Edited version of private advice

Authorisation Number: 1052326887865

Date of advice: 6 November 2024

Ruling

Subject: Fuel tax credits

Question 1

Is the entity entitled to fuel tax credits under section 41-5 of the Fuel Tax Act 2006 (FTA) in respect of taxable fuel which it acquired for use in carrying on its enterprise and made available to its Subcontractors to allow them to use in their heavy vehicles to travel on public roads?

Answer

Yes.

Question 2

If the answer to question 1 is the entity entitled to claim fuel tax credits, subject to the time limits in section 47-5 of the FTA by amending its previously lodged business activity statements (BAS).?

Answer

Yes.

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

The scheme commenced on:

1 July 2020

Relevant facts and circumstances

The entity (you) is registered for goods and services tax and fuel tax credits.

During the relevant period, you conduced the business of transportation and logistics.

You don't own a fleet of vehicles or employ staff to conduct the transport business during the relevant period. Instead, you outsourced your transportation services to a number of Subcontractors.

The vehicles used by the Subcontractors are heavy vehicles with a gross vehicle mass (GVM) of more than 4.5 tonnes.

When you engage the Subcontractors to provide services, their heavy vehicles are used exclusively for your entity.

You have provided sample documents to substantiate that you purchased the taxable that you provide to your Subcontractors for use to carry on your enterprise. The fuel are not on sold to your Subcontractors.

Relevant legislative provisions

Fuel Tax Act 2006 Section 41-5

Fuel Tax Act 2006 Section 47-5

Reasons for decision

The fuel tax credit entitlement provision is section 41-5 of the FTA. To be entitled to a fuel tax credit, you must have acquired, manufactured or imported taxable fuel, and used that fuel to carry on an enterprise. You must also be registered for GST at the time you acquired the fuel.

You are registered for goods and services tax.

To determine your entitlement, the remaining questions are:

1.    Did you acquire the taxable fuel? and

2.    Did you use that fuel to carry on an enterprise?

Guidance on the meaning of 'acquire' and 'use' has been provided 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 (FTR 2009/1).

Did you acquire the fuel?

The term 'acquire' is not defined in the FTA, and 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'.

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.

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.

Paragraph 22 of FTR 2007/1 states:

22. Whether you get ownership of, or proprietary interest in, fuel will depend on all the facts and circumstances of each case. It will be necessary to examine the surrounding circumstances, together with any relevant documentation, including any written agreement.

Paragraphs 36 and 37 of FTR 2007/1 state:

36. If you purchase an ascertained or specific amount of taxable fuel in a deliverable state, you acquire it when it is intended that property in the fuel is to pass to you. This is ordinarily when the contract for the sale and purchase of the fuel is made.

37. If you enter into a contract for the sale and purchase of taxable fuel which, at the time of contract, is unascertained, you acquire the fuel when, in the absence of a contrary intention, the fuel in a deliverable state is unconditionally appropriated to the contract.

Based on the sample supporting information provided as part of this private ruling, you acquired the taxable fuel.

Did you use the fuel to carry on your enterprise?

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.

You outsourced your transportation services to a number of Subcontractors because you did not own a fleet of vehicles or employ staff to conduct the transport business during the relevant period.

You allowed the Subcontractor to use your fuel at no cost to the Subcontractor.

At paragraphs 25 and 26 of FTR 2009/1:

25. Generally, a sale of fuel occurs where one entity supplies fuel to another and requires payment for the fuel supplied.

26. Whether there is a sale of fuel in a hire arrangement will depend on the intention of the parties, to be determined according to any relevant contracts and surrounding circumstances.

Paragraphs 28 to 30 of FTR 2009/1 further states:

28. As explained in FTR 2007/1, if you acquire a right or a licence to use another entity's fuel, you do not acquire taxable fuel for the purposes of the FT Act. The mere grant of a right or licence to use the fuel does not result in you obtaining a proprietary interest in, or ownership of, the fuel.

29. Whether there is a licence to use fuel in a hire arrangement will depend on the intention of the parties, to be determined according to any relevant contracts and surrounding circumstances.

30. The following circumstances may be indicative of a hire company's intention to only provide the hirer the licence to use its fuel:

•         the hire company charges a flat fee which is inclusive of all fuel used irrespective of the quantity used, including refuelling the vehicle or equipment; or

•         the hire company provides the fuel for no charge.

FTR 2007/1 provides further guidance:

Taxable fuel provided for use by contractors and subcontractors

166. Where a contractor (or a subcontractor) carries out an activity for an entity, it is often agreed between the parties that the contractor will be able to replenish their plant or equipment with fuel from the entity's fuel supply, both throughout the activity and upon its completion. This is commonly referred to as a full on/full off arrangement. These kinds of arrangements are particularly common in agriculture and mining.

167. In circumstances where an entity, in the course of carrying on an enterprise, engages the services of a contractor to carry out an eligible activity, and the entity provides taxable fuel for use by the contractor in carrying out that activity, the entity's entitlement to a fuel tax credit is not affected by the use of the fuel by the contractor. The Commissioner considers that the contractor does not acquire the fuel in these circumstances, and, as such, the contractor is not entitled to a fuel tax credit in respect of this fuel.

It has been established that the Subcontractor's vehicles were used exclusively in performing services for your entity. The fuel made available by you, not payable by Subcontractors, is for use by the Subcontractor exclusively in the course of undertaking work for you.

Accordingly you have 'used' the fuel in the course of your enterprise and has not disposed of the fuel.

Are you entitled to claim fuel tax credits, subject to the time limits in section 47-5 of the FTA, by amending your previously lodged BAS for each tax period in the relevant period?

If you're entitled to a fuel tax credit, you need to claim it within four years.

The four years starts from the day after you were required to lodge the BAS for the tax period in which the fuel was acquired.

If the fuel tax credit is not claimed within this time the entitlement ceases under subsection 47-5(1) of the FTA.

Subsection 47-5(1) of the FTA states:

You cease to be entitled to a fuel tax credit to the extent that it has not been taken into account, in an *assessment of a *net fuel amount of yours, during the period of 4 years after the day on which you were required to give to the Commissioner a return for the tax period or fuel tax return period to which the fuel tax credit would be attributable under subsection 65-5(1), (2) or (3).

For fuel tax credit entitlements that arose within the previous 4 years of the current tax period you can amend previously lodged BAS.