• The Administrative Appeals Tribunal (“AAT”) hands down decision on fuel tax credits (“FTC”)

On 22 February 2019, Deputy President Justice J Jagot, in the Administrative Appeals Tribunal (“AAT”) handed down her decision on whether businesses can claim fuel tax credits (“FTC”) at the maximum rate of entitlement for fuel used while travelling on toll roads, in the case of Linfox Australia Pty Ltd and Commissioner of Taxation (Taxation) [2019] AATA 222 (the “Toll Roads Case”).

he Toll Roads Case is a case that has been anticipated for businesses that use fuel for travel on toll roads for a number of years, and had the potential to provide significant refund opportunities to transport operators not seen since Re Linfox Australia Pty Ltd and Federal Commissioner of Taxation [2012] AATA 517 (“Linfox [2012]”) where it was held fuel used to power refrigerated trailers is eligible for FTC at the maximum rate of entitlement.

The Issues

The issues that were considered by the Tribunal in the Toll Roads Case were as follows:

  • whether the road user charge in section 43-10 of the Fuel Tax Act 2006 (Cth) (“FTA”) applies to fuel acquired for use in a vehicle for travelling on certain toll roads, the M2 Motorway, the Go Between Bridge, Eastlink, and the Sydney Harbour Tunnel;
  • whether the road user charge in section 43-10 of the FTA applies to fuel acquired for use in powering air conditioning units in the heavy vehicles in the Applicant’s (Linfox Australia Pty Ltd) fleet;
  • whether, as a result of the operation of section 47-5 of the FTA, the Applicant has ceased to be entitled to certain fuel tax credits; and
  • whether the Applicant’s objection was effective for the period ended 30 July 2012.

The Tribunal relevantly held that:

  • the road user charge in section 43-10 of the FTA applies to fuel acquired for use in a vehicle for travelling on the toll roads;
  • the road user charge in section 43-10 of the FTA applies to fuel acquired for use in powering air conditioning units in the heavy vehicles in the Applicant’s fleet;
  • the Applicant has not ceased to be entitled to certain fuel tax credits as a result of the operation of section 47-5 of the FTA; and
  • the Applicant’s objection was valid when lodged and thus for the period ended 30 July 2012.

For the purposes of this analysis, we will be considering Issues 1 and 2, which were held in favour of the Respondent (the Commissioner of Taxation). It is expected that the Applicant will appeal this decision.

Legislative Background

FTC Eligibility

FTC eligibility for fuel acquired and used is primarily governed by the requirements set out in the FTA. General entitlement to claim FTC is granted by section 41-5 of the FTA which considers that, “You are entitled to a fuel tax credit for taxable fuel that you acquire or manufacture in, or import into, Australia to the extent that you do so for use in carrying on your enterprise”.

Subdivision 41-B of the FTA also provides several disentitlement rules for FTC, including that there is no entitlement for fuel used in light vehicles (less than 4.5 tonne GVM) travelling on public roads (section 41-20 of the FTA).

Rate of FTC Entitlement

Section 43-5 of the FTA provides that the amount of FTC is equal to the full amount of excise payable on the fuel.

In accordance with section 43-10(3) of the FTA, this amount must be reduced by the Road User Charge (“RUC”) to the extent that fuel is used “in a vehicle, for travelling on a public road”.

It is important to note that under the disentitlement rule at section 41-20 outlined above, that section 43-10(3) does not apply to light vehicles as these vehicles are not entitled to FTC for fuel used for travelling on public roads.

Issue 1 – Toll Roads

The key issue between the two parties for Issue 1 in the Toll Roads Case is whether or not toll roads are “a public road” within the meaning of the FTA and in particular, section 43-10(3).

The Applicant contended that the toll roads are operated by a private entity for profit and are maintained by that private entity and therefore, are not under the function of the RUC and thus the toll roads are not “public roads” for the purposes of the FTA.

The Respondent argued that any road to which the public may generally access as of right, is a “public road” and the fact that there is an obligation to pay a toll to a private entity to exercise that right does not change this position. It was also argued that the fact that a private operator is responsible for the cost of maintaining the road does not lead to a different conclusion, as it does not alter the position that the road is generally accessible to the public as of right.

It was ultimately held by the AAT that these toll roads are considered a “public road” within the legislative definition. In forming the decision, the specific context of the phrase “public road” within the FTA was used to determine its meaning. The Applicant’s argument that because the purpose of section 43-10(3) is to reduce FTC by the amount of the RUC, “public road” is to be understood in the context of the RUC, was rejected. It was further determined that the argument that the purpose of the RUC was to “reimburse the public purse for the road expenditure occasioned by the damage caused by heavy vehicles to roads not already financed through tolls”, was not an accurate construction of the legislation itself.

There is nothing confining the Transport Minister under the FTA to only recover the costs to the Government of the construction and maintenance of roads through the RUC. On this basis, there was no reason to conclude that given a toll road was being operated for private profit by a private operator who was responsible for maintenance costs, that the government could not recover the RUC for fuel used while travelling on toll roads. Construed in the context of the FTA, there was no basis to understand “public road” to mean a road for which the government is responsible for construction and maintenance costs or a road which is not operated with the object of yielding profit to a private entity.

Deputy President Justice J Jagot also rejected the approach that assumes that the limits of the RUC are set by the costs of constructing and maintaining roads. It was noted that while these factors may be considered, they are not fixed limits of the power to determine the amount of the RUC.

It was concluded that the toll roads are generally accessible to the public and are fully integrated into the overall public road system, albeit subject to the obligation or condition of paying the toll. Ultimately, the AAT preferred the broader meaning of “public road”, considering the breadth of the determination making power of the Transport Minister discussed above and ensuring the meaning operates sensibly for all provisions within the FTA.

Issue 2 – Air Conditioning Units

In Issue 2, the AAT considered the meaning of “for travelling on a public road”. The Applicant submitted that fuel used to power the air-conditioning units in the driver’s cabins is not fuel acquired “for travelling on a public road”, by virtue of the decision in Linfox [2012]. In that decision, it was held that fuel acquired to power the refrigeration trailers on the back of trucks was not fuel acquired “for travelling on a public road”.

Deputy President Justice J Jagot’s interpretation of the meaning for “for travelling on a public road” for the purposes of section 43-10(3) is broader than what was originally held in Linfox [2012]. In Linfox [2012], it was held that “for travelling on a public road” is confined to the meaning of propelling a vehicle on a public road given that the purpose of the RUC is “to recover party of the cost of road construction and maintenance costs attributable to heavy vehicles”.

The AAT decision here noted that a vehicle does not travel merely by the engine propelling the wheels; “[a vehicle] travels, and can travel, because it has a driver controlling the steering, headlights, indicators, windscreen wipers, brakes and air conditioning to ensure the driver can remain comfortable”. Therefore, it was ultimately held that fuel acquired for use in a vehicle for all these purposes is fuel “for travelling”. Thus in the present case the fuel used in air conditioning the driver’s cabin is used on a public road.