Taxation Determination

STD 96/2

Title: Statutory period - heavy motor vehicles for transporting livestock in remote areas

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FOI status:

may be releasedFOI number: I 1218129

Background

In order to qualify for Sales Tax exemption on a motor vehicle, a person must intend to use it in exempt circumstances for a time known as the statutory period.

Ordinarily, the statutory period is the first two years' use of goods, or their effective working life, whichever is the shorter, or a time that the Commissioner considers appropriate in special circumstances.

For some time the ATO has accepted that motor cars and light commercial vehicles qualified for exemption if they were used in exempt circumstances for 40,000 kilometres or 2 years, whichever occurred first.

The question has been raised whether the mileage test also applies to heavy motor vehicles for transporting livestock in remote areas.

Issue

What is the statutory period in relation to heavy motor vehicles that would be exempt under Item 4 when used to transport livestock in remote areas?

Decision

The 40,000 kilometre test has not been extended to heavy vehicles under Item 4. As a result, the statutory period that applies to these vehicles is 2 years.

Date of effect

This determination confirms previous ATO advice and is effective immediately.

Reasons

We have based our decision on the following legislative provisions: Section 5 of Sales Tax Assessment Act 1992; Section 5 of Sales Tax (Exemptions and Classifications) Act 1992; and Item 4 Schedule 1.

Item 4 describes certain motor vehicles that can qualify for exemption, that is, heavy trucks and prime movers with a net power rating of at least 74.57 kW and-

*

in the case of a truck- a gross vehicle weight rating of at least 9.071 tonnes, or

*

in the case of a prime mover- a gross combination weight rating of at least 13.607 tonnes,

for use by a person exclusively in a remote area, mainly for transporting livestock .

Remote area means the prescribed area that is defined in section 79A of the Income Tax Assessment Act 1936, referred to as Zone A or Zone B.

Livestock means:

*

animals that are being reared or maintained for producing food, fibres, fur, skins, feathers or similar products, or for use in farming land

*

breeding stock for animals referred to above

*

horses

but does not include:

*

fish, crustaceans or molluscs

*

animals that are kept, or are to be kept, as domestic pets.

Mainly means to the extent of more than 50%.

Therefore, under this Item, heavy trucks and prime movers can qualify for exemption from sales tax if they are for use exclusively in a remote area mainly for transporting livestock.

Where an exemption Item requires the motor vehicle to be used in a particular way or by a particular person, the use requirement is for the whole of the statutory period .

The statutory period is defined as the period that starts at the time when a motor vehicle is first applied to a person's own use in Australia and ends at the earliest of the following times-

(a)

the end of two years after the time of the first use of a vehicle;

(b)

the time when a vehicle is no longer reasonably capable of being used for the purpose for which vehicles of that kind are ordinarily used;

(c)

a time that the Commissioner considers to be appropriate in special circumstances.

Paragraph (b) has application where, for example, a vehicle is to be operated in conditions that reduce its working life to less than two years, or where the designed working life of a particular kind of vehicle is less than two years. These conditions include unusually heavy, or prolonged work, or operations in a corrosive environment. Obsolescence does not satisfy the terms of paragraph (b).

Paragraph (c) provides flexibility to deal with other situations. The 40,000 kilometre criterion for certain vehicles is an example of the application of paragraph (c).

Vehicles that qualify for exemption under Item 4 are for use in the transport industry or for use in activities similar to those conducted by the transport industry. The effective working life of these vehicles is generally well in excess of two years. The 40,000 kilometre criterion has not been used as an alternative because in most cases that would represent only several months' use of the vehicle and this would not qualify as special circumstances.

Communication of the Decision

This determination has been made available for publication by the sales tax publishing houses and will be provided to sellers of these goods that are registered as sales taxpayers with the ATO.

Commissioner of Taxation
13 March 1996

References

ATO references:
NO NAT 96/1756-6

Related Rulings/Determinations:

STD 95/9

Subject References:
Statutory period
Heavy motor vehicles for transporting livestock in remote areas

Legislative References:
Section 5 Sales Tax Assessment Act 1992
Section 5 Sales Tax (Exemptions & Classifications) Act 1992
and Item 4 Schedule 1