Issue
Is the use of diesel fuel to power a generator that supplies electrical power to a vessel to meet the domestic requirements of the crew of the vessel while in port, eligible for the diesel fuel rebate under paragraph 164(1)(b) of the Customs Act 1901 or paragraph 78A(1)(b) of the Excise Act 1901 ?
Decision
Yes. The use of diesel fuel to power a generator that supplies electrical power to a vessel is eligible for diesel fuel rebate under paragraph 164(1)(b) of the Customs Act or paragraph 78A(1)(b) of the Excise Act to the extent that the diesel fuel is used to generate electricity to meet the domestic requirements of the crew of the vessel.
Facts
Certain visiting vessels shut down their on-board generators while visiting ports in Australia.
An entity is contracted to provide shore electrical power to the vessels while they are in port. The electrical power is supplied for the day to day operation of the vessel.
On the vessel, the living quarters of the crew are 'residential premises' for the purposes of the diesel fuel rebate scheme. The generator is located in sufficient proximity to the vessel to satisfy the requirement in paragraph 164(1)(b) of the Customs Act and paragraph 164(1)(b) of the Excise Act that the fuel is used 'at residential premises'.
Reasons for Decision
Paragraph 164(1)(b) of the Customs Act provides that a rebate is payable to a person who purchases diesel fuel for use by him: (b) at residential premises to generate electricity for use in: (i) providing food and drink for; (ii) providing lighting, heating, air-conditioning, hot water or similar amenities for; or (iii) meeting other domestic requirements of; residents of the premises; ...
In this case, the diesel fuel used in the generators provides electricity to the vessel. Some of the electricity is used in providing the domestic requirements of the residents of the premises (the crew). The proportion of the diesel fuel which generates electricity for the domestic requirements of the crew is eligible for the diesel fuel rebate.
However, the diesel fuel used to generate electricity for non-domestic purposes (e.g. to power navigation systems or other ship's systems) is not eligible for diesel fuel rebate as it does not meet the requirements of paragraph 164(1)(b) of the Customs Act.
The total amount of electricity purchased and used in the generators must be apportioned to eligible and non-eligible uses for the purposes of calculating the amount of the diesel fuel rebate which is payable.