Edited version of private advice

Authorisation Number: 1051781219739

Date of advice: 17 November 2020

Ruling

Subject: Fuel tax credits - public roads

Question

Are roads on land classified in a specific Act (the Land) considered to be "public roads" for the purposes of section 41-20 of the Fuel Tax Act 2006 (FTA)?

Answer

No. However, many roads that border or traverse the Land are not in fact part of the Land and the need to possess a permit, as prescribed by the specific Act, will not be a determinative factor in establishing whether a road on the Land is a 'public road' for the purposes of the FTA.

As a working guide, we consider roads that run between townships or link highways with townships are public roads. Any other roads that border the Land or commence or end outside the Land are also considered public roads for the purposes of the FTA. However, roads that are totally contained within the Land (chiefly local roads) are accepted as not being public roads. These principles will apply to the entirety of a road notwithstanding the fact the road may change names at various points.

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

20XX-XX income year

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are registered for Goods and Services Tax.

You acquire taxable fuel and use in heavy and light vehicles as part of carrying on your enterprise.

Your vehicles travel within the Land specified in the Act and on roads bordering or traversing the Land.

A permit is required to enter the Lands.

Relevant legislative provisions

Section 41-5 Fuel Tax Act 2006

Subdivision 41-B Fuel Tax Act 2006

Section 41-20 Fuel Tax Act 2006

Subsection 43-10(3) Fuel Tax Act 2006

Reasons for decision

Section 41-5 of the 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.

Subdivision 41-B of the FTA includes the disentitlement rules for fuel tax credits. Section 41-20 of the FTA contains the disentitlement rules in respect of light vehicles and this provision 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 issue of whether a particular road is a public road is relevant to the determination of fuel tax credit entitlements for two reasons:

1.    Taxable fuel use in a light vehicle travelling on a public road is ineligible for fuel tax credits.

2.    Fuel used in a vehicle greater than 4.5 tonnes GVM for travelling on a public road is eligible for fuel tax credits, but the entitlement is reduced by the road user charge (subsection 43-10(3) of the FTA).

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.

The Administrative Appeals Tribunal (AAT) heard the case of Linfox Australia Pty Ltd and Commissioner of Taxation [2019] AATA 222 (Linfox 2019 AAT), the facts of which involved a taxpayer acquiring fuel for use in a heavy on-road vehicle which travelled from time to time on privately operated toll roads. The taxpayer argued that the road user charge did not apply to fuel acquired for travelling on privately operated toll roads.

In determining whether a toll road is a 'public road' for the purposes of the FTA, the AAT found that a public road is one on which members of the public are generally entitled as of right to travel. The toll road in question satisfied this test. The AAT also found that there was insufficient justification from the legislation to interpret 'public road' to mean a road for which government is responsible for construction and maintenance costs or a road which is not operated with the object of making a profit for a private entity (Linfox 2019 AAT paragraph 29).

The taxpayer appealed the AAT's decision to the Full Federal Court (FFC) in respect of the decision that a toll road is a public road (Linfox Australia Pty Ltd and Commissioner of Taxation [2019] FCAFC 131 (Linfox 2019 FFC)). The FFC upheld the AAT's decision with respect to toll roads being public roads and expressed the following factors as being key considerations when determining whether a road is a "public road":

a)    whether the public is generally entitled to use the road; and

b)    whether the roads are fully integrated into the overall public road system to ensure public accessibility.

Having regard to these observations, we consider that accessibility by the public is the key consideration, with a practical rather than legalistic approach to classification of a road as public being preferred. In this context, we consider that the integration of the road within the public network is relevant to the assessment of whether the road be regarded as part of a public road.

Roads that are exclusively on the Land are not integrated within the public road network. They are not the means by which towns/settlements are accessed.

Whether a permit is required for members of the public to travel along a road is not considered determinative. The principle test is whether the road is generally relied upon by the public for travelling between townships or travelling from highways to townships. In many instances travellers require permits to travel along highways because of the likelihood (given the remote locations and vast distances involved) that they will enter the Land. Accordingly, whether or not a permit is required when travelling on particular roads is not determinative of whether that road is a public road or otherwise.

Paragraph 44 of FTR 2008/1 provides examples of a 'public road.'

A road is a public road if:

•         it is opened, declared or dedicated as a public road under a statute;

•         it is vested in a government authority having statutory responsibility for the control and management of public road infrastructure; or

•         it is dedicated as a public road at common law.

Consideration is also given to the examples provided above in respect of the roads on the Land to confirm that these roads are not public roads.

It is accepted that roads totally contained within the Land are not 'public roads' for the purposes of the FTA.

Other roads - public roads bordering or traversing the lands

There are roads that border or traverse land that is within the Land.

Roads, for example highways or arterials roads, that traverse land that is within the Land where the public is generally entitled to use, are considered public roads for fuel tax credit purposes.

The roads provide access between townships, and in some cases, may be the only roads that connect one town to the next. Alternatively, these roads may connect a highway with a township and are therefore relied upon by the public as the primary means of accessing the townships. They are also the primary means by which supplies are brought to the township.

The public may require a permit to access those roads because the roads pass through the Land, but as explained above this is not considered determinative.

A working guide

As a working guide, we consider roads that run between townships or link highways with townships are public roads. Any other roads that border the Land or commence or end outside the Land are also considered public roads for the purposes of the FTA. However, roads that are totally contained within the Land (chiefly local roads) are accepted as not being public roads. These principles will apply to the entirety of a road notwithstanding the fact the road may change names at various points.