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Edited version of your written advice
Authorisation Number: 1012735823099
Ruling
Subject: Fuel Tax Credits - Fair and reasonable method of apportionment
Question 1
Can an entity use a method of apportionment for fuel used in the auxiliary equipment of its vehicles, where the Commissioner of Taxation (Commissioner) has previously approved the method as being fair and reasonable when the vehicles were owned and used by a third party in the same circumstances and under the same conditions as the entity?
Answer
Yes, as the vehicles and the auxiliary equipment are used in the same circumstances and under the same conditions as those in respect of which the apportionment methodology was determined.
This ruling applies for the following periods:
1 July 2013 to 30 June 2014
1 July 2014 to 30 June 2015
1 July 2015 to 30 June 2016
1 July 2016 to 30 June 2017
The scheme commences on:
1 July 2013
Relevant facts and circumstances
You are registered for goods and service tax and fuel tax credits.
In carrying on your enterprise you operate a number of vehicles which travel on a public road. The vehicles have a gross vehicle mass of greater than 4.5 tonnes. The vehicles are used in only one activity.
A methodology for apportioning the fuel used in the vehicles between that used to power the vehicle and that used to power the auxiliary equipment of the vehicle was developed.
The methodology involved separating the vehicles and the auxiliary equipment by model and activity. The fuel consumption of the vehicle and the auxiliary equipment, relevant to each model and activity, was determined and this fuel consumption was a factor used in calculating the apportionment amount, of the enterprise that operated the vehicles.
The Commissioner confirmed that the methodology provided a fair and reasonable apportionment.
At the time the apportionment methodology was developed the vehicles were operated by a third party.
Since the apportionment methodology was determined, you now operate several of the vehicles that were previously operated by the third party. You operate the vehicles under the same circumstances and conditions under which they were operated by the third party when the apportionment methodology was determined.
You intend to apply the fuel consumption rates previously determined, relevant to the vehicles you now operate, in working out the apportionment of fuel for the purposes of your entitlement to FTCs.
Relevant legislative provisions
Fuel Tax Act
Other references
Law Administration Practice Statement PSLA 2010/3: Apportioning for the purposes of the Fuel Tax Act
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?
Reasons for decision
FTD 2010/1 sets out the Commissioner's view on the requirement to apportion fuel for the purposes of determining a fuel tax credit entitlement. At paragraph 7 of FTD 2010/1 the Commissioner states that an entity can use any apportionment method that is fair and reasonable in its circumstances to calculate its fuel tax credit entitlement.
In PSLA 2010/3, the Commissioner explains how an entity can satisfy the fair and reasonable requirement in determining a fuel tax credit entitlement. Relevantly, at paragraph 161 of PSLA 2010/3, some of the methodologies for apportioning the fuel used in a vehicle between fuel used to power the vehicle and fuel used to power the auxiliary equipment of the vehicle are explained.
It is important to note that the methodology for the apportionment of the fuel must take into account the circumstances of the use of the vehicle and the auxiliary equipment.
Two of the methodologies listed in paragraph 161 of PSLA 2010/3 were used to determine the fuel consumption of the vehicles and auxiliary equipment you now operate.
At the time the apportionment of fuel relevant to the vehicles you operate was determined, the vehicles were owned and operated a third party. The amount apportioned took into account the different types and models of vehicles and auxiliary equipment and the conditions under which they operated. The Commissioner confirmed that the methodology was considered to provide a fair and reasonable apportionment of fuel.
As the vehicles are now operated by you, the previous apportionment is no longer relevant as it is:
• relevant to a separate entity; and
• took into account additional vehicles and auxiliary equipment which were operated under different conditions.
Nevertheless, the fuel consumption results specific to the vehicles and auxiliary equipment, which are now operated by you, and the circumstances of their use, are relevant in working out the apportionment of fuel for those vehicles.
This is because the vehicles and auxiliary equipment are the same, they have not been modified or changed to an extent that would affect their performance, and are operated under the same circumstances and conditions as they were at the time the fuel consumption of the vehicles was determined.
Therefore, we consider results of the fuel consumption tests conducted when the vehicles were operated by a third party may be applied in working out the apportionment of fuel used in the vehicles now operated by you. These results may be used to determine the apportionment of fuel used in your enterprise.
It is noted that in paragraphs 196 to 199 of PSLA 2010/3 the Commissioner states that it is considered reasonable that a third party's apportionment may be used in a specific circumstance.
In this case, we do not consider that you are applying a third party's apportionment. Whilst you are applying the fuel consumption test results of the vehicles when they were operated by a third party, you are working out an apportionment relevant only to the vehicles you now operate.
As you operate the vehicles under the same conditions as those present when the fuel consumption was determined by the third part, it is reasonable to conclude that the fuel consumption of the vehicles and the auxiliary equipment is consistent and can be applied in working out your apportionment.