Edited version of your private ruling

Authorisation Number: 1012650725054

Ruling

Subject: Fuel tax credits - petrol in aviation

Question 1

Are you entitled to a fuel tax credit for premium unleaded petrol (PULP) you purchase for use in your aircraft hire business?

Answer

Yes, provided that you register for fuel tax credits.

This ruling applies for the following periods:

1 July 2013 to 30 June 2014.

The scheme commences on:

1 July 2013.

Relevant facts and circumstances

You are an Australian company registered for goods and services tax (GST) and fuel tax credits.

You own a number of aircraft.

You hire these aircraft to other entities.

You hire these aircraft at a rate which includes the fuel used by the hirer.

You purchase premium unleaded petrol for use in your aircraft. This fuel is sold to you as, and taxed as, normal vehicular fuel and not as aviation fuel.

You advise that the hirer does not acquire any fuel for use in your aircraft.

Relevant legislative provisions

Fuel Tax Act 2006 section 41-5

Fuel Tax Act 2006 section 41-30

Fuel Tax Act 2006 subdivision 41-B

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

Eligible fuel

However, section 41-30 of the FTA provides that you are not entitled to a fuel tax credit for fuel that you acquire, manufacture or import for use as fuel in aircraft if the fuel was entered for home consumption for that use (within the meaning of the Excise Act 1901 or the Customs Act 1901, as the case requires).

The Explanatory Memorandum to the Fuel Tax Bill 2006 states that section 41-30 of the FTA applies to aviation fuels such as aviation turbine fuel or Avtur and aviation gasoline or Avgas. It goes on to state:

2.61 If however, a taxpayer acquires, manufactures or imports other taxable fuels for use in an aircraft in carrying on their enterprise, for example diesel, they will be entitled to a fuel tax credit under section 41-5.

You purchase and use PULP in your aircraft. The PULP you purchase has not been entered for home consumption for use as a fuel in aircraft within the meaning of the Excise Act 1901 or the Customs Act 1901. Therefore, section 41-30 of the FTA does not apply to disentitle you to a fuel tax credit.

Acquire and use

In determining whether you are entitled to fuel tax credits, it must also be determined whether you have 'acquired' taxable fuel for the purpose of the fuel tax provisions, and if so, whether you have then 'used' the fuel in an eligible activity in carrying on your enterprise.

Acquire

As the term 'acquire' is not defined in the FTA, it takes its ordinary meaning.

The Macquarie Dictionary defines 'acquire' as:

1 . to come into possession of; get as one's own:

2 . to gain for oneself through one's actions or efforts...

In Fuel Taxation Ruling FTR 2007/1, Fuel tax: the meaning of 'acquire', 'manufacture' and 'import' in the expression 'taxable fuel that you acquire or manufacture in, or import into, Australia to the extent that you do so for use in carrying on your enterprise' in the Fuel Tax Act 2006, the Commissioner discusses the meaning of 'acquire', 'manufacture', and 'import'.

In Fuel Tax Ruling FTR 2009/1, Fuel tax: entitlement to a fuel tax credit under section 41-5 of the Fuel Tax Act 2006 in a vehicle or equipment hire arrangement the Commissioner explains which entity is entitled to a fuel tax credit under section 41-5 of the FTA in a vehicle or equipment hire arrangement. FTR 2009/1 also sets out the principles which can be used in determining whether fuel has been disposed of by the hire company to the hirer, and consequently acquired by the hirer, and which entity has fuel tax credit entitlements under section 41-5 of the FTA.

An entity must establish whether it has first acquired fuel prior to determining if it has used the fuel in carrying on its enterprise. The meaning of 'acquire' and 'use' is discussed in both FTR 2007/1 and FTR 2009/1.

Paragraphs 19 to 21 of FTR 2007/1 state that, for the purposes of the FTA, 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).

Conversely, if an entity simply acquires a right or a licence to use another entity's fuel in their plant or equipment in performing work for that entity, the second entity has not acquired that fuel for the purposes of the FTA as the mere grant of a right or licence to use the fuel does not result in you obtaining a proprietary interest in, or ownership of, the fuel.

In your case, as you simply purchase the fuel through a normal retail transaction, there is no doubt that you acquire the fuel in question.

Use

At paragraphs 14 and 15 of FTR 2009/1 the Commissioner states that when determining which entity in a hire arrangement acquires and uses the fuel, it is necessary to take into account the facts and circumstances in each case.

This is because ownership and use are not always readily apparent. For example where a hire company acquires fuel and does not dispose of the fuel to the hirer, the hire company will be entitled to a fuel tax credit for fuel used in the hire vehicle or equipment in carrying on their enterprise (subject to the disentitling provisions).

However, where the hire company acquires a quantity of fuel but disposes of the fuel to the hirer, the hire company will not be entitled to a fuel tax credit.

In paragraphs 82A to 82J of FTR 2009/1 the Commissioner gives an example of fuel use in a hire arrangement which is similar to yours. That is, a hire company supplying a vehicle/equipment and fuel under a licence to use situation.

The rate you charge for use of your aircraft includes any fuel acquired by you and used by the entity hiring the aircraft. The only fuel used in the aircraft is the fuel acquired by you and you do not sell the fuel to the hirer. You supply that fuel under a licence to use situation and there is never any intention to transfer ownership in the fuel.

We therefore accept that you have acquired taxable fuel, for the purposes of claiming a fuel tax credit under section 41-5 of the FTA for use in carrying on your enterprise of aircraft hire during the period 1 July 2013 to 30 June 2014 and would therefore be entitled to a fuel tax credit for that fuel.