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Edited version of your written advice
Authorisation Number: 1051438653910
Date of advice: 8 October 2018
Ruling
Subject: Fuel tax credits
Question
Is the deductive methodology applied by an entity in calculating fuel tax credits (FTC) entitlements for the purpose of section 41-5 of the Fuel Tax Act 2006 (FTA), considered fair and reasonable in its circumstances and consistent with ATO guidelines and pronouncements?
Answer
Yes.
This ruling applies for the following periods:
20xx-xx income year
20xx-xx income year
20xx-xx income year
20xx-xx income year
20xx-xx income year
The scheme commences on:
1 July 20xx
Relevant facts and circumstances
The Commissioner was asked if an entity that was registered for fuel tax credits and have historically applied the constructive claim methodology in order to calculate its fuel tax credits entitlement could claim their fuel tax credit entitlement under the deductive method for a certain tax period and tax periods going forward.
Relevant legislative provisions
Fuel Tax Act 2006, section 41-5
Fuel Tax Act 2006, section 41-20
Fuel Tax Act 2006, section 60-5
Reasons for decision
Subdivision 41-A of the FTA sets out the rules for entitlement for fuel tax credits. The entitlement is given under section 41-5 of the FTA which states:
You are entitled to a fuel tax credit for taxable fuel that you acquire or manufacture in, or import into, the indirect tax zone to the extent that you do so for use in carrying on your enterprise.
The entity must be registered or required to be registered for GST at the time they acquire, manufacture or import the fuel. Therefore, an entity is entitled to a fuel tax credit for taxable fuel they acquire, manufacture, to the extent the fuel is for use in carrying on their enterprise.
Subdivision 41-B of the FTA sets out the rules for disentitlement to a fuel tax credit. Section 41-20 of the FTA states:
You are not entitled to a fuel tax credit for taxable fuel to the extent that you acquire, manufacture or import the fuel for use in a vehicle with a gross vehicle mass of 4.5 tonnes or less travelling on a public road.
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) states that as acquire is not defined in the FTA, it therefore takes its ordinary meaning of to ‘get one’s own’.
Specifically, paragraph 21 of FTR 20017/1 states that
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). This necessarily means that you get ownership of, or proprietary rights in respect of, the fuel.
Hence whether you get ownership of, or proprietary interest in, fuel will depend on all the facts and circumstances of each case.
In Fuel Tax Determination 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? (FTD 2006/1), it is explained that entities may need to use a ‘fair and reasonable’ apportionment method to calculate the extent of their entitlement to a fuel tax credit and states:
In working out your net fuel amount, section 60-5 requires the sum of all fuel tax credits to which you are entitled that are attributable to the period to be calculated. Your net fuel amount for a tax period is worked out using the following formula:
Total fuel tax - Total fuel tax credits + Total increasing fuel tax adjustments - Total decreasing fuel tax adjustments
By way of further information, the Practical Compliance Guideline 2016/8 Fuel Tax Credits – apportioning fuel for fuel tax credits (PCG 2016/8) provides some acceptable, practical methodologies to assist taxpayers in apportioning taxable fuel to meet their fuel tax credit obligations. It also explains various principles, measures and factors that may be applied to determine if other methods used are also ‘fair and reasonable.’
You are registered for fuel tax credits and have historically applied the constructive method of apportionment to calculate entitlement to fuel tax credits.
However you now want to establish your fuel tax credit entitlement under the deductive method for a particular fuel tax period.
Calculation of your entitlements using the deductive method by reducing the quantity of fuel you acquired by the amount of fuel:
a) claimed in previous fuel tax claims
b) used in activities that do not give rise to an entitlement to fuel tax credits
c) which is disentitled to fuel tax credits.
Calculation of your fuel tax entitlements in their entirety under the deductive method, with the formula for the deductive method being:
(Fuel acquired – Ineligible fuel consumption) X Relevant fuel tax credit rate = fuel tax credit entitlement
Using the deductive methodology and taking into account the matters discussed above provides a fair and reasonable calculation of your fuel tax credit entitlements in relation to the specified tax periods.