ATO Interpretative Decision

ATO ID 2007/156

Excise

• With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the Fuel Tax legislation with the term 'indirect tax zone' by the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts.
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Issue

Does an entity have an increasing fuel tax adjustment, under section 44-5 of the Fuel Tax Act 2006 (FTA), if the entity's vehicle satisfied the environmental criteria in section 41-25 of the FTA at the time of acquiring fuel, but did not satisfy the environmental criteria when the fuel was used?

Decision

Yes. An entity has an increasing adjustment, under section 44-5 of the FTA if the entity's vehicle satisfied the environmental criteria in section 41-25 of the FTA at the time of acquiring the fuel, but did not satisfy the environmental criteria when the fuel was used.

Facts

An entity operates a motor vehicle with a gross vehicle mass (GVM) of over 4.5 tonnes that was manufactured before 1 January 1996.

The entity acquired taxable fuel for use in the vehicle.

The vehicle met the environmental criteria requirements of subsection 41-25(1) of the FTA, at the time the fuel was acquired for use in the vehicle for travelling on public roads.

The entity satisfied all other requirements for entitlement to a fuel tax credit in respect of the fuel.

The entity claimed a fuel tax credit entitlement for the fuel acquired for use in the vehicle.

When the entity subsequently used the fuel in the vehicle, the vehicle no longer satisfied the environmental criteria in subsection 41-25(1) of the FTA.

The exclusions from the requirement to satisfy environmental criteria contained in subsection 41-25(2) of the FTA are not relevant to this entity.

Reasons for Decision

Under section 41-5 of the FTA an entity is entitled to a fuel tax credit for taxable fuel that they acquire or manufacture in, or import into, Australia to the extent that they do so for use in carrying on their enterprise.

The FTA sets out a number of limitations on an entity's entitlement to fuel tax credits where fuel is acquired, manufactured, or imported for use in a vehicle travelling on a public road.

One limitation, set out in subsection 41-25(1) of the FTA, is that an entity is not entitled to the extent that it acquires, manufactures or imports the fuel for use in a motor vehicle, unless the vehicle meets one of a number of environmental criteria. (Subsection 41-25(2) of the FTA provides for a number of circumstances where this limitation does not apply, none of which are relevant in this instance).

The entity satisfied one of the environmental criteria at the time it acquired the fuel. The entity also satisfies all of the other requirements for entitlement to a fuel tax credit in respect of the fuel.

Therefore the entity was entitled to a fuel tax credit when it acquired the fuel and claimed the credit in its fuel tax return.

At the time the entity used the fuel, the vehicle no longer satisfied the environmental criteria in subsection 41-25(1) of the FTA.

Section 44-5 of the FTA provides that an entity has a fuel tax adjustment if it uses fuel, or makes a taxable supply of fuel, in circumstances where, if the entity had originally acquired, manufactured or imported the fuel in those circumstances, their entitlement would have been different from their actual entitlement.

If the entity had failed to satisfy the environmental criteria when it acquired the fuel, they would not have been entitled to a fuel tax credit. Therefore, their entitlement at the time they acquired the fuel would have been different from the amount claimed. It follows that, pursuant to section 44-5 of the FTA, the entity has an increasing fuel tax adjustment.

Legislative References:
Fuel Tax Act 2006
   subsection 41-5
   subsection 41-25
   subsection 41-25(1)
   subsection 41-25(2)
   subsection 44-5

Keywords
FTC environmental measures
FTC fuel tax adjustment
FTC vehicle emissions
Fuel tax credits
Increasing fuel tax amount

Siebel/TDMS Reference Number:  5530661

Business Line:  Indirect Tax

Date of publication:  13 July 2007

ISSN: 1445-2782