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Fuel Tax Credits: ATO amends public rulings

The ATO has recently made some amendments to Fuel Tax Credits public rulings, including reducing the FTC entitlements for buses and coaches.

Note: TaxEd is hosting a webinar on 28 November 2019 providing an update and refresher on matters relating to FTCs. You can view more information for it here.

In response to the decision in Linfox  Australia Pty Ltd and Commissioner of Taxation with respect  to fuel tax credits (FTCs) and the further recent Federal Court proceedings, the ATO has made some amendments to its public fuel tax ruling, FTR 2008/1, and Practical Compliance Guide, PCG 2016/11.

Prior to making these amendments, both documents recognised that fuel used by buses or coaches to power air conditioning was not fuel used for travelling on a public road. The effect was that FTCs could be claimed by eligible entities without reducing their entitlement by the road user charge. Practically, this resulted in a higher FTC entitlement.

The recent amendments to FTR 2008/1 have been issued as an addendum to FTR 2008/1, and referred to as FTR 2008/1A8.  They removed the specific example (Example 9B) stating that fuel used to power air-conditioning in passenger buses and coaches were not for travelling on a public road and also inserted express statements indicating that such fuel is used for travelling on a pubic road.

Prior to the amendment, PCG 2016/11 included a specific reference to fuel used to power air-conditioning in buses and coaches and indicated that a fair and reasonable percentage was that 5% of fuel was used for that purpose. This has also been removed.

Both the addendum and the amendments indicate that this change in treatment applies to taxable fuel acquired on or after 1 November 2019.

The rationale for the amendments is stated in the preamble to the addendum as:

“Although the Linfox AAT case concerned fuel used to power cabin air-conditioning in vehicles, the Commissioner’s view is that the rationale employed by Jagot J. is equally applicable to the powering of passenger air-conditioning in buses.”

Incidentally, the ATO flagged that these amendments may be required in its Decision Impact Statement (DIS) issued in response to the Linfox proceedings. The DIS was issued on 24 September 2019 and invited comments until 25 October 2019.

The ATO has issued the amendments less than a week after the closing date for submissions – speedy even by the ATO standards. On a positive note, at least the ATO change in view only applies prospectively.

FTC rate

In addition to the above, and based on the Linfox decision, the ATO also recently released information regarding the rate of FTC applicable and claimable by commercial buses and coaches.

The ATO is stating that for fuel acquired before 1 November 2019 businesses can use the ‘all other business rate’, and for fuel acquired after 1 November 2019 businesses can use the rate for ‘heavy vehicles for travelling on public roads’. However, this latter rate from 1 November 2019 also needs to be reduced by the road user charge.

By way of example, assuming the fuel is diesel, the rates would be:

  • Prior to 1 November 2019 – ‘all other business uses’ – 41.8 cents per litre;
  • From 1 November 2019 – ‘heavy vehicle travelling on public road’ – 16 cents per litre.

Other amendments

The ATO also recently released addendums to each of:

  • Fuel Tax Determination FTD 2006/2, which deals with the records that are required to be kept by taxpayers to substantiate a claim for a FTC; and
  • Fuel Tax Determination FTD 2010/1, which deals with apportionment when determining total fuel tax credits in calculating the net fuel amount under s 60-5 of the Fuel Tax Act 2006.

These changes essentially update references in relation to repealed or redundant provisions. Both apply on and from 30 October 2019.

This article provides a general summary of the subject covered and cannot be relied upon in relation to any specific instance. It is not intended to be, nor should it be relied upon as, a substitute for professional advice. TaxEd Pty Ltd and any person connected with its production disclaim any liability in connection with any use.