Energy Grants Credits Scheme - purchase of fuel

Has an entity purchased diesel fuel for a use by them as required by subsection 53(1) of the Energy Grants (Credits) Scheme Act 2003 (EGCSA) when they reimburse a contractor for the cost of diesel fuel purchased by the contractor and used by the contractor in the contractor's equipment in fulfilment of a contract with the entity?

No. An entity has not purchased diesel fuel for a use by them as required by subsection 53(1) of the EGCSA when they reimburse a contractor for the cost of diesel fuel purchased by the contractor and used by the contractor in the contractor's equipment in fulfilment of a contract with the entity.

An entity engages the services of a contractor to carry out certain services on its behalf.

The contractor purchases fuel, which it uses in its own equipment in the fulfilment of its obligations under the contract.

The agreement between the entity and the contractor stipulates that the entity will be charged a fee for the service, and will also have to reimburse the contractor for the cost of fuel purchased by the contractor and used in the contractor's equipment.

Subsection 53(1) of the EGCSA provides that an entity is entitled, subject to certain prescribed conditions, to an off-road credit if they purchase diesel fuel for a use by them that qualifies.

The Administrative Appeals Tribunal (AAT) considered the issues of 'use' and to a lesser extent 'sale' or 'disposal' in Re Riviera Nautic Pty Ltd v. Federal Commissioner of Taxation [2002] AATA 657 ; (2002) 50 ATR 1106 ( Riviera Nautic ) which concerned the hire of a pleasure craft. The case was decided in relation to the Diesel Fuel Rebate Scheme which was the precursor to the Energy Grants (Credits) Scheme. In Riviera Nautic , the AAT considered that in determining whether something has been sold, one should consider whether property in it is intended to pass.

The contractor has purchased the diesel fuel for use in its equipment. The contractor has retained control over the fuel at all times, and used it in its equipment. There is nothing to indicate that the property in the fuel has passed, or was intended to pass to the entity.

The contract between the parties merely specifies that the contractor is able to charge the entity for the fuel that the contractor ultimately uses in the contractor's equipment in the provision of its services to the entity under the contract.

Consequently, following the principle in Riviera Nautic , the contractor has not sold or otherwise disposed of the fuel to the entity. It follows that the entity has not purchased the fuel from the contractor.

Therefore, the entity has not purchased diesel fuel for a use by them as required by subsection 53(1) of the EGCSA when they reimburse a contractor for the cost of diesel fuel purchased by the contractor and used by the contractor in the contractor's equipment in fulfilment of a contract with the entity.