Edited version of private advice

Authorisation Number: 1052231849880

Date of advice: 10 April 2024

Ruling

Subject: Fuel Tax Credit - apportionment

Question

Is the calculation of the average fuel consumption rate per hour for the applicants fleet of heavy vehicles fair and reasonable?

Answer

No.

Question

Is the proposed methodology to apportion fuel used in heavy vehicles whilst not traveling on a public road for the purposes of calculating fuel tax credits fair and reasonable?

Answer

No.

This ruling applies for the following periods:

1 July 20YY to 30 June 20YY

1 July 20YY to 30 June 20YY

The scheme commenced on:

1 July 20YY

Relevant facts and circumstances

You are registered for goods and services tax.

You carry on an enterprise which includes providing bulk haulage services using your fleet of heavy vehicles with a gross vehicle mass (GVM) of over 4.5 tonnes.

The heavy vehicles travel on public roads, private roads, in quarries and work sites. Typically, your fleet would travel on roads other than public roads to pick up raw materials and deliver/unload it at work sites.

The auxiliary equipment, mainly tippers, are only used while the vehicle is off a public road. The heavy vehicles have their engines running at all times when off public roads.

Your proposed methodology is to work out an average fuel consumption rate and apply that rate to the hours spent off a public road to calculate the fuel used while the vehicles are travelling off a public road, for powering auxiliary equipment and also for idling off a public road.

You have provided data to show:

•        Details and sizes of all your heavy vehicles. They are all similar in types and sizes.

•        Total fuel usage (diesel) and the engine hours of your fleet for the sample periods.

•        You divide total litres of fuel used by total engine hours to get an average fuel consumption rate (litres per hour).

•        The fleet also have Global Positioning System (GPS) to confirm the exact time (enter and exit times) when the vehicles are off public roads.

•        The same GPS product is used across all the vehicles in your fleet.

•        The GPS can show the time when the vehicles are off a public road. However, it will not show what activities the vehicles engaged in during that time (e.g. travelling, idling, etc).

•        Your data shows that the time spent off a public road is minimal compared to the times spent on public roads.

You provided Engine Diagnostic Reports for a sample of vehicles. These reports show fuel usage, idling hours, and distance and hours travelled.

Relevant legislative provisions

Fuel Tax Act 2006 section 60-5

Reasons for decision

The Fuel Tax Act 2006 and Fuel Tax Regulation 2016 do not set out any methods that an entity must use to apportion taxable fuel.

Fuel Tax Determination 2010/1 Fuel tax: apportionment may apply when determining total fuel tax credits in calculating the net fuel amount under section 60-5 of the Fuel Tax Act 2006 (FTD 2010/1) sets out the Commissioner's view on apportioning fuel tax credit entitlements.

The Commissioner considers that an entity can use any apportionment methodology that is fair and reasonable in its circumstances.

Paragraphs 7 and 8 of FTD 2010/1 provide that:

7. You can use any apportionment method that is fair and reasonable in your circumstances to determine the fuel tax credit that is available for the taxable fuel that you acquire.

8. Where there is more than one fair and reasonable way of apportioning, you may choose any method as long as it is fair and reasonable in your circumstances.

Further, example 1 of FTD 2010/1 states a scenario in which acquiring one fuel for use in multiple activities require separate calculations:

12. Whelan Enterprises Ltd, which is registered for GST, acquires diesel fuel in bulk for use in its business during October 2018. The diesel fuel is acquired for three uses: Use in a generator to generate electricity, use in a forklift to load goods onto the trucks in the warehouse, and use in trucks with a gross vehicle mass of more than 4.5 tonnes to deliver goods via public roads. The entity is entitled to a full fuel tax credit for the first two uses and a fuel tax credit reduced by the road user charge for the third use.

13. The activities attract different rates of fuel tax credits. To work out its entitlement to fuel tax credits, Whelan Enterprises Ltd should separately calculate the quantity of diesel fuel acquired for the first two uses and the third.

Practical Compliance Guidelines 2016/8 Fuel Tax Credits - apportioning fuel for fuel tax credits (PCG 2016/8) provides guidance in relation to the apportionment of fuel for fuel tax credits including methods, reliable measures and other principles.

Paragraph 27 of PCG 2016/8 states:

27. When determining fuel consumption based on hours of operation the rate of fuel consumption must be taken into account. For example, where a vehicle travels on public roads, and operates auxiliary equipment on sites (off public roads), the rate of fuel consumed differs in respect of these different activities. Apportioning fuel consumption solely by the hours of operation will not give a fair and reasonable apportionment. Additional steps will be necessary to determine the rate of fuel consumption for the different activities prior to apportioning the taxable fuel based on the hours of operation of each activity.

Your proposed methodology has utilised some known reliable measures to apportion and calculate fuel usage. Your proposed methodology includes using GPS data to determine when the vehicles are located off public roads.

Your sample period and sample size is considered to be reasonable.

Your proposed methodology is to work out an average fuel consumption rate and apply that rate to the hours spent off a public road to calculate the fuel used while the vehicles are travelling off a public road and for idling off a public road.

Your business undertakes various activities, and based on the information you've provided in regard to your fleet, it is apparent that the fuel used is used for different activities.

Generally, a fair and reasonable apportionment of fuel needs to consider the different fuel consumption rates of when the vehicle is travelling in different road conditions, as well as when idling. It is reasonable to expect some variations in fuel consumption when a vehicle is travelling compared to when it is stationary and idling.

In your circumstance, though the time spent off a public road is lower compared to the time spent travelling on public roads, the various activities you conduct while off a public road has the ability to effect the fuel consumption rate. In addition, your supporting documents show very high idling hours indicating off road visits are spent not travelling within the geofenced areas.

The data suggests that in this proposed apportionment method, variations in fuel consumption across different activities and vehicle types significantly influence the off road percentage. This, in turn, affects both the average hourly fuel consumption rate and the fuel allocated to off road activities.

To this regard, the proposed methodology, and ultimately using one figure to apportion fuel used in heavy vehicles whilst not on a public road, conducting various activities is not fair and reasonable for the purposes of calculating fuel tax credits.