Edited version of your private ruling

Authorisation Number: 1012590715581

Ruling

Subject: Fuel tax credits - eligibility

Question 1

Are you entitled under section 41-5 of the Fuel Tax Act 2006 (FTA) to fuel tax credits for the petrol you acquire and use in your aircraft at your flying school?

Answer

Yes

Question 2

What is the amount of fuel tax credit (FTC) as worked out under Subdivision 43-A of the FTA?

Answer

The applicable amount of FTC is 32.347 cents per litre.

This ruling applies for the following period

1 July 2013 - 30 June 2014

Relevant facts

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

You are not currently registered for fuel tax credits.

You operate a flight training school.

You use premium grade motor fuel RON 95 (known as 'Premium Unleaded petrol' or PULP) in your aircraft.

The fuel was not entered for home consumption (within the meaning of the Excise Act 1901 or the Customs Act 1901) as fuel for use in an aircraft.

The fuel is bulk delivered to the airport by a fuel supplier with the fuel being used for aviation purposes only.

Relevant legislative provisions

Fuel Tax Act 2006

Section 41-5

Subdivision 41-B

Section 41-30

Subsection 43-5(1)

Section 43-8

Excise Tariff Act 1921

Subitem 10.5 of the Schedule

Reasons for decision

Question 1

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.

However Subdivision 41-B of the FTA contains provisions that may affect your entitlement to a fuel tax credit (disentitlement rules) including where:

· another entity was previously entitled to a credit;

· fuel is to be used in a light vehicle on public roads;

· fuel is to be used in motor vehicles that do not meet environmental criteria;

· the fuel is aviation fuel used in aircraft.

Relevantly, section 41-30 of the FTA provides that there will be no entitlement to a fuel tax credit for taxable fuel acquired for use as fuel in an aircraft if the fuel was entered for home consumption for that use (unless the fuel is covered by the Opt-in Scheme).

In this case you acquire PULP for use in your aircraft. The PULP was not entered for the specific purpose of operating aircraft and is hence not captured by section 41-30 of the FTA. Note: gasoline entered for use in aircraft has a different excise duty rate under the Schedule to the Excise Tariff Act 1921 (ETA).

Therefore, where the PULP has been entered for home consumption appropriately, you are entitled to a fuel tax credit for the petrol you acquire and use in your aircraft at your flying school.

Question 2

Subsection 43-5(1) of the FTA provides that the amount of your fuel tax credit for taxable fuel is the amount of effective fuel tax (i.e. the fuel tax amount less any applicable Commonwealth grant or subsidy) less the amount of carbon reduction.

The amount of fuel tax on fuel in this case is prescribed in subitem 10.5 of the Schedule to the ETA as $0.38143 per litre.

Section 43-8 of the FTA contains provisions for working out the amount of carbon reduction by using the following formula:

quantity of fuel x carbon price x carbon emission rate.

Where you acquired the fuel in the financial year starting on 1 July 2013, the 'carbon price' is 2415 cents and the 'carbon emission rate' for petrol is 0.0024.

As such, the carbon reduction per litre of fuel is 5.796 cents (2415 x 0.0024).

The fuel tax credit will therefore be $0.32347 per litre ($0.38143 - $0.05796).

Further issues for you to consider

Note that the 'carbon price' amount will increase annually until 30 June 2015 and may change every six months thereafter thus changing the fuel tax credit rate applicable.

Also note that in order for the correct labels to be included on your activity statements to claim fuel tax credits you will need to contact the ATO and register for fuel tax credits.