Issue
Is an enterprise eligible to claim for a diesel fuel rebate, under the marine transport category of subsection 164(1) of the Customs Act 1901 (Customs Act) and section 78A of the Excise Act 1901 (Excise Act), when the relevant diesel fuel is used in a motor vessel which has been hired by the enterprise to another person?
Decision
For the purposes of subsection 164(1) of the Customs Act and section 78A of the Excise Act, when an enterprise hires a motor vessel to a person, the diesel fuel used by the motor vessel during the period of the hire is not fuel used in carrying on the enterprise. Consequently the enterprise is not entitled to receive payment of the diesel fuel rebate in respect of the fuel.
Facts
The applicant conducts an enterprise which includes the hire of motor vessels to the public for pleasure cruising. The fee paid by members of the public for hire of the vessels is inclusive of the cost of the fuel and gas provided with the vessel.
The applicant made an application under the diesel fuel rebate scheme in respect of fuel used in the hired motor vessels under the marine transport category. The applicant submitted that the fuel provided with the vessels for the term of the hire contract was fuel used for marine transport in the course of the applicant's enterprise.
Reasons for Decision
The diesel fuel rebate scheme is established by section 164 of the Customs Act and section 78A of the Excise Act.
Subsection 164(1AA) of the Customs Act makes provision for a rebate to be payable in respect of diesel fuel purchased for certain usages. Subsection 164 (1) of the Customs Act provides that a rebate is 'payable to a person who purchases fuel for use by him'.
The applicant has claimed the rebate for use in marine transport, under paragraph 164(1)(ac) of the Customs Act, which states, 'in marine transport (otherwise than for the purpose of propelling a road vehicle on a public road) in the course of carrying out an enterprise'.
Subsection 164(7) of the Customs Act defines the following relevant terms:
'marine transport includes transport by vessels in or on fresh water, but does not include any transport relating to forestry';
'use, in relation to diesel fuel, in relation to a person, does not include the sale or other disposal of the diesel fuel by the person to another person or the loss of the diesel fuel by the person'; and
'carrying on an enterprise has the same meaning as in the Diesel and Alternative Fuels Grants Scheme Act 1999'.
Section 5 of the Diesel and Alternative Fuels Grants Scheme Act 1999 states:
'carry on an enterprise includes doing anything in the course of the commencement or termination of the enterprise'; and
'enterprise has the meaning given by section 38 of the A New Tax System (Australian Business Number) Act 1999'.
Section 38 (2) of A New Tax System (Australian Business Number) Act 1999 states:
'However, enterprise does not include an activity, or series of activities, done....... as a private recreational pursuit or hobby'.
In order for a rebate to be payable to the applicant under the marine transport category, it must be demonstrated that the relevant fuel, used to fuel motor vessels during the period of the hire, is fuel used by the applicant in marine transport in the course of carrying out an enterprise.
The term 'hire' is defined by Butterworths Australian Legal Dictionary as:
'To lend to another for consideration the possession and use of some goods for a particular period or purpose'.
When this definition is applied in the circumstances under consideration, it is evident that the persons who have hired a motor vessel from the applicant have the legal possession and use of that vessel for the period of the hire.
As the hire agreement is inclusive of the fuel provided with the vessel, it follows that the use of the fuel is made by the person(s) who hired the vessel, and not by the applicant's enterprise.
Consequently the applicant is unable to satisfy the requirement that the fuel is used in marine transport in the course of carrying on his enterprise.