Issue
Is a grader a 'motor vehicle' for the purposes of subsection 41-25(1) of the Fuel Tax Act 2006 (FTA)?
Decision
No. A grader is not a 'motor vehicle' for the purposes of subsection 41-25(1) of the FTA.
Facts
An entity operates a grader with a gross vehicle mass (GMV) of greater than 4.5 tonnes.
The grader is designed to cut, move and spread material.
The entity uses the grader to undertake road construction and maintenance work.
The grader has design features that enable it to travel on public roads.
The entity acquires fuel for use in the grader.
The entity uses some of this fuel in the grader for travelling on public roads to and from the work site.
The entity is entitled to a fuel tax credit in respect of the fuel used in the grader whilst travelling on public roads to and from the worksite under section 41-5 of the FTA.
Reasons for Decision
Under section 41-5 of the FTA an entity is entitled to a fuel tax credit for taxable fuel that they acquire or manufacture in, or import into, Australia to the extent that they do so for use in carrying on their enterprise.
However, Subdivision 41-B of the FTA sets out a number of disentitlement rules for fuel tax credits.
Relevantly, subsection 41-25(1) of the FTA provides that an entity is not entitled to a fuel tax credit for fuel used in a motor vehicle unless the vehicle satisfies one of a number of specified environmental criteria.
The issue to be determined is whether a grader falls within the definition of 'motor vehicle' for the purposes of subsection 41-25(1) of the FTA, and as such must satisfy the environmental criteria requirement.
Section 110-5 of the FTA provides that the term 'motor vehicle' has the same meaning as in section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997).
Section 995-1 of the ITAA 1997 defines 'motor vehicle' as 'any motor-powered road vehicle (including a 4 wheel drive vehicle)'.
The Revised Explanatory Memorandum to the Fuel Tax Bill 2006 and the Fuel Tax (Consequential and Transitional Provisions) Bill 2006, in discussing the environmental criteria in section 41-25 of the FTA explains, at paragraph 2.55, that: The criteria are only intended to apply to motor powered road vehicles. They are not intended to apply to vehicles that are not road vehicles.
The Commissioner considered the nature of 'road vehicles' in the Fact Sheet GST and motor vehicles (NAT 4629). The fact sheet examined the meaning of the term 'road vehicle' because the A New Tax System (Goods and Services Tax Transition) Act 1999 , like the FTA, defines the term 'motor vehicle' as having the meaning given by section 995-1 of the ITAA 1997.
We consider the approach taken for GST purposes is relevant in establishing the meaning of 'road vehicle' for the purposes of determining whether a vehicle falls within the ambit of subsection 41-25(1) of the FTA.
The view expressed in the GST fact sheet is that the following factors are relevant in determining that a vehicle is not a 'road vehicle': • the main function of the vehicle is not related to public road use, and • the vehicle's ability to travel on a public road is secondary to its main function.
A grader is designed to cut, move and spread material. Its design enables it to undertake work on a public road. The main function of a grader that is used for road maintenance and construction is to work on a road, rather than to use a public road. Whilst a grader has design features that enable its use on a public road, the ability to travel on public roads is secondary to its main function.
Accordingly, we do not consider that a grader is a 'road vehicle'. Consequently, a grader is not a 'motor vehicle' for the purposes of subsection 41-25(1) of the FTA, and will therefore not be required to meet the environmental criteria listed in that subsection.