When is a road a 'public road'? | KPMG | AU
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When is a road a 'public road'?

When is a road a 'public road'?

Anthony Versace and Sam Mohammad discuss whether a toll road is a public road for the purposes of fuel tax credits.

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Aerial view of a road network.

Businesses that use fuel in heavy vehicles (vehicles with a gross vehicle mass over 4.5 tonnes) that travel on 'public roads' are entitled to claim a fuel tax credit (FTC). However, FTCs for fuel used for travel on a public road must be reduced by the road user charge (RUC), which results in an FTC of only 14.5 cents per litre, based on current rates. This is in contrast to the full FTC rate (currently, 40.3 cents per litre) available for fuel used for travel other than on a public road.

The policy behind the RUC, and the reduced FTC rate for public road use, is to allow the Government to recover some of the construction and maintenance costs attributable to heavy vehicles using public roads. However, there is a question whether this logic still stacks up if a road is privately maintained and constructed (e.g. toll roads).

One taxpayer, a national transport and logistics company, is currently asking the Federal Court to consider whether toll roads are public roads for FTC purposes. In this respect, the term 'public road' is not defined in the tax law and the Commissioner has historically adopted a relatively wide interpretation – essentially, the Commissioner believes a public road to be any road that is available for use by members of the public.

If the taxpayer is successful in arguing that a toll road, which is privately operated and maintained, is not a ‘public road’, it (and others) may, as a result, be entitled to claim FTCs at the full rate rather than reduced (on account of the RUC) rate. This may be available both on a prospective and retrospective basis (up to the last four years). There may also be significant implications across a much broader range of taxpayers:

  • Other businesses that run heavy vehicles, such as buses, construction vehicles, removalist and tow trucks, on toll roads.
  • An interesting question would arise with respect to whether FTCs would also be available for fuel used in light vehicles travelling on toll roads. This may impact any business that use toll roads, such as taxis, roadside assist services and taxpayers with fleets of light vehicles such as utes, minivans etc.

In addition, a successful outcome for the taxpayer in the Federal Court may also bring into question whether other types of roads that are privately maintained are public roads, such as some busways, car parks, shopping centre accessways and roads at airports.

On the other hand, if the Commissioner is successful, we may finally have some clarity around what constitutes a ‘public road’ for these purposes. 

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