Edited version of your written advice

Authorisation Number: 1012713611140

Ruling

Subject: Fuel Tax Credits - acquisition

Question 1

Are you entitled to a fuel tax credit for the taxable fuel you acquired in performance of services that you provided under a contractual arrangement?

Answer

Yes. You acquired taxable fuel for use in carrying on your enterprise and did not dispose of that fuel under the contractual arrangement.

This ruling applies for the following periods:

Year end 30 June 2013.

The scheme commences on:

The scheme has commenced

Relevant facts and circumstances

You were engaged under contract to provide specified services.

You imported into, and purchased in Australia taxable fuel in carrying out these services.

A dispute arose between you and the contractor. The contractor and you entered into an agreement in settlement of the dispute.

Relevant legislative provisions

Fuel Tax Act 2006 section 41-5

Fuel Tax Act 2006 Division 44

Reasons for decision

Section 41-5 of the FTA provides that:

You are entitled to a fuel tax credit for taxable fuel that you acquire, or import in, or import into, Australia to the extent you do so for use in carrying on your enterprise.

You must be registered for GST at the time of acquisition, importation or manufacture of the fuel.

If, however, the fuel is subsequently used in different circumstances, or you make a taxable supply of the fuel, then a fuel tax adjustment for the fuel tax credit arises under Division 44 of the FTA.

The Commissioner of Taxation (Commissioner) discusses the meaning of 'acquire' in the context of the FTA 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 (FTR 2007/1).

At paragraph 19 of FTR 2007/1 the Commissioner states that the term 'acquire' has the ordinary meaning of to 'get as one's own'. Paragraph 20 explains that:

To 'get as one's own' requires property in or ownership of the relevant taxable fuel to pass from one entity to another entity, or alternately, that ownership is conferred because the fuel has been obtained by an entity as its own.

Paragraphs 21 and 22 of FTR 2007/1 explain that fuel is acquired if:

• you purchase the fuel;

• the fuel is gifted to your; or

• you get the fuel as your own by any other means (other than manufacture or import). This necessarily means that you get ownership of, or proprietary rights in respect of, the fuel.

Whether you get ownership of, or proprietary interest in, fuel will depend on all the facts and circumstances of each case. It will be necessary to examine the surrounding circumstances, together with any relevant documentation, including any written agreement.

At paragraph 144 of FTR 2007/1 the Commissioner reiterates his view that:

…an entity typically 'acquires' taxable fuel upon a change in ownership of, or a transfer of proprietary rights in, the fuel from one entity to another.

You can substantiate that you imported into, and purchased in Australia, taxable fuel in carrying out your services, however it must be determined if you disposed of this fuel.

When reading the contract in conjunction with and the agreement in settlement of the dispute it is not clear as to whether or not you disposed of the fuel. In interpreting the effect of clauses in a contract that could have more than on interpretation, the courts have given weight to the common intention of the parties to the contract, as drawn from the available evidence.

When reading the contract and the settlement agreement together, and taking into account the commonly held view and actions of the parties it is reasonable to conclude that you did not dispose of the fuel.