Fuel Tax Credits: Eligibility and Legal Framework

A Comprehensive Guide to Acquisition Requirements and Enterprise Considerations

  1. Fuel tax credit may be given to a taxpayer for the fuel tax (excise
    or customs duty) paid, where the tax payer has acquired fuel. The
    fuel will need to be used in machinery, plant, equipment and
    vehicles.

Background

  1. The amount of credit will be dependant on:
    1. the type of fuel;
    2. how much fuel was acquired; and
    3. the use of fuel;

Legislative Provisions

  1. to be entitled to a fuel tax credit:[1](1) You are entitled to a fuel tax credit for taxable fuel that you
    acquire or manufacture in, or import into, the indirect tax zone to the
    extent that you do so for use in * carrying on your * enterprise.(2) However, you are only entitled to the fuel tax credit if, at the
    time you acquire, manufacture or import the fuel, you are * registered
    for GST, or * required to be registered for GST.
  2. the key point is that the taxable fuel needs to be acquired to the
    extent that is used in carrying on a taxpayer’s enterprise;
  3. the taxpayer will need to be registered or required to be registered
    for GST;

Entitlement to FTC

  1. in respect of s45-5(1):

Taxable Fuel

  1. the requirement of taxable fuel:
    1. means a fuel means a fuel in respect of which a duty is payable
      under the Excise Act 1901 and the Excise Tariff Act 1921
      applies;
    2. in respect of diesel (a common fuel used in businesses) a duty
      is payable under the legislation above and is therefore a
      taxable fuel;

Acquired

  1. in respect of the requirement that the fuel is acquired:
    1. there is not legislative definition of acquired in the Fuel Tax
      Act;
    2. there is a definition of acquire in the GST Act, this is
      discussed in the context of GST;
    3. case law suggests that ‘acquire’ required legal title of goods
      to pass from one person to another;

Colby

  1. to acquire a good, the legal title of those goods must pass, that is
    there must be some transfer of the property or goods from one person
    to another[2]
    1. the case of Colby considers this in the context of now
      repealed legislation;
    2. the issues for the taxpayer in this case was that there were
      insufficient records to substantiate their statements; and

No Requirement to Purchase

  1. the term ‘acquire’ does not equate to purchase of fuel:
    1. there is no requirement in the legislation that the fuel be
      purchased;
    2. it is sufficient that legal title transfer from the supplier to
      a claimant;

Definition of Purchase

  1. however, a purchase of fuel also satisfies the criteria of acquire A
    purchase is defined to mean:
    1. to acquire by way of bargain and sale for money or other
      valuable consideration;[3]
    2. relevantly in the case of Woodlands[4] Pincus JA stated in
      that case:

It was not and could hardly have been contended that it is impossible to
have a contract for sale under which the property in what is sold passes
as it is consumed; sales of electricity are a familiar example.

  1. Further Fitzgerald P:[5]

whether there is a sale will depend on the intention of the parties,
which is to be ascertained ‘according to the terms in which they have
contracted, set in the context of the circumstances in which their
contract was formed’

  1. McPherson JA stated:[6]

The fact that the oil was consumed by its use does not seem to me to
prevent there being a sale. Ordering food for consumption in a
restaurant is now regarded as involving a contract for sale of goods
which is subject to the Sale of Goods Act: see Lockett v A & M Charles
Ltd [1938] 4 All ER 170 and Wallis v Russell [1902] 2 IR 585 at 611
… In Bentley Bros v Metcalfe & Co [1906] 2 KB 548 at 552, Collins MR
said that the result of a contract to supply power, “whether it relates
to gas, electricity or any other motive power, is the consumption of
that which is supplied”. Such a contract, his Lordship went on: “…
is in fact one of purchase and sale. It may be difficult to describe in
precise terms the thing that is bought, but that does not alter the fact
that there is a sale”: see also Cozens-Hardy LJ (at 553) …

  1. The Commissioner in FTR 2009/1[7] states that in the case of
    Woodlands[8] the main consideration is who paid for the fuel;[9]
  2. the test is not for whether a claimant purchases fuel but whether
    they have acquired fuel. Purchasing fuel is merely one way of
    acquiring fuel;

Commissioner’s View

  1. acquiring the fuel can be achieved if:[10]
    1. you purchase the fuel;
    2. the fuel is gifted to you; or
    3. you get the fuel as your own by any other means (other than
      manufacture or import). This necessarily means that you get
      ownership of, or proprietary rights in respect of, the fuel.
    4. a purchase of fuel can be evidenced by the following:[11]
      1. (a) purchase or delivery date;
      2. (b) invoice or receipt number;
      3. (c) type of product purchased or delivered;
      4. (d) supplier details;
      5. (e) price paid per litre;
      6. (f) quantity delivered (litres); or
      7. (g) bulk tank issue records
    5. records should be kept showing:
      1. purchase or acquisition date;
      2. invoice with invoice number;
      3. type of goods delivered (in this case fuel);
      4. supplier details; and
      5. the price paid or other consideration paid for the fuel and
        the amount;
  1. the Commissioner’s view on acquire (for the purposes of the Act):
    1. the term of acquire is not defined in the Act;[12]
    2. in the context of the Act the Commissioner considers that the
      term ‘acquire’ has the ordinary meaning of to ‘get as one’s
      own’[13]
    3. To ‘get as one’s own’ requires:[14]
      1. property in or ownership of the relevant taxable fuel to
        pass from one entity to another entity, or
      2. alternatively, that ownership is conferred because the fuel
        has been obtained by an entity as its own;
    4. Whether you get ownership of, or proprietary interest in, fuel
      will depend on all the facts and circumstances of each case. It
      will be necessary to examine the surrounding circumstances,
      together with any relevant documentation, including any written
      agreement;[15]
  1. The Commissioner considers:
    1. that to ‘get as one’s own’, implies getting ownership or
      proprietary rights in respect of the taxable fuel;[16]
    2. this will mean either that property in the taxable fuel passes
      from one entity to another or that proprietary rights or
      ownership is conferred by the act of obtaining the taxable fuel
      by other means;[17]
    3. therefore, the Commissioner takes the view that an entity
      typically ‘acquires’ taxable fuel upon a change in ownership
      of, or a transfer of proprietary rights in, the fuel from one
      entity to another;[18]

Carrying on an Enterprise

  1. the final requirement is that the fuel is acquired in carrying out
    an enterprise, much of the discussion on this point is made in the
    context of GST Act;
    1. in respect of the requirement that the thing be acquired in the
      carrying on your enterprise:
      1. giving effect to the words of s11-15(1), goods or
        services are acquired by an entity for a “creditable
        purpose        ” if the acquisition is connected with the
        activities that constitute the entity’s
        “enterprise“;”[19]
      2. there must be an objective assessment as to whether there is
        a connection between the thing acquired and the
        enterprise based on all the facts and
        circumstances;[20]
      3. in Magna Alloys[21] Brennan J stated both motive and
        subjective purpose are states of mind, whereas objective
        purpose is an attribute of a transaction. That is, it is
        attributed to a transaction by reference to all the known
        circumstances;

Commissioner’s View

  1. The Commissioner considers the following factors relevant in
    determining that an acquisition is made in carrying on an
    enterprise:[22]
  • the acquisition is incidental or relevant to the commencement,
    continuance or termination of the enterprise;
  • the thing acquired is used by the enterprise in making supplies;
  • the acquisition secures a real benefit or advantage for the
    commencement, continuance or termination of the enterprise;
  • the acquisition is one which an ordinary business person in the position
    of the recipient would be likely to make for the enterprise;
  • the acquisition does not meet the personal needs of individuals such as
    partners or directors;
  • the acquisition helps to protect or preserve the enterprise entity,
    structure or organisation; and
  • the acquisition is made by the entity in accordance with, or to satisfy,
    a statutory requirement imposed on the enterprise;

Carrying On

  1. carrying on means:[23]

“carrying on” an enterprise includes doing anything in the course of the
commencement termination of the enterprise

Acquisition from a GST Perspective

  1. Given there is a close proximity between fuel tax credits and GST, I
    have made some additional observation of the provision in a GST
    context:

Input Tax Credits

  1. for the purposes of the GST Act an input tax credit is defined
    to mean an entitlement arising under s11-20, or s15-5:[24]
    1. s11-20 relates to entitlements to input tax credits</em
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