Edited version of your private ruling

Authorisation Number: 1012444999386

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Ruling

Subject: Fuel tax credits - garbage trucks - road user charge (RUC) and carbon reduction

Question 1:

Are you are entitled to a fuel tax credit at the full rate less road user charge (RUC), for the portion of taxable fuel you acquired for use in your garbage compactor with a gross vehicle mass (GVM) greater than 4.5 tonnes, for travelling on a public road, for the tax periods 1 January 2009 to 30 November 2012?

Answer:

Yes.

Question 2:

Are you are entitled to fuel tax credits that are not reduced by the RUC for the portion of taxable fuel you acquired for use in operating the bin lift and compacting equipment of the garbage compactor with a GVM greater than 4.5 tonnes during the tax periods 1 January 2009 to 30 November 2012?

Answer:

Yes.

Question 3:

Is the carbon reduction nil, for all fuel used in a vehicle with a GVM of more than 4.5 tonnes travelling on a public road, including fuel used in powering auxiliary equipment in or on the vehicle 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?

Answer:

No.

Question 5:

Can you claim fuel tax credits retrospectively back to the tax period commencing 1 January 2009 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 (No 1) 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 on a monthly basis.

You conduct certain public services including the collection of household rubbish within your boundaries.

You acquire and use taxable fuel (diesel and/or biodiesel) in vehicles with a GVM exceeding 4.5 tonnes, referred to as garbage compactors, to undertake the rubbish collection. These vehicles are fitted with equipment which enables the lifting of rubbish bins and compacting of the rubbish.

The garbage compactors travel from the depot to specified points where they commence collecting rubbish from rubbish bins.

The garbage compactors move along a road continuously stopping to lift bins and empty contents into the vehicles hopper.

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).

You have asked us to treat your private ruling application received on 31 January 2013 as a notification of entitlement to fuel tax credits under section 105-55 of the Taxation Administration Act 1953 (TAA).

You state that the point on the road where the garbage compactor begins and continues to empty the bins, to the point of completion of this task and the commencement of travel to the dump site and/or to the depot, cannot be used by other vehicles whilst the garbage compactor is lifting the bins and collecting the rubbish, thereby, in your view, closing that portion of the road to the public.

You advise that in some government jurisdictions, the driver of garbage compactors must sit in the left hand seat of the vehicle for the collection of rubbish and in the right hand seat for the travel to and from the depot and to and from the dump site.

You contend that fuel used to operate the bin lift and rubbish compacting equipment of the garbage compactors while moving from street to street is not used for travelling and the fuel tax credit for the fuel should not be reduced by the RUC.

You accept that the vehicle is travelling to and from the depot to the place where it commences to collect rubbish and to and from the dump site and is subject to the RUC.

You contend that a garbage compactor can be likened to a street sweeper as discussed 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 in that they are similarly moving along the road collecting rubbish. You state, that in the case of garbage compactors, the vehicle is lifting the rubbish into the compactor and the street sweeper is sucking the rubbish into the hopper. It is your view that the compactor similarly moves along the road and this movement should not be constituted as travel.

Relevant legislative provisions

Fuel Tax Act 2006 section 41-5

Fuel Tax Act 2006 section 41-20

Fuel Tax Act 2006 section 43-5

Fuel Tax Act 2006 subsection 43-5(2)

Fuel Tax Act 2006 paragraph 43-8(4)(c)

Fuel Tax Act 2006 subsection 43-10(3)

Fuel Tax Act 2006 section 47-5

Fuel Tax Act 2006 section 47-10

Fuel Tax Act 2006 section 60-10

Fuel Tax Act 2006 section 65

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

Section 41-5 of the FTA provides entitlement 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.

The disentitlement provisions to a fuel tax credit are contained in Subdivision 41-B of the FTA. Section 41-20 of the FTA relevantly states that you are not entitled to a fuel tax credit for taxable fuel used in a vehicle with a GVM of 4.5 tonnes or less travelling on a public road.

Calculating fuel tax credits

In accordance with section 43-5 of the FTA, the amount of the fuel tax credit for taxable fuel is the amount of effective fuel tax that is payable on the fuel. However, your fuel tax credit entitlement can be affected by:

· the amount of any applicable grant or subsidy (subsection 43-5(2)); or

· the amount of the road user charge (RUC) in relation to use of taxable fuel in a vehicle for travelling on public roads (subsection 43-10(3)).

However, from 1 July 2012, whilst your fuel tax credit may still be affected by one of the points above, the amount of your fuel tax credit is worked out by the amount of effective fuel tax less amount of carbon reduction (if applicable).

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 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 a public road was subject to subsection 43-10(3) of the FTA and therefore, if the fuel tax credit for the fuel was 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 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 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 therefore was not subject to the RUC.

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, that is. 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).

Roads that are public roads

In paragraphs 44 and 45 of FTR 2008/1DAC1, the Commissioner states:

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

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

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

(c) 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, your contention that the road is closed to the public whilst the compactor is in the act of collecting garbage has no bearing on whether the fuel being used in the vehicle is fuel used in a vehicle 'for travelling' on a public road in the context of the RUC.

Treatment of a street sweeper

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 is stated 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 washing 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.

Both a garbage compactor and street sweeper collect rubbish, however unlike a garbage compactor, the activity of the street sweeper affects the quality of the road. The Commissioner considers that this activity constitutes road maintenance and that whilst the activity requires the vehicle to move along the road, this movement is not 'travelling' for the purposes of subsection 43-10(3) of the FTA.

Fuel use in a vehicle, for travelling on a public road

Entitlement to a fuel tax credit for fuel used in a garbage truck has been contemplated by the Commissioner, in FTR 2008/1DA4 -Draft Addendum and incorporated into the draft consolidated version of FTR 2008/1DAC1.

In paragraphs 30 and 31 the Commissioner uses the example of a garbage truck in explaining the application of the RUC. At paragraph 31 the Commissioner states that:

The garbage truck's travel begins when it leaves its depot and ends when it arrives back at the depot. The fuel used for the vehicle to travel along the public road is subject to the road user charge. The fuel used to operate the bin lift and the compacting mechanism is unrelated to the vehicle's movement along the public road. Hence, the fuel used to operate the bin lift and the compacting mechanism is not subject to the road user charge.

Therefore, a portion of the fuel you acquire and use in your garbage compactors is used for travelling on a public road and subsection 43-10(3) of the FTA applies.

Accordingly, you are entitled to a fuel tax credit at the full rate less RUC, for the portion of taxable fuel you acquired for use in your garbage compactor with a gross GVM greater than 4.5 tonnes, for travelling on a public road, for the tax periods 1 January 2009 to 30 November 2012.

Fuel used in operating the bin lift and compacting equipment

A portion of the fuel you acquire and use in your garbage compactors is also used in the bin lift and rubbish compacting equipment fitted to the vehicles. The use of fuel to power this equipment is unrelated to the movement of the vehicle along the public road. Therefore, subsection 43-10(3) of the FTA does not apply and the fuel tax credit for this fuel will not be reduced by the RUC.

Accordingly, you are entitled to fuel tax credits that are not reduced by the RUC for the portion of taxable fuel you acquired for use in operating the bin lift and compacting equipment of the garbage compactor with a GVM greater than 4.5 tonnes during the tax periods 1 January 2009 to 30 November 2012.

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 the bin lift and compacting equipment of the garbage compactor with a GVM greater than 4.5 tonnes, 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) 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) focuses on whether fuel is for use in a vehicle travelling on a public road. This can be contrasted with the wording in subsection 43-10(3) which sets out the circumstances when fuel tax credits are reduced by the RUC. Subsection 43-10(3) focuses on whether fuel is to use, in a vehicle, for travelling on a public road.

As highlighted above, the issue of when fuel is used in a vehicle for travelling on a public road was considered by the AAT in Linfox.

In discussing the statutory context, the AAT referred to the differences in wording between subsection 43-10(3) of the FTA and the similarly worded section 41-20 of the FTA. The AAT noted that:

It is significant, in our view, that the word "for" does not precede the phrase "travelling on a public road" in s 41-20 but it does in s 43-10(3)… That is not the case in s 43-10(3), where the use of the word "for" before the phrase "travelling on a public road" is evidently intended to narrow the reach of the provision, such that the RUC on taxable fuel is only imposed where the purpose is to propel the vehicle on a public road [our emphasis].

In contrast to the wording in 43-10(3) of the FTA, and its intended narrow focus, the intention and wording of paragraph 43-8(4)(c) of the FTA is similar to the broad intention and wording in section 41-20 of the FTA.

Therefore, for the purposes of paragraph 43-8(4)(c) of the FTA, the amount of the carbon reduction is nil for all fuel used in a vehicle with a GVM of more than 4.5 tonnes travelling on a public road, including fuel used in powering auxiliary equipment in or on the vehicle. It is not necessary that the fuel is used 'for' travelling on a public road.

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 31 January 2013, the relevant tax period is the period ending 31 January 2009.

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 your garbage compactors, you claimed fuel tax credits at the full rate less the applicable RUC.

We have found that you were not required to apply the RUC to the portion of fuel used to operate the bin lift and compacting equipment of the garbage compactors as this was not fuel used for travelling on a public road.

As such you can claim the amount by which the fuel tax credit for this fuel was reduced by the RUC from the tax period commencing 1 January 2009.

For the period from 1 December 2008, we needed to have your notification within 4 years from the end of the tax period i.e. by the 31 December 2012 and as such, your request for this tax period was not made within the appropriate time.

This means that you will be required to apportion some of the fuel used in the garbage compactor to the operation of the bin lift and compacting equipment. 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