Why is the fuel tax credit important for your business? Fuel expenses can be a significant portion of your operational costs, especially if you rely on heavy vehicles or equipment that consume substantial amounts of fuel. By claiming these tax deductions, you can offset a portion of these expenses, resulting in potential savings and improved profitability.
The fuel tax credit is particularly beneficial for businesses engaged in activities such as transportation, agriculture, mining, construction, and manufacturing, where fuel consumption plays a critical role. These credits serve as a form of financial relief, allowing businesses to recoup a portion of the fuel tax paid and reinvest those savings into other areas of their operations.
In the following sections, we will delve deeper into the eligibility criteria, calculation methods, and claiming process for fuel tax allowances in Australia. Understanding these aspects will empower you to navigate the system effectively and maximize the benefits available to your business.
So, let’s explore how you can make the most of fuel tax credits and optimize your financial position.
IN THIS ARTICLE
- What is the Fuel Tax Credit?
- Eligibility Criteria for Fuel Tax Credits
- Fuels Ineligible For Tax Credit
- What Are The Fuel Tax Credit Rates in 2023 For Businesses?
- How To Calculate Fuel Tax Credit
- Claiming Fuel Tax Credits
- How To Register For Fuel Tax Credits
- What Records Should You Maintain to Claim Fuel Tax Credit?
What is the Fuel Tax Credit?
Fuel tax credits refer to the financial incentives provided to businesses in Australia to offset the fuel tax, which includes the excise or customs duty paid on fuels used for specific activities.
Businesses can claim credits for the fuel tax they have paid on eligible fuels used in:
• heavy vehicles, and
• light vehicles traveling off public roads or on private roads
These credits are not a direct refund of the tax paid but rather a credit that can be used to reduce the overall tax liability of the business.
The amount of fuel tax deductions depends on various factors, including:
• the timing of fuel acquisition,
• the type of fuel used, and
• the specific activity in which it is used.
Businesses need to stay updated on the current fuel tax credit rates, as they can change periodically. Checking the rates regularly when preparing business activity statements (BAS) is crucial to ensure accurate calculations and claims.
Eligibility Criteria for Fuel Tax Credits
To be eligible to claim fuel tax deductions, businesses must fulfill the following registration requirements:
- GST Registration: Your business must be registered for Goods and Services Tax (GST) at the time of fuel acquisition. GST is a consumption tax levied on the supply of most goods and services in Australia.
- Fuel Tax Credits Registration: When lodging the claim, your business must also be registered for fuel tax credits. This registration ensures compliance with the tax system and allows businesses to claim credits for eligible fuel used in their operations.
Your Business Activity Statement (BAS) must include the fuel tax credits you want to claim.
As an enterprise, you can avail fuel tax credits for the fuel you procure, produce, or bring into the country and employ exclusively for the operational needs and ventures of your business.
Eligible Liquid Fuels For Fuel Tax Credit
The fuel used must be taxable to claim fuel tax deductions, meaning you must have paid fuel tax (excise or customs duty) on them. Eligible liquid fuels include:
- Petrol: You can claim fuel tax exemption for various types of petrol, including unleaded, premium unleaded, and high-octane petrol.
- Diesel: Fuel tax relief can be claimed for diesel fuel used in your business activities.
- Other Liquid Fuels: Several other liquid fuels are also eligible, such as fuel oil (used in industrial furnaces, ships, and locomotives), kerosene, mineral turpentine, white spirit, toluene, heating oil, and certain solvents.
- Fuel Blends: For fuel blends, you can claim fuel tax deductions depending on the amount of biodiesel or ethanol present in each blend. However, it’s important to remember that you are eligible for tax credits only with specific taxable fuels for certain business activities—for instance, packaging or utilizing fuel for domestic home heating.
- Fuels Used in Aircraft: If you utilize diesel or petrol in an aircraft for your business operations, there might be situations where you can claim fuel tax credits. For instance, if you are registered for Goods and Services Tax (GST) and can demonstrate that the fuel was not consumed for personal use in an aircraft at the time of purchase, you are likely eligible to claim fuel tax relief.
Eligible Gaseous Fuels For Tax Credit
Businesses may claim fuel tax credits for eligible gaseous fuels used in their operations. Gaseous fuels include:
- liquefied petroleum gas (LPG),
- liquefied natural gas (LNG), and
- compressed natural gas (CNG)
Gaseous fuels are further categorized based on their duty payment status:
1. Transport Gaseous Fuels (Duty Paid)
You can claim fuel tax deductions for transporting gaseous fuels because duty has been paid on them. This includes:
- LPG or LNG intended for propulsion in the internal combustion engine of a motorized vehicle or watercraft, whether utilized directly or transferred to an interconnected tank connected to said engine.
- CNG-that is imported or compressed for use as fuel in a motor vehicle.
- All gaseous fuels used for mixed purposes or when the end use is unknown.
The application of gaseous fuels in transportation extends beyond the boundaries of transport-related activities. They can also be used in all other business activities undertaken off a public road.
To ensure eligibility for fuel tax credits on gaseous fuels, it is crucial to uphold comprehensive records that validate the payment of fuel tax (excise duty) for the respective fuel.
2. Non-Transport Gaseous Fuels (Not Duty Paid)
Fuel tax credits do not apply to non-transport gaseous fuels that have not had duty paid. This category includes the following:
- LPG and LNG for Non-Vehicle Use: You cannot claim fuel tax incentive for LPG and LNG delivered solely for purposes other than powering the internal combustion engine of a motor vehicle or vessel, such as for residential heating or burner applications.
- LPG for Forklifts: Fuel tax deductions are unavailable for LPG delivered exclusively for use in forklifts.
- CNG for Specific Use: CNG imported or compressed only for use in forklifts or not intended for use as fuel in a motor vehicle does not qualify for fuel tax relief.
- Residential Compressed CNG: Fuel tax deductions cannot be claimed for CNG compressed at residential premises using equipment capable of compressing at a rate not exceeding 10kg of natural gas per hour and not intended for sale.
Eligible Activities For Fuel Tax Credit
Fuel tax credits can be claimed for specific activities where eligible fuels are used. These activities can be categorized into two groups based on whether the fuel is combusted or not.
1. Activities where the Fuel is Combusted
a. Road Transport
Vehicles weighing more than 4.5 tonnes traveling on public roads can claim fuel tax credits for eligible fuels used. This applies to diesel vehicles acquired before July 1, 2006, as they can have a weight equal to 4.5 tonnes.
The rate of fuel tax credits depends on the type of fuel used and whether it is used for traveling on a public road or powering auxiliary equipment. For example, if the fuel is used for traveling, it includes propulsion along the road and certain vehicle functions like lights, brakes, and power steering.
However, these credits do not include fuel used for purposes unrelated to a vehicle’s movement on a public road.
b. Specified Off-Road Activities
Another group of activities where the fuel is combusted includes specified off-road activities such as agriculture, fishing, and forestry. Fuel tax credits can be claimed for eligible fuels used in these activities, supporting businesses in these industries.
c. Other Off-Road Activities
There are other off-road activities where fuel tax credits apply. These activities encompass mining, marine and rail transport, nursing and medical services, burner applications, electricity generation, construction, manufacturing, wholesale/retail, property management, and landscaping. It’s important to note that this category also includes vehicles traveling on private roads.
2. Activities where the Fuel is Not Combusted
Fuel tax credits can also be claimed for activities where the fuel is not combusted. This includes fuel used directly in a non-fuel manner, such as using it as a solvent. Additionally, fuel used as an input or ingredient in manufacturing products is also eligible for these credits.
These non-combustible uses provide opportunities for businesses to receive tax credits for a wide range of purposes beyond combustion.
3. Packaging or Supplying Fuel
Fuel packaging and supply also fall under the eligibility criteria for tax credits. Fuel can be packaged or supplied for combustible or non-combustible use.
Combustible use includes:
- Filling LPG into cylinders for non-transport use.
- Supplying transport LPG for residential tanks.
- Supplying kerosene or heating oil fuel for domestic home heating.
Non-combustible use includes packaging certain liquid fuels in 20 liters or less containers.
4. Fuel Used to Power Auxiliary Equipment
When heavy vehicles travel on public roads, fuel used to power auxiliary equipment is not subject to the road user charge or carbon charge. This means that businesses can claim fuel tax credits for the fuel used to power auxiliary equipment, such as
- concrete-mixing barrels,
- garbage bin lifters,
- refrigeration units,
- air conditioning systems in commercial buses or coaches
The fuel used for these purposes is considered unrelated to the vehicle’s movement along a public road, providing an opportunity for businesses to receive tax credits for these specific uses.
Fuels Ineligible For Tax Credit
The following fuels are not eligible for claiming fuel tax credits:
- Fuels without paid excise or customs duty: Non-transport gaseous fuels that have no excise or customs duty paid on them are not eligible for fuel tax credits.
- Aviation fuels: Aviation gasoline and kerosene are ineligible for fuel tax credits.
- Additives: Additives, such as diesel exhaust fluids, are not considered taxable fuels and do not qualify for fuel tax credits.
Furthermore, there are activities that do not qualify for the claiming of fuel tax credits. These include:
- Fuels used in light vehicles with a gross vehicle mass (GVM) of 4.5 tonnes or less while traveling on public roads, including cars, small vans, taxis, and ride-sourcing services, are not eligible for fuel tax credits.
- Fuel for private purposes, including light vehicles like utes, does not qualify for fuel tax credits.
- Fuel tax credits cannot be claimed for the transport gaseous fuels used in heavy vehicles with a GVM greater than 4.5 tonnes for traveling on public roads.
- Fuel that was acquired but not used due to loss, theft, or other disposals, as well as fuels that had no excise or customs duty paid on them, are not eligible for claiming fuel tax credits. Certain fuels that do not meet the criteria of taxable fuels, such as used oil used solely for burner applications, also do not qualify.
It’s important to note that although certain fuels and activities are ineligible for fuel tax credits, there are still circumstances where claims can be made. For example, if you use fuel in light vehicles traveling off public roads, such as on work sites or private roads, you may still be eligible to claim fuel tax credits.
What Are The Fuel Tax Credit Rates in 2023 For Businesses?
Fuel tax credit rates for business activities undergo regular changes, and staying informed about the updated rates is crucial. These rates are indexed twice a year, specifically in February and August, based on the consumer price index (CPI) movement.
This indexation factor, which reflects the price change, was 1.037 as of February 1, 2023. Applying the correct rate to ensure accurate calculations and compliance with regulations is essential.
Changes in Fuel Tax Credit Rates for Heavy Vehicles
Changes in the road user charge can result in variations in fuel tax credit rates for the usage of fuel in heavy vehicles while traversing public roads. The road user charge, which is reviewed annually, often undergoes modifications that come into effect in July. Businesses need to be aware of these changes as they may impact the fuel tax credit rates for heavy vehicles. Staying updated and applying the correct rates during this period is crucial for accurate calculations and adherence to regulations.
Annual Changes in Biodiesel (B100) Rates
Specifically, in July 2023, there will be adjustments to the fuel tax credit rates for biodiesel (B100). These changes are driven by the annual increase in excise duty rates for biodiesel. Businesses using biodiesel in their operations should take note of these rate adjustments to ensure accurate calculations of fuel tax credits.
1. Fuel Purchased and Used from 1 February 2023 to 30 June 2023
The following table reflects the fuel rates for different fuel types and their specific usage categories during the period of 1 February 2023 to 30 June 2023.
Fuel used in heavy vehicles for traveling on public roads
|Fuel used in all other business activities (including powering auxiliary equipment of a heavy vehicle)|
|Liquid Fuels (e.g., diesel or petrol)||20.5 cents per liter||47.7 cents per liter|
|Blended Fuels (B5, B20, E10)||20.5 cents per liter||47.7 cents per liter|
|Blended Fuel (E85)||Not eligible||20.415 cents per liter|
|Liquefied Petroleum Gas (LPG)-LPG-(duty paid)||Not eligible||15.6 cents per liter|
|Liquefied Natural Gas (LNG) or Compressed Natural Gas (CNG)-Duty Paid||Not eligible||32.7 cents per liter|
|B100||Not eligible||11.1 cents per liter|
2. Fuel Purchased and Used from 29 September 2022 to 31 January 2023
The table below reflects the fuel rates for different fuel types and their specific usage categories during the period of 29 September 2022 to 31 January 2023.
|Fuel Type||Fuel used in heavy vehicles for traveling on public roads||Fuel used in all other business activities (including powering auxiliary equipment of a heavy vehicle)|
|Liquid Fuels (e.g., diesel or petrol)||18.8 cents per liter||46.0 cents per liter|
|Blended Fuels (B5, B20, E10)||18.8 cents per liter||46.0 cents per liter|
|Blended Fuel (E85)||Not eligible||19.735 cents per liter|
|Liquefied Petroleum Gas (LPG)- (duty paid)||Not eligible||15.0 cents per liter|
|Liquefied Natural Gas (LNG) or Compressed Natural Gas (CNG)-Duty Paid||31.5 cents per kilogram|
|B100||Not eligible||10.7 cents per liter|
How To Calculate Fuel Tax Credit
Calculating your fuel tax credit is a straightforward process. You need to multiply the number of liters of eligible fuel your business acquired and used for its operations by the specific fuel tax credit rate applicable to your vehicle category at the time of fuel purchase.
For instance, let’s say your business purchases 1,000 liters of eligible fuel, and the current fuel tax credit rate is 20.5 cents per liter. In this case, you would be eligible to claim $205 as a fuel tax relief. It’s important to keep accurate records of the fuel purchase and its usage to support your claim.
To assist you in calculating your fuel tax deductions, the Australian Taxation Office (ATO) provides a fuel tax credit calculator on their website. This tool helps you determine the exact amount of tax credit you can claim based on the latest fuel tax credit rates.
Always to refer to the ATO website for up-to-date fuel tax credit rates, which may change over time.
Claiming Fuel Tax Credits
When claiming fuel tax deductions, you can conveniently do so on your business activity statement (BAS), following a similar process as claiming GST credits. It’s important to note that you have the option to claim the fuel tax credits at the time of acquiring the fuel.
However, it’s crucial to adhere to the timeframe for claiming. You must make your claim within four years, with the four-year period commencing from the day following the deadline for lodging the BAS for the tax period in which the fuel was acquired. Ensuring timely and accurate claiming is essential to maximize your eligible fuel tax credits.
How To Register For Fuel Tax Credits
To register for fuel tax credits, the process varies depending on whether you have an existing business or a new business.
If you are already registered for GST, you can register for fuel tax credits by completing the “Add a new business account (NAT 2954)” form or by calling the Australian Taxation Office (ATO).
If you have an Australian business number (ABN) but are not registered for GST, you can simultaneously register for both GST and fuel tax credits. You have the following options:
- Register online through the Business Portal at bp.ato.gov.au (if you have an AUSkey).
- Complete the “Add a new business account (NAT 2954)” form.
- Call the ATO
If you are starting a new business, you can register for an ABN, GST, and fuel tax credits at the same time using one of the following methods:
- Register electronically through the Australian Business Register at abr.gov.au.
- Use the electronic lodgment service through your registered tax agent.
- Complete the relevant forms: “ABN registration for companies, partnerships, trusts, and other organizations (NAT 2939)” or “ABN registration for individuals (sole traders) (NAT 2938).”
It’s important to carefully follow the instructions provided by the ATO when registering for fuel tax credits. Ensure that you provide accurate and complete information in the registration process.
What Records Should You Maintain to Claim Fuel Tax Credit?
Maintaining accurate and comprehensive records is essential for effectively calculating and supporting your fuel tax credits. With tax rates frequently changing, it becomes increasingly important to maintain proper documentation. Your records should indicate the type and quantity of fuel acquired and its usage in various business activities, including whether it was used for traveling on public roads or other purposes.
There are two primary categories of records you need to keep:
Records of Fuel Acquisition and Usage
Keep records of when you obtained the fuel and how it was utilized. When calculating your credits, these details help determine the appropriate fuel tax credit rate for each fuel.
Also, maintain records that validate any reasonable method used to determine the amount of fuel consumed.
Business and Tax Records
1. Maintain records that demonstrate the nature of your business activities. This includes preserving documents such as
- business expense records related to eligible activities,
- sales and production records,
- lease agreements for agricultural land or equipment,
- share-farming contracts,
- records of vehicle and equipment usage and maintenance
- work contracts,
- any government-required licenses
2. Additionally, ensure you have records supporting your tax credit claims. This includes:
- tax invoices for fuel purchases,
- bank statements reflecting fuel transactions,
- records of fuel usage (including any losses, thefts, or disposals),
- documentation detailing the methodology used to calculate fuel tax credits
The worksheet provided with your Business Activity Statement (BAS) can serve as a useful record.
For heavy diesel vehicles manufactured before January 1, 1996, and used on public roads, it is important to demonstrate compliance with environmental criteria, such as adhering to an approved maintenance schedule.
3. Other essential fuel usage records may include:
- Logbooks that are detailed records of fuel usage for vehicles, equipment, and machinery
- Fuel Supplier Statements
- Fuel Issue Records that are records of fuel distributed from your own storage facilities.
- Odometer Readings showing regularly recorded distances traveled.
- GPS/Telematic Data that shows fuel usage in vehicles, equipment, and machinery.
- Service Records
If your annual fuel tax credit claim is below $300, you are not required to maintain records of fuel acquisition. However, ensuring that the fuel you acquire is still used in an eligible business activity is crucial.
This article is for general information only. It does not make recommendations nor does it provide advice to address your personal circumstances. To make an informed decision, always contact a registered tax professional.