Edited version of your written advice

Authorisation Number: 1051516507628

Date of advice: 14 May 2019

Ruling

Subject: Fuel tax credit

Question 1

Are you entitled to a fuel tax credit for taxable fuel you acquired for use in:

● testing and training customers on the use of your equipment before you supply them to your customers;

● testing of equipment at your workshop, or at customer’s site, under a full hire arrangement (where you supply the equipment and fuel at a flat rate and you do not itemise the service and materials cost)?

Answer

Yes.

Question 2

Are you entitled to a fuel tax credit for taxable fuel acquired by you but subsequently sold to your customers as a cost in equipment, or utilised during equipment rentals (itemised invoice issued for services and materials, including fuel, when they are supplied)?

Answer

No.

Question 3

Are you entitled to a fuel tax credit for taxable fuel you acquired and used in your hot wash/steam cleaner for cleaning of equipment as part of repair and maintenance?

Answer

Yes.

Question 4

Are you entitled to a fuel tax credit at the full rate for taxable fuel you acquired and used in service vehicles with a gross vehicle mass of less than 4.5 tonnes whilst servicing equipment within off-road sites?

Answer

Yes

This ruling applies for the following periods:

2019 – 2020 income year

2020 – 2021 income year

2021 – 2022 income year

The scheme commences on:

1 July 2019

Relevant facts and circumstances

You are registered for goods and services tax (GST).

Your business involves in the selling, hire, maintenance and servicing of equipment.

Some of your operations are carried out on site at your premises and some are conducted at the premises of your customers.

You acquire and use taxable fuel in your equipment for the following purposes:

● testing of the equipment - done during servicing and repairs

● when you sell a new equipment to a customer you put a small amount of fuel in the equipment for testing and to train the customers in correct operation and use of their equipment

● when you hire the equipment, including fuel, to your customers for use in their business at a flat rate.

You also acquire and utilise diesel, a taxable fuel, for use in steam cleaner/hot wash which is utilised in your dedicated wash bay for cleaning equipment/engines etc. belonging to customers and your own hire fleet as part of repair and maintenance.

Some of your operations are carried out on off road sites that are not accessible to the public, where you have been contracted directly with the companies to provide your service.

You stated that your equipment, and maintenance of equipment supplied to your customers is crucial to the effective operations of these sites. These services include:

● emergency breakdown service of equipment

● servicing and maintenance of equipment

● rental of equipment

● installation of new equipment.

You use light vehicles in your business. The light vehicles are not used while you provide the services; the vehicles are used to carry the necessary equipment to the specified sites for you to provide the services to your customers.

You understand that you are not entitled to claim fuel tax credit for fuel used in the light vehicles when travelling on public road.

You acquired and used taxable fuel in a number of ways:

● preparing equipment for sale on your premises

● in the servicing and repair of equipment on your premises

● in the servicing and repair of equipment on the sites of your customers

● in your road vehicles of less than 1.5 tonnes GVM on off road sites

● in rental equipment.

The way in which you charge for the services that you provide varies between customers:

● Some customers contract to supply service and equipment at a flat rate. Invoices in these cases will not itemise the service and material costs.

● Some other customers contract on a variable rate with an itemised invoice for services and materials (including fuel) when they are supplied.

Relevant legislative provisions

Fuel Tax Act 2006 section 41-5

Fuel Tax Act 2006 Subdivision 41-B

Fuel Tax Act 2006 Section 41-20

Reasons for decision

Section 41-5 of the Fuel Tax Act 2006 (FTA) provides that if you are registered for goods and services tax at the time you acquire the fuel, 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.

You are registered for GST and your business involves in the selling, hire, maintenance and servicing of equipment.

You acquire and use taxable fuel in your equipment for the following purposes:

● testing of the equipment - done during servicing and repairs

● when you sell a new equipment to a customer you put a small amount of fuel in the equipment for testing and to train the customers in correct operation and use of their equipment

● when you hire the equipment, including fuel, to your customers for use in their business at a flat rate.

You also acquire and utilise taxable fuel for use in steam cleaner/hot wash which is utilised in your dedicated wash bay for cleaning equipment/engines etc. belonging to customers and your own hire fleet as part of repair and maintenance.

Accordingly, the purchase and use of the taxable fuel in your business for the above activities satisfies the fuel tax credit entitlement provision.

Acquire and Use

To be entitled to a fuel tax credit, section 41-5 of the FTA requires that you acquire taxable fuel and use it in your enterprise.

The meaning of ‘acquire’ and ‘use’ is discussed in the following rulings:

● 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); and

● Fuel Tax Ruling FTR 2009/1, Fuel tax: entitlement to a fuel tax credit under section 41-5 of the Fuel Tax Act 2006 in a vehicle or equipment hire arrangement (FTR2009/1).

The term ‘acquire’ is not defined in the FTA, therefore takes its ordinary meaning.

In the context of the FTA, the Commissioner considers that the term ‘acquire’ has the ordinary meaning of to ‘get as one’s own’.

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

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.

The term ‘acquire’ is further explained at paragraph 144 of FTR 2007/1. The Commissioner considers that to 'get as one's own', implies getting ownership or proprietary rights in respect of the taxable fuel. This will mean either that property in the taxable fuel passes from one entity to another or that proprietary rights or ownership is conferred by the act of obtaining the taxable fuel by other means. Therefore, the Commissioner takes the 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.

In FTR 2009/1 the Commissioner explains which entity is entitled to a fuel tax credit under section 41-5 of the FTA in a vehicle or equipment hire arrangement. FTR 2009/1 also sets out the principles which can be used in determining whether fuel has been disposed of by the hire company to the hirer, and consequently acquired by the hirer, and which entity has fuel tax credit entitlements under section 41-5 of the FTA.

The Commissioner states that when determining which entity in a hire arrangement acquires and uses the fuel, it is necessary to take into account the facts and circumstances in each case. The entity which acquires fuel for use (and uses the fuel) in vehicle or equipment hire arrangements in carrying on their enterprise will be entitled to a fuel tax credit under section 41-5, subject to the disentitling provisions.

In the context of section 41-5 of the FTA, the term ‘use’ means ‘expend or consume in use’, which in turn requires that the fuel be expended or consumed, such that it no longer exists as fuel, by putting it into service in carrying on your enterprise.

Equipment (including fuel) supplied to customers

As part of your business, you purchase taxable fuel to use in your equipment. You also hire equipment to your customers.

For some customers, you supply the equipment and fuel under a full hire arrangement, where you supply the equipment and fuel at a flat rate and you do not itemise the service and materials cost. In this situation we do not consider that you have sold or otherwise disposed of the fuel to your customer; you are using the fuel in the carrying on of your enterprise. Therefore, you would be entitled to a fuel tax credit under section 41-5 of the FTA.

In other instances, you purchase the fuel but would subsequently sell the fuel to your customers as a cost in equipment, or utilised during equipment rentals (i.e. you would issue itemised invoice for services and materials, including fuel). Although you may initially acquire the fuel for use in the equipment, you have subsequently sold it to your customers. Therefore your customers will have acquired the fuel and used the fuel in carrying on their enterprise. Accordingly, you will not be entitled to a fuel tax credit to the fuel that you acquired but subsequently sold to your customers.

Fuel used in light vehicles

Subdivision 41-B of the FTA includes the disentitlement rules for fuel tax credits and relevantly, section 41-20 of the FTA contains the disentitlement rules in respect of light vehicles travelling on a public road. 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.

The term ‘light vehicle’ is used in the FTA in reference to a vehicle with a gross vehicle mass (GVM) of 4.5 tonnes or less.

The term ‘public road’ is not defined in the FTA; however, the Commissioner’s view of what constitutes a public road is discussed in Fuel Tax Ruling FTR 2008/1 Fuel tax: vehicle’s travel on a public road that is incidental to the vehicle’s main use and the road user charge.

A public road is a road that is available for use by members of the public.

You use light vehicles in your business. You understand that you are not entitled to claim fuel tax credit for fuel used in the light vehicles when travelling on public road.

The vehicles are not used while you provide the services; the vehicles are used to carry the necessary equipment to the specified sites for you to provide the services to your customers.

The services you provide at these sites include:

● emergency breakdown service of equipment

● servicing and maintenance of equipment

● rental of equipment

● installation of new equipment.

…whilst providing services within off road sites

Some of your operations are carried out on off road sites. Access to these off road sites is restricted, and the roads within the sites are not available for use by members of the public, they are therefore not ‘public roads’.

Accordingly, within these off road sites you are entitled to a fuel tax credit at the full rate for taxable fuel you have acquired and used in your light vehicles, in your equipment as part of your business services.