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ATO Interpretative Decision

ATO ID 2015/20

Excise
Excise: Petroleum: Fuel blends that can be used as fuel in an internal combustion engine



CautionCAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.


Issue

Does a blend of fuels fall within subitem 10.30 of the Schedule to the Excise Tariff Act 1921 (Tariff Act) where its use as fuel in an internal combustion engine is limited to internal combustion engines that have a particular specification or use?

Decision

Yes. If a blend of fuels (with or without other substances) can be used as fuel in an internal combustion engine, irrespective of the quality of the fuel or the specifications of the engine, the blend falls within subitem 10.30 of the Tariff Act.

Facts

A licensed excise manufacturer blends excisable fuel with other substances.

The blended product cannot be used as fuel in the internal combustion engine of a light high performance vehicle as it will damage the engine and compromise the engine warranty.

The blended product can be used as fuel in the internal combustion engines of heavy haulage diesel vehicles or slow turning marine engines.

Reasons for Decision

Goods which fall within subitem 10.30 are:

   Blends of 1 or more of the above goods (with or without other substances) not elsewhere included that can be used as fuel in an internal combustion engine (other than goods covered by section 77J of the Excise Act 1901).

Goods that may be blended for the purpose of subitem 10.30 include, petroleum condensate and oil, liquid hydrocarbon products, liquefied petroleum gas, liquefied natural gas and biodiesel. These goods may also be blended with other substances.

Section 77J of the Excise Act is not relevant in these circumstances as it deals with goods reused as a solvent following a recycling process.

The description of goods which fall within subitem 10.30 states only that the blend 'can' be used as fuel in an internal combustion engine.

Relevantly, the term 'can' is defined in the Macquarie Dictionary as, amongst other things, 'to be able to'. In turn, the term 'able' is defined as:

    1. having sufficient power, strength, or qualifications; qualified: she is ready, willing, and able.

    ...

    -phrase 4. be able to, to have the capability or capacity to...

Therefore, if a fuel blend, when used in an internal combustion engine, enables the engine in which it is used to operate as intended, it can be said that the fuel blend 'can be used as fuel in an internal combustion engine' for the purpose of subitem 10.30.

The quality of the fuel and the specifications of the engine are only relevant to this extent.

It will always be a question of fact whether use of a particular blend of fuel will enable the internal combustion engine in which it is used to operate as intended.

This conclusion is supported by the explanatory memorandum to the Excise Tariff Amendment (Fuel Tax Reform and Other Measures) Bill 2006, under which subitem 10.30 was inserted into the Schedule to the Tariff Act. Paragraph 1.113 of the explanatory memorandum explains the phrase 'can be used', for the purpose of subitem 10.30 as:

   This test is a practical, objective test of whether the blend can be used in an internal combustion engine, not whether the blend is designed or intended to be used in that way. For example, paint can be manufactured by blending toluene (subitem 10.25) with other substances including pigments. An objective test says that paint cannot be used in an internal combustion engine. Paint is therefore not classified to subitem 10.30 (or any other item). The above discussion refers to the ability of a blend of excisable fuel products, with or without other substances, to be used as a fuel in an internal combustion engine. It does not infer that the fuel must be of a certain quality or that the internal combustion engine is for a particular use.

In this case, the fuel blend cannot be used as fuel in the internal combustion engine of a high performance vehicle. It would damage the engine and compromise the engine warranty.

However, the same blend may be used as fuel in a more robust internal combustion engine such as a heavy haulage vehicle or a marine diesel engine.

Consequently, the fuel blend can be used as a fuel in an internal combustion engine for the purpose of subitem 10.30.

Date of decision: 20 July 2015

Legislative References:
Excise Tariff Act 1921
   Schedule item 10
   subitem 10.30

Excise Act 1901
   section 77J

ATO Interpretative Decisions overturned by this decision
ATO ID 2006/225

Other References
Explanatory Memorandum to the Excise Tariff Amendment (Fuel Tax Reform and Other Measures) Bill 2006

Keywords
Excisable goods manufacturer
Fuel blending

Siebel/TDMS Reference Number: 1-5OXP75X

Business Line: Indirect Tax

Date of publication: 24 July 2015

ISSN: 1445-2782

 


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