ATO Interpretative Decision
ATO ID 2008/118
Excise
Excise: synthetic hydraulic fluidFOI status: may be released
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is a product made of the polyol ester family and used as a hydraulic fluid in industrial hydraulic applications a synthetic equivalent of a petroleum based oil for the purposes of subitem 15.1 in the Schedule to the Excise Tariff Act 1921 (Schedule)?
Decision
Yes. A product that is made of the polyol ester family and used as a hydraulic fluid in industrial hydraulic applications is a synthetic equivalent of a petroleum based oil for the purposes of subitem 15.1 in the Schedule.
Facts
The entity manufactures at a chemical plant, a product which is used as a hydraulic fluid.
The hydraulic fluid, which is formed through the reaction of an organic acid and alcohol, is of the polyol ester family.
The hydraulic fluid can be used for the same applications to that of petroleum hydraulic fluids.
Reasons for Decision
Subitem 15.1 of the Schedule applies to 'petroleum-based oils (including lubricant/fluid/oil products) and their synthetic equivalents but not greases'. The Prefatory Notes to the Schedule give the meaning of 'lubricant/fluid/oil products' to include hydraulic fluid.
The Excise Tariff Act does not define the meaning of 'synthetic equivalent'. Therefore the term takes on its ordinary meaning. The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW (the Dictionary) relevantly defines the term 'synthetic' as '2 denoting or relating to chemical compounds, resins rubbers, etc., formed by chemical reaction in a laboratory or chemical plant, as opposed to those of natural origin'.
Polyol esters are produced by re-acting a highly branched di-functional alcohol with a monobasic acid. As polyol esters are produced by a process of a chemical reaction in a laboratory or at a chemical plant, a product belonging to the polyol ester family is a synthetic product.
To be classifiable to subitem 15.1 of the Schedule the product must be synthetic, and, an equivalent of a petroleum-based hydraulic fluid.
The Dictionary relevant defines 'equivalent' as '2 corresponding in position, function, etc.'.
Hydraulic fluids have been and are currently manufactured from petroleum-based oil and are used in various hydraulic systems including industrial machinery, construction equipments, automotive, aircraft and marine applications.
Petroleum-based hydraulic fluids and polyol ester based hydraulic fluids can be used in the same hydraulic systems. Therefore, as polyol ester based hydraulic fluids have a corresponding function to that of petroleum-based hydraulic fluids, they are an equivalent of petroleum based hydraulic fluids.
Hence a product that is made of the polyol ester family and used as a hydraulic fluid is a synthetic equivalent of a petroleum based oil for the purposes of subitem 15.1 in the Schedule.
Date of decision: 29 August 2008
Legislative References:
Excise Tariff Act 1921
Schedule subitem 15.1
ATO ID 2008/119 ATO Interpretative Decisions overturned by this decision
ATO ID 2001/697
Keywords
Excisable goods
Excise
ISSN: 1445-2782