Edited version of private advice

Authorisation Number: 1052321781880

Date of advice: 23 October 2024

Ruling

Subject: Fuel tax credits

Question

Is the methodology to apportion fuel used in your operation fair and reasonable? If the methodology is considered fair and reasonable, can it be applied retrospectively subject to the time limits in section 47-5 of the Fuel Tax Act 2006, and prospectively?

Answer

Yes. The methodology to apportion fuel is fair and reasonable and can be applied retrospectively subject to the four years' time limits, and prospectively.

This ruling applies for the following periods:

1 July 2020 to 30 June 2021

1 July 2021 to 30 June 2022

1 July 2022 to 30 June 2023

1 July 2023 to 30 June 2024

1 July 2024 to 30 June 2025

1 July 2025 to 30 June 2026

1 July 2026 to 30 June 2027

The scheme commenced on:

1 July 2020

Relevant facts and circumstances

You are registered for goods and services tax.

You carry on an enterprise which includes providing transport services.

You use taxable fuel in:

•                     heavy vehicles with a gross vehicle mass (GVM) greater than 4.5 tonnes

•                     light vehicles with a GVM of 4.5 tonnes or less and

•                     other off road business activities.

You do not claim any fuel tax credits for fuel used in light vehicles travelling on a public road.

No fuel tax credits are claimed for fuel used for travelling and idling off the public road.

Your methodology also does not use ATO accepted percentages outlined in PCG 2016/11 Fuel tax credits - apportioning taxable fuel used in a heavy vehicle with auxiliary equipment.

Your apportionment methodology is a deductive methodology, based on ensuring the total fuel used are accurate.

Sample records were provided to support the methodology.

You have a process in place to ensure that the fuel used is reconciled to fuel purchased and supported with documentary evidence.

Relevant legislative provisions

Fuel Tax Act 2006 section 41-5

Fuel Tax Act 2006 subdivision 41-B

Fuel Tax Act 2006 section 41-20

Fuel Tax Act 2006 section 47-5

Fuel Tax Act 2006 subsection 47-5(1)

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.

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.

Other than light vehicles, you also use fuel in heavy vehicles and other uses off a public road.

For this reason, you are looking to apply a methodology to apportion the fuel used in your business.

The FTA 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: 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 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.

Relevantly, 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.

You do not claim any fuel tax credits for fuel used in light vehicles travelling on a public road. You also do not claim any fuel used for travelling and idling off a public road or apply the ATO accepted percentages outlined in PCG 2016/11 Fuel tax credits - apportioning taxable fuel used in a heavy vehicle with auxiliary equipment.

Your apportionment methodology is a deductive methodology. This method is based on ensuring the total fuel used are accurate, and you have a process in place to ensure that the fuel used is reconciled to fuel purchased and supported with documentary evidence.

Your sample period was considered reasonable.

The methodology is fair and reasonable for the purposes of calculating fuel tax credits.

The method can be applied retrospectively and prospectively, however:

•                     For retrospective claims, you will need to ensure the fuel tax credit is claimed within the four years' time limits. If the fuel tax credit is not claimed within this time the entitlement ceases under subsection 47-5(1) of the FTA. Further, as only sample records were requested and reviewed as part of the ruling application, for the relevant periods, you must keep records to support your fuel tax credit eligibility and environmental criteria, the accuracy of fuel purchased and used, and the fuel tax credit claims.

For prospective claims, your method will be fair and reasonable where the total quantity of taxable fuel acquired is determined by reference to the supplier's documentation or other relevant documentation. The Commissioner is not in a position at the time of this ruling to examine future evidence. As such, you must keep records to support your fuel tax credit eligibility and environmental criteria, the accuracy of fuel purchased and used, and the fuel tax credit claims.