Issue
Is diesel fuel purchased and used in the construction of premises that will not form part of a hospital a qualifying use under paragraph 53(4)(c) of the Energy Grants (Credits) Scheme Act 2003 (EGCSA)?
Decision
No. Diesel fuel purchased and used in the construction of premises that will not form part of a hospital is not a qualifying use under paragraph 53(4)(c) of the EGCSA.
Facts
Diesel fuel is used in undertaking excavation work in the construction of new premises within the grounds of a hospital.
The diesel fuel is being purchased and used in constructing premises for another institution which will use the premises for their own purposes.
Reasons for Decision
Section 53 of the EGCSA provides that, subject to the conditions and restrictions specified in the Energy Grants (Credits) Scheme Regulations 2003, an entity is entitled to an off-road credit if they purchase or import into Australia off-road diesel fuel for a qualifying use.
Subsection 53(4) of the EGCSA lists a number of uses that qualify. One use, set out in paragraph 53(4)(c) of the EGCSA is: ... use at a hospital or nursing home or at any other institution providing medical or nursing care.
In this instance, the diesel fuel is being used within hospital grounds in excavation work in the construction of new premises for another institution that will use the premises for their own purposes.
The Energy Grants (Credits) Scheme, which replaced the Diesel Fuel Rebate Scheme (DFRS), maintained the entitlements that were available under the DFRS.
The DFRS was introduced under the Diesel Fuel Taxes Legislation Amendment Bill 1982.
The Second Reading Speech for the Bill explained that: ...The users of diesel fuel in the categories defined in clause 5 of the Bill who use the fuel for 'off road' purposes are eligible for a rebate of the duty paid on the diesel fuel used in their operations ...The categories I have just referred to relate to the use of diesel fuel in the agriculture, mining, forestry and fishing industries, in domestic premises, hospitals, aged persons homes and nursing homes... (emphasis added)
Therefore, for the purposes of paragraph 53(4)(c) of the EGCSA there must be close connection between the use to which the diesel is put and the institution referred to in that provision.
This view was affirmed in the decision of the Tribunal in the Rebmik Contractors P/L v. Commissioner of Taxation ( Rebmik ) [2008] AATA 335 which considered the entitlement to an off road credit for diesel fuel used in excavation work for the construction of a medical school and an aged-care facility on the grounds of a hospital. In Rebmik , the Tribunal found that paragraph 53(4)(c) of the EGCSA was not satisfied because the diesel fuel was not used for the purposes of the hospital even though the fuel may have been for use on hospital grounds. As the Tribunal remarked in paragraph 21 of the decision: Although the purpose to which those institutions may use the diesel fuel is not limited in the way residential premises are limited, nevertheless, to be a qualifying use, it must be for activities conducted by those institutions. In other words it must be for the purposes of those existing institutions.
Accordingly, in the current situation, though the diesel fuel may have been for use on hospital grounds, the diesel fuel is not being used at a hospital for its purposes when it is used in excavation work for the construction of new premises for another institution, which will use the premises for their own purposes. Therefore, the diesel fuel is not purchased and used in a qualifying use under paragraph 53(4)(c) of the EGCSA.