ATO Interpretative Decision

ATO ID 2008/65 (Withdrawn)

Excise

Fuel Tax Credit: electricity generation - fuel purchased between 1 July 2008 and 30 June 2012
FOI status: may be released
  • This ATO ID is withdrawn because it contains a view in respect of a provision of the Fuel Tax (Consequential and Transitional Provisions) Act 2006 that does not apply after the 2011-12 income year. Despite its withdrawal, this ATO ID continues to be a precedential ATO view in respect of decisions for income years up to, and inlcuding, the 2011-12 income year.
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CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 diesel, fuel used to generate electricity for the purposes of subparagraph 11(1)(b)(iii) of Schedule 3 to the Fuel Tax (Consequential and Transitional Provisions) Act 2006 (Fuel Tax Transitional Act) when it is used in the internal combustion engine which drives the overall machine and also drives the machine's generator to provide electrical power to the components of the machine?

Decision

No, diesel fuel is not used to generate electricity for the purposes of subparagraph 11(1)(b)(iii) of Schedule 3 to the Fuel Tax Transitional Act when it is used in the internal combustion engine of a machine which also drives the machine's generator to provide electrical power to the components of the machine.

Facts

An entity uses a machine in its enterprise.

The machine is powered by an inbuilt internal combustion engine. Diesel fuel is used in the internal combustion engine.

The internal combustion engine also drives a small internal generator which supplies power to the components of the machine. This enables the machine to perform its designed use without relying on an external power supply.

No electricity is generated by the machine for any other use.

Reasons for Decision

Item 11 of Schedule 3 to the Fuel Tax Transitional Act restricts an entity's entitlement to a fuel tax credit for fuel acquired, manufactured or imported for use in carrying on its enterprise during the period 1 July 2008 to 30 June 2012. However, these restrictions do not apply in the circumstances set out in paragraph 11(1)(b) of the Fuel Tax Transitional Act. One circumstance is where fuel is used by an entity in generating electricity.

In the context of the fuel tax provisions, it is the purpose for which the fuel is acquired that is important when deciding whether it was acquired to generate electricity.

Fuel is used for the purpose of generating electricity where the electricity is an end in itself and can in turn be used for any purpose for which electricity is required. For example, fuel is used in generating electricity when it is used in a generator so as to make power available to business premises. Similarly, the use of fuel in a generator to provide power to a range of external equipment (such as electrically powered machinery in a factory) would constitute use in generating electricity.

The above uses of fuel can be contrasted with the use of fuel within the actual equipment that is to be powered by the fuel. For example, fuel acquired for use in the internal combustion engine of a vehicle is for the purpose of driving or propelling the vehicle. Similarly the use of fuel in the internal combustion engine of a machine where the power generated by the machine is for use by that machine is for the purpose of operating the machine.

The entity acquires diesel fuel to use in the machine's internal combustion engine to drive or propel the machine enabling it to fulfil its designed use. Although the versatility of the machine is enhanced, as it can perform without an external power supply, the generation of electricity is only incidental to the purpose of using the fuel to operate the machine's engine. Further, the machine does not generate electricity for any other use.

Accordingly, diesel fuel is not used to generate electricity for the purposes of subparagraph 11(1)(b)(iii) of Schedule 3 to the Fuel Tax Transitional Act when it is used in the internal combustion engine of a machine which provides power to the components of the machine.

Date of decision:  23 April 2008

Legislative References:
Fuel Tax (Consequential and Transitional Provisions) Act 2006
   Schedule 3, item 11
   Paragraph 11(1)(b)
   subparagraph 11(1)(b)(iii)

Related ATO Interpretative Decisions
ATO ID 2007/113

Keywords
Fuel tax credits
FTC diesel
FTC electricity generation
FTC use

Siebel/TDMS Reference Number:  5940119

Business Line:  Indirect Tax

Date of publication:  9 May 2008

ISSN: 1445-2782

history
  Date: Version:
  23 April 2008 Original statement
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