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Fuel tax credit entitlement for refrigerated transport

AAT win for taxpayer

Fuel tax credit entitlement for refrigerated transport7 August 2012

The Administrative Appeals Tribunal (AAT) has handed down its decision in favour of the taxpayer in the matter of Linfox Australia Pty Ltd and Commissioner of Taxation.

The taxpayer was advised by Deloitte.

Outcome and implications

Contrary to the position taken by the Commissioner, the AAT decided that the taxpayer’s entitlement to a fuel tax credit for diesel fuel acquired for use in refrigeration units attached to insulated trailers (that are designed to be towed by prime movers) should not be reduced by the heavy vehicle Road User Charge (RUC).

This decision paves the way for the taxpayer to recover fuel tax credit entitlements that have been under-claimed as a result of applying the RUC. Subject to any appeal by the Commissioner, this decision also has implications for other taxpayers who have acquired fuel for use in equivalent circumstances, potentially resulting in increased fuel tax credit claims.

Although this matter only concerned refrigerated trailers (a circumstance where the fuel used for refrigeration was in a separate fuel tank to the prime mover’s fuel tank), our view is that the Tribunal’s reasoning can potentially be applied to several other road transport circumstances, not limited to the refrigerated transport sector, where taxpayers are currently claiming fuel tax credits that are reduced by the RUC.       


This test case is the first to consider the meaning of the phrase in section 43-10(3) of the Fuel Tax Act 2006, “… acquire … fuel to use, in a vehicle, for travelling on a public road…”, since the Act was introduced on 1 July 2006. The section reduces a taxpayer’s entitlement to fuel tax credits by imposing the RUC. The RUC was designed to claw back, from operators of heavy vehicles, an amount in respect of their share of the wear and tear on public roads.

Arguments considered by the AAT

At the tribunal, the Commissioner contended that a refrigerated trailer qualifies as a “vehicle” and therefore all acquisitions of fuel for use in that vehicle where it is travelling on, or preparing to travel on, a public road are subject to the RUC.

The taxpayer’s position was that only fuel acquired for use for travelling is subject to the RUC; fuel acquired and used for the purpose of refrigerating cargo inside a refrigerated trailer is not. Aside from submissions based on the plain meaning of the words employed in section 43-10(3), the taxpayer also argued that the ATO’s interpretation of section 43-10(3) was inconsistent with the policy intent behind the law. The taxpayer submitted evidence that trailers are excluded from the calculations made by the National Transport Commission when making recommendations to the federal Transport Minister about changes to the RUC rate. Therefore, to adopt the Commissioner’s interpretation of section 43-10(3) would result in more RUC being collected than was necessary to fund the wear and tear on public roads.

If the Commissioner’s argument had prevailed, it would have produced the odd result that a refrigerated trailer would, at least in theory, be paying for more wear and tear on public roads than a non-refrigerated trailer. It would also have meant that a refrigerated reefer (i.e. a refrigerated container that is transported on a skeletal trailer towed by a prime mover) would be entitled to a higher level of fuel tax credits than a refrigerated trailer only because the former is not a “vehicle”, even though they perform the same role.

Next steps

The Commissioner has until 4 September 2012 to decide if he will appeal against the AAT’s decision.  

Subject to an appeal by the Commissioner, Deloitte plans to meet with the ATO shortly, to explore the wider implications of the decision.

Contact a member of the Deloitte tax team, regarding your Fuel Tax Credits enquiry To find out more about the decision or to discuss the potential impact of it for your business, please contact:

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