fuel tax credit for the tax period in which the error occurred has not ceased because of section 105-55 in Schedule, 1 of the Taxation Administration Act 1953 .

You have stated that, for fuel you acquired in the period 1 December 2008 to 30 November 2012 and used in street sweepers, you claimed fuel tax credits at the full rate less the applicable RUC.

For the period 1 December 2008 to 30 June 2012, you have claimed fuel tax credits at the correct rate, that is full rate less road user charge.

However, for diesel acquired on or after 1 July 2012, you are not required to reduce your fuel tax credit amount by the RUC for the portion of fuel acquired for use in operating your street sweepers while the brushes are down, in sweeping rubbish from the street and gutters on public roads.

You have stated you have claimed fuel tax credits for the fuel you acquired and used in your street sweepers at 38.143 cents per litre less the applicable road user charge.

As fuel used in the street sweepers, whilst maintaining the roads is not travelling or fuel used in the heavy vehicles 'for travelling' on public roads, you may claim the amount by which the fuel tax credit for this fuel was reduced by the RUC in line with the circumstances described above.

This means that you will be required to apportion some of the fuel used in the street sweeper between that portion of fuel used for:

· travel with the brushes up on public roads where the RUC does apply, and

· movement along the public road whilst sweeping (maintaining) the road where the RUC does not apply.

Note: for that portion of fuel used for movement along the public road whilst sweeping (maintaining) the road where the RUC does not apply, your fuel tax credit amount is reduced by the carbon reduction amount for the fuel. For diesel this is 6.21 cents per litre.

The Commissioner considers that an entity can use any apportionment method that is fair and reasonable in the circumstances.

The following documents published by Commissioner discuss matters of apportionment:

· Fuel Tax Determination 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; and

· Practice Statement PS LA 2010/3: apportionment for the purposes of the Fuel Tax Act 2006.