ATO Interpretative Decision
ATO ID 2010/138 (Withdrawn)
Excise
Energy Grants (Credits) Scheme: on-road - incidental use - manufacture and unloadingFOI status: may be released
-
This ATO ID is withdrawn from 1 July 2012, the date the Energy Grants (Credits) Scheme Act 2003 was repealed.
Despite its withdrawal, this ATO ID continues to be a precedential ATO view in respect of the period the Act was in force, 1 July 2003 up to and including 30 June 2012.This document has changed over time. View its history.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 the use of a vehicle to conduct on-site manufacture and to unload the manufactured goods an incidental use or any other use of the vehicle that is integral to operating the vehicle under paragraph 42(2)(c) of the Energy Grants (Credits) Scheme Act 2003 (EGCSA)?
Decision
No. The use of a vehicle to conduct on-site manufacture and to unload the manufactured goods is not an incidental use or any other use of the vehicle that is integral to operating the vehicle under paragraph 42(2)(c) of the EGCSA.
Facts
An entity operates a vehicle that transports goods to a client's site.
The vehicle has a gross vehicle mass (GVM) of more than 20 tonnes.
The vehicle is fitted with auxiliary equipment to manufacture explosives and to unload the explosives by pumping.
The vehicle is fitted with several tanks and bins to transport the ingredients/goods which are used in the manufacture. For safety reasons the manufacture is conducted at the site where the explosives are to be used.
The vehicle's engine provides power to mix the ingredients/goods in the final step of manufacture and to pump the explosive where required.
At no point are the transported goods unloaded from the vehicle. Rather the manufacture of the explosives occurs on the vehicle, and it is the explosives that are unloaded.
The vehicle is not located on a road when the mixing of the explosives and their unloading occur.
The vehicle is a vehicle for transporting passengers or goods for the purposes of subsection 42(2) of the EGCSA.
The entity is entitled to an on-road credit under section 42 of the EGCSA for the fuel used in the vehicle while goods are loaded onto the vehicle and while the goods are being transported to the client's site.
Reasons for Decision
Section 42 of the EGCSA details the circumstances when an entity will be entitled to an on-road credit for the use of diesel or alternative fuel in a registered vehicle that has a GVM of 20 tonnes or more.
Subsection 42(1) of the EGCSA provides that a claimant is entitled to an on-road credit if they purchase on-road diesel fuel or on-road alternative fuel for:
- (a)
- use in a registered vehicle that has a gross vehicle mass of 20 tonnes or more, or
- (b)
- incidental use in relation to such a vehicle.
However, the extent of entitlement is limited by subsection 42(2) of the EGCSA which requires that the fuel is for use in the carrying on of the entity's enterprise.
Subsection 42(2) of the EGCSA also serves to separate entitlement based on whether or not the vehicle is a vehicle for transporting passengers or goods.
If a vehicle is a vehicle for transporting passengers or goods, paragraph 42(2)(a) of the EGCSA is relevant and states that the use of fuel will be eligible if the fuel is used in operating the vehicle on a road in Australia. If the vehicle is not for use in transporting passengers or goods, paragraph 42(2)(b) of the EGCSA limits entitlement to use on a road for the purpose of transporting the vehicle to or from a place (whether or not on a road) where it is to operate, or from where it has operated.
As the vehicle used in the manufacture of explosives is a vehicle for transporting passengers or goods, paragraph 42(2)(a) of the EGCSA is relevant. However, the vehicle is not being used on a road when the explosives are manufactured and unloaded. Accordingly, the requirements of paragraph 42(2)(a) are not satisfied.
Where the use of a vehicle does not satisfy paragraphs 42(2)(a) or (b) of the EGCSA, paragraph (c) extends entitlement to incidental use, or any other use, of the vehicle that is integral to operating the vehicle as mentioned in paragraphs (a) or (b). As paragraph (b) is not relevant (because the vehicle is a vehicle for transporting passengers or goods), to be eligible under paragraph (c), the use of the vehicle in manufacturing and unloading must be an incidental use of the vehicle, or any other use of the vehicle, that is integral to operating the vehicle as mentioned in paragraph 42(2)(a).
'Incidental use' in relation to a vehicle is defined in section 8 of the EGCSA which states:
Each of the following, whether or not it takes place on a road, is an
incidental use
in relation to a vehicle:
The vehicle is operated to transport and deliver goods. Once the transported goods have reached their destination the goods are manufactured into another good. The manufactured good is then unloaded.
The provision relevant to the entity's circumstances is subparagraph 8(a)(i) of the EGCSA. Under this subparagraph, the powering of the vehicle or auxiliary equipment in or on the vehicle must occur while goods transported by the vehicle are being unloaded. In this instance, the goods that were transported are never unloaded. Instead the goods, upon reaching their destination, are used in the manufacture of different goods (being explosives) which are then unloaded from the vehicle. Therefore the goods that were transported are not the same goods that are subsequently unloaded. It follows that the powering of the vehicle or auxiliary equipment in or on the vehicle while the explosives are manufactured and unloaded does not satisfy the requirements of subparagraph 8(a)(i) of the meaning of incidental use in section 8 of the EGCSA.
Subparagraphs (a)(ii) and (iii) and paragraphs (b), (c) and (d) of the meaning of incidental use in section 8 of the EGCSA are not relevant to the entity's circumstances.
Accordingly, powering the vehicle, or auxiliary equipment in or on the vehicle while the explosives are manufactured and unloaded does not fall within the definition of 'incidental use' contained in section 8 of the EGCSA.
Therefore the entity's use of the vehicle to manufacture and unload explosives does not qualify as incidental use for the purposes of paragraph 42(2)(c) of the EGCSA.
Given this, and the fact the vehicle is a vehicle for transporting passengers or goods, the requirements of paragraph 42(2)(c) of the EGCSA will only be satisfied if the manufacture of the explosives and their unloading constitute 'any other use' of the vehicle that is 'integral to operating the vehicle as mentioned in paragraph 42(2)(a)'. Paragraph 42(2)(a) of the EGCSA refers to operating a vehicle that is a vehicle for transporting passengers or goods on a road in Australia.
The manufacture and unloading of the explosives is not considered to have the requisite connection with the operation of the vehicle on a road. This is because by the time manufacture is undertaken and the manufactured goods are unloaded from the vehicle, the transportation of the goods from which the explosives are manufactured has concluded. In addition, the goods that are manufactured and ultimately unloaded from the vehicle are different from the goods that were transported by the vehicle.
As the manufacturing and unloading of the explosives does not constitute an incidental use, or any other use of the vehicle that is integral to operating the vehicle on a road in Australia, the requirements of paragraph 42(2)(c) of the EGCSA are not satisfied.
Date of decision: 8 July 2010
Legislative References:
Energy Grants (Credits) Scheme Act 2003
section 8
section 42
subsection 42(1)
paragraph 42(2)(a)
paragraph 42(2)(b)
paragraph 42(2)(c)
ATO ID 2004/215
Keywords
EGCS incidental use
EGCS on-road
ISSN: 1445 - 2782
| Date: | Version: | |
| 8 July 2010 | Original statement | |
| You are here | 1 July 2012 | Archived |