Edited version of your written advice

Authorisation Number: 1012662691905

Ruling

Subject: Fuel tax credits and apportionment

Question

Does the proposed method for apportioning fuel used in your vehicles between fuel used to power the vehicle and fuel to power the auxiliary equipment result in a fair and reasonable apportionment?

Answer

Yes.

This ruling applies for the following period(s)

1 July 2000 to 30 June 2014

The scheme commences on

1 July 2000

Relevant facts and circumstances

You own a business that distributes products. You use two heavy vehicles (ie have a gross vehicle mass over 4.5 tonnes) with refrigerated units to conduct your business. Your vehicles travel on public roads.

You are registered for GST and have quarterly tax periods.

In the past you have claimed fuel tax credit at the heavy vehicle rate applicable to travelling on a public road (full fuel tax credit amount which is reduced by the applicable road user charge, currently 12.003 cents per litre).

You have only just discovered that you can claim fuel tax credit at 38.143 cents per litre to power auxiliary equipment of a heavy vehicle. This applies to fuel used to operate a refrigerated unit.

It takes the drivers approximately on average a specified number of hours to deliver all orders to each customer and return the truck to its starting point.

You operate X trucks. These trucks operate a specified refrigeration unit.

Entity B have maintained and serviced both of your trucks' refrigeration units since you operated this business. They have provided over 6 years of service. They have taken into account the size of the pan, the nature of your deliveries (ie the number of multi drop deliveries) and the climatic conditions. They have stated in their letter dated a specified date that the refrigeration units use a specified number of litres of diesel fuel per hour.

Entity B informed you on a specified date that the relevant panel for the refrigerated unit provides you with information on how many hours the unit has been turned on since it was installed.

You took meter readings of the refrigeration units from both trucks over a 5 month period to determine the daily hourly usage of the refrigerated units.

You have compiled a spread sheet which lists the total consumption of diesel during a specified financial year for both trucks.

You will then use the relevant percentage that is attributed to the refrigeration unit and apply it to the preceding four years.

You propose to apply the relevant percentages to the previous four financial years to determine the fuel which is attributable to powering the refrigerated units on your trucks. Once you have calculated these amounts you propose to claim the amount computed using the applicable road user charge.

You intend to take readings in respect to the refrigeration units on the first and last day of each Business Activity Statement quarter to determine the total hours the refrigerated units have been using diesel fuel. You will then multiply by a specified number of litres per hour to determine the total litres consumed by your refrigerated units during the relevant quarter.

Four year time limit to claim fuel tax credits

There is a four year time limit in which to claim fuel tax credits. As you have advised us of your entitlement on a specified date, we acknowledge receipt of your notification for the tax periods from 1 April 2010 to 30 June 2012 and confirm that it was made within the appropriate time.

For the period prior to 1 April 2010 we needed to have your notification within 4 years from the end of the relevant tax period and as such, your request was not made within the appropriate time.

Please note, notifications of entitlement to refunds within the four year period only apply to tax periods commencing before 1 July 2012.

For tax periods commencing after 30 June 2012, you need to make your claim within four years after the day on which you were required to give the Commissioner a return for the fuel tax return period in question.

However, this acknowledgment does not confirm your entitlement to a refund or credit. Your entitlement to the refund or credit is subject to the normal fuel tax credit rules.

The Commissioner's practice, as outlined in Miscellaneous Taxation Ruling MT 2009/1, is to ask that within three months of the notification, an entity formalises their claim.

Please note, where an entity fails to formalise their claim within a reasonable timeframe, the Commissioner may consider the original notification as being speculative for the purpose of reserving a right to make future claims rather than a genuine notification regarding particular entitlements.

Relevant legislative provisions

Fuel Tax Act 2006 section 41-5

Reasons for decision

Fuel Tax Determination FTD 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?, sets out the Commissioner's view on determining a fuel tax credit entitlement. The Commissioner considers that the use of the phrase 'to the extent that', in the context of determining fuel tax credit entitlements, contemplates apportionment, in the context of section 41-5 of the FTA between:

• a use of taxable fuel that entitles you to a fuel tax credit and one that does not, and

• uses of fuel that give rise to different rates of fuel tax credit.

In FTD 2010/1 the Commissioner considers that an entity can use any apportionment method that is fair and reasonable in its circumstances. Guidance on whether a method of apportionment is fair and reasonable in the circumstances is provided for in Practice Statement Law Administration (PSLA) 2010/3 - Apportionment for the purposes of the Fuel Tax Act 2006.

PSLA 2010/3 discusses reasonable methods of apportionment of fuel used in vehicles undertaking on-road and off-road use, and the apportionment of fuel between that used to power the vehicle and to power the auxiliary equipment of the vehicle.

While the following commonly used methods are considered to be a fair and reasonable basis for apportionment, there may be other methods or variations to these methods which could prove to be a fair and reasonable apportionment, depending on the entity's circumstances. The methods are:

• the constructive methods (actual use or planned use)

• the deductive methods (actual use or planned use)

• the percentage use method, and

• the estimate use method.

At paragraph 84 of PSLA 2010/3, the Commissioner explains that any appropriate reliable measure can be used as the basis for calculating the amount of taxable fuel that it acquires for use in an eligible activity. Examples of known reliable measures include:

• odometer readings of kilometres actually travelled

• route distances if a vehicle operates on fixed routes

• kilowatt hours of electricity generated

• hours of operation of vehicle or equipment, or

• average hourly fuel consumption of vehicle or equipment.

Similarly, there are various methods of determining the apportionment of fuel between fuel used to power the vehicle and fuel used to power the auxiliary equipment of the vehicle.

You propose to use the hours of operation of the refrigeration units multiplied by the hourly fuel consumption of the equipment to determine that amount of fuel used by the refrigeration units of your vehicles. You will use this information to apportion the fuel used in the vehicle between fuel used to power the vehicle and fuel used to power the refrigeration unit of the vehicle.

We consider that the method you propose to determine the fuel consumed by the refrigeration units, including the average hourly rate of fuel consumption of the refrigeration unit, provides a fair and reasonable apportionment of the fuel.