TAXATION RULING NO. ST 2400

ST 2400

SALES TAX: METHANOL

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FOI status:

May be releasedFOI number: I 1019716

PREAMBLE

Sub-item 48(6) in the First Schedule to the Sales Tax (Exemptions and Classifications) Act exempts from sales tax power alcohol produced in Australia and mixtures produced in Australia of petrol and power alcohol.

2. Sub-item 48(8) exempts from sales tax substances not covered by any other sub-item of item 48 for use as fuel for internal combustion engines. Like sub-item 48(6) this exemption is confined to Australian products.

3. Sub-item 111(1) exempts from sales tax goods which are the produce or manufacture of New Zealand, Fiji, Norfolk Island, Papua New Guinea, the Territory of Christmas Island or the Territory of Cocos (Keeling) Islands, being goods of the same class or kind as goods upon the sale value of which, if produced or manufactured in Australia, sales tax is not payable.

4. This Ruling considers the classification of methanol, including methanol for use as fuel for internal combustion engines.

FACTS

5. Methanol is methylated alcohol. Methanol is principally used as a solvent for industrial purposes. Other uses are as an additive to ethyl alcohol to make methylated spirits and as a fuel for motor racing. Most methanol used in Australia is imported from New Zealand.

6. Power alcohol is absolute ethyl alcohol (i.e., 99.8% anhydrous ethyl alcohol) or absolute ethyl alcohol which has been suitably denatured (i.e., by the addition of 1/8% wood naptha, 1% benzol and 1% petrol). The term "power alcohol" is also used loosely to cover rectified spirit (i.e., 85-96% ethyl alcohol, 4% water, plus denaturants). Power alcohol was used as a mixture with petrol as fuel for internal combustion engines during petrol shortages in the 1940s.

RULING

7. Methanol is not power alcohol and therefore methanol produced in Australia is not exempt under sub-item 48(6), First Schedule.

8. However, methanol produced in Australia for use as fuel for internal combustion engines is exempt under sub-item 48(8), First Schedule.

9. Methanol imported from New Zealand for similar use is exempt by virtue of sub-item 111(1), First Schedule. Methanol imported from overseas countries, other than New Zealand and the other countries covered by sub-item 111(1), is not exempt under sub-item 48(8) and is taxable at 20%.

10. Methanol which is not for use as fuel for internal combustion engines is not covered by item 48 nor any other item in the First Schedule and is taxable at 20%.

COMMISSIONER OF TAXATION
24 MARCH 1988

References

ATO references:
NO 1.87/10832-5

Date of effect:
Immediate

Subject References:
METHANOL

Legislative References:
SALES TAX (EXEMPTIONS AND CLASSIFICATIONS) ACT; SUB-ITEMS 48(6),
48(8) AND
111(1), FIRST SCHEDULE