Edited version of your written advice

Authorisation Number: 1013005745843

Date of advice: 6 July 2016

Ruling

Subject: Fuel Tax Credits entitlements for bunker fuels used in domestic voyage by non-resident operator.

Question:

Can a fuel tax credit be claimed on imported, (customs) duty paid bunker fuel by a Customs Broker which has an authority to also act as a resident shipping agent on behalf of their client, where the client is a non-resident shipping operator undertaking a short term coastal voyage or short term disconnection from an international voyage?

Answer

Yes, where the non-resident operator is registered or required to be registered for GST.

Summary

You are a customs broker and resident shipping agent for non-resident shipping companies which enter and operate vessels in Australian waters.

You have applied for a private binding ruling seeking assurance in your eligibility to claim fuel tax credits for taxable fuel imported on behalf of non-resident shipping operators who are undertaking short term coastal voyages or short term disconnections from an international voyage.

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

• You act as a customs broker.

• You have stated that your clients include non-resident shipping operators undertaking short term coastal voyages, or short term disconnections from an international voyage.

• You have advised that you supply both bunker service arrangements and full agency services to non-resident shipping operators.

• Ship's bunker fuels on which Customs duty is levied are marine distillate and marine fuel oil.

• Imported marine distillate and marine fuel oil on which duty is payable under the Customs Act 1901 and the Customs Tariff Act 1995 are taxable fuels for the purposes of the Fuel Tax Act 2006.

• You have also advised that you have the authority to act on behalf of your non-resident shipping operator clients as both their customs broker and resident shipping agent.

• You are registered for GST and fuel tax credits.

Detailed reasoning

The term "bunkers" refers to fuel loaded onto a vessel to be used to power the vessel and are considered to be "ships stores" for the purposes of the Excise Act 1901 (Excise Act) and the Customs Act 1901 (Customs Act).

The requirement to pay duty or taxes (excise duty, customs duty and GST) for uploads and consumption of bunker fuel in international commercial shipping operations depends on:

• the type of voyages undertaken in Australian waters

• the residency (for tax purposes) status of the shipping operator

• agency arrangements on behalf of non-resident shipping operators.

Duty (excise or customs) is payable on bunker fuel used in a vessel undertaking a domestic voyage. A domestic voyage while not defined in the Excise Act or Customs Act is a voyage that is not considered to be an international voyage.

An 'overseas ship' is defined in section 4 of the Excise Act as having the same meaning as 'ship' in Part VII of the Customs Act.

Part VII, section 130C of the Customs Act prescribes that a 'ship' does not include:

• a ship that is not currently engaged in making international voyages; or

• a ship that is currently engaged in making international voyages but is about to make a voyage other than an international voyage.

Section 130C also prescribes that an 'international voyage' in relation to a ship, means a voyage, whether direct or indirect, between a place in Australia and a place outside Australia.

Given the above definitions, a ship undertaking short term coastal voyages, or short term disconnections from an international voyage is not undertaking an 'international voyage' and thus the fuel used in the voyage will have an associated duty (excise or customs) liability.

Taxable fuel is defined in section 110-5 of the Fuel Tax Act 2006 (FTA) as fuel (with certain exclusions) on which duty is payable under the Excise Act and the Excise Tariff Act 1921 or the Customs Act and the Customs Tariff Act 1995. Therefore imported marine diesel or fuel oil is a taxable fuel for the purposes of the FTA.

Subsection 41-5(1) of the FTA, provides an entitlement to a fuel tax credit for 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.

Section 70-30 of the FTA provides that where an entity is a 'resident agent', the fuel tax law applies to the entity and its fuel tax credits, net fuel amount and fuel tax adjustments in the corresponding way to the way in which Division 57 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) applies to the entity.

Under the basic rules for GST, an entity making a creditable acquisition or creditable importation is entitled to the input tax credits for that acquisition or importation. However, if you are a resident and an agent under general law for a non-resident principal who makes creditable acquisitions or importations through you, then you are entitled to the input tax credit on the acquisitions or importations and not the non-resident principal. These transactions are made through you as an agent where you have the authority of the non-resident principal to make those transactions on its behalf.

Creditable acquisitions or importations may be made for the non-resident principal if it is registered or required to be registered for GST. Subsection 57-20(1) of the GST Act stipulates that the resident agent is also required to be registered where the non-resident principal is registered or required to be registered for GST.

Division 57 of the GST Act effectively makes resident agents acting for non-residents responsible for the GST consequences (subsection 57-5) of taxable supplies and creditable acquisitions or importations the non-residents make through their resident agents. In respect of non-resident's creditable acquisitions or importations made through resident agents, subsection 57-10 of the GST Act ensures that the resident agent is the only entity eligible to claim the relevant input tax credit. Specifically, subsection 57-10 provides:

(1) If a *non-resident makes a *creditable acquisition or *creditable importation through a *resident agent:

(a) the agent is entitled to the input tax credit on the acquisition or importation; and

(b) the non-resident is not entitled to the input tax credit on the acquisition or importation.

(2) This section has effect despite sections 11-20 and 15-15 (which are about who is entitled to input tax credits).

Accordingly, the resident agent deals with these liabilities and entitlements through its own GST registration. You act on behalf of a number of non-resident shipping operators by undertaking customs brokerage services, full agency services and bunker service arrangements associated with the taxable fuel (marine diesel and fuel oil).

The non-resident's registration status is important in light of Division 57 of the GST Act as this division cannot apply if the non-resident is not either registered or required to be registered.

Your non-resident principal will be required to register where it is carrying on an enterprise and its annual turnover arising from activities connected with Australia is $75,000. An international shipping business is an enterprise for GST purposes. If the non-resident's annual turnover is less than $75,000, it is entitled to register voluntarily as long as it is carrying on an enterprise. Note, that you must take reasonable steps to ascertain the principal's registration status.

If a non-resident principal is not registered or required to be registered for GST, it has no underlying entitlement to claim input tax credits at all. Therefore an agent acting for such a principal cannot claim input tax credits in the principal's place, Division 57 of the GST Act notwithstanding.

As such, where the requirements are met, section 70-30 of the FTA applies such that the fuel tax credit entitlement is treated in the same manner as an input tax credit would be by the operation of Division 57 of the GST Act. This means that you, as the resident agent, are entitled to the fuel tax credit on the importation of the taxable fuel for non-resident shipping operators where the operators are registered or required to be registered for GST.