It is obvious that as a business, you will have to operate numerous pieces of equipment daily. However, operating such huge equipment comes with significant costs, one of which is fuel expense.
If you have to incur fuel costs for equipment to run your business, fuel tax credits can be really helpful to retrieve a good portion of your expenses. So here is a guide to help you know how the fuel tax credits scheme works in Australia and how you can claim them.
What are fuel tax credits?
The fuel tax credits scheme is a government program that allows eligible individuals and businesses to claim credits for the paid fuel tax. The fuel used in heavy vehicles (only for business purposes), machinery, equipment, and other specific activities like heating, lighting and off-road activities will also be included in this system.
These credits can be used to offset the cost of fuel tax and can help businesses and individuals save a considerable amount of money. The fuel tax credit is claimed through the ATO by submitting your Business Activity Statement (BAS).
Eligibility to claim fuel tax credits
In order to be eligible to claim fuel tax credits, individuals and businesses have to meet specific criteria set by the ATO. But first, let’s discuss the types of assets for which one can claim fuel tax credits. You can claim for:
- Operating machinery like tractors, excavators, backhoes, generators, and so on;
- Heavy vehicles travelling on private property or public roads and operating auxiliary equipment (for refrigeration, air conditioning, tipping or pumping equipment, etc.)
- Light vehicles travelling on private property
Fuel used in light vehicles to drive on public roads is excluded from this scheme, along with the fuel used in heavy vehicles that do not meet emission standards and in aviation equipment.
A business, on the other hand, must have an ABN (Australian business number) and be registered with the ATO for fuel tax credits and GST (at the time when the fuel is acquired). Along with this, there are certain requirements when it comes to the type of fuel (diesel, petrol or other fuel) used in business activities, the type of vehicle in which the fuel was used (with a GVM or gross vehicle mass greater than 4.5 tonnes) and the kind of business activity.
Individuals and businesses must also provide some documentation (invoices and receipts) proving that the fuel tax has been paid.
It is worth noting that the fuel tax credits are different from the tax rebates that are used to provide financial assistance to specific groups through separate government programs.
The whole process can be complex and also time-consuming. Keeping records of all the necessary information and documents can be hectic, which is why it is sometimes better to reach out to professionals like Clear Tax Accountants.
Fuel excise tax VS customs duty
In Australia, fuel tax can be divided into two main categories: excise and customs duty. Fuel excise tax is applicable to the fuel produced domestically, whereas customs duty is the tax applied to imported fuel. The calculation of excise duty and customs duty is based on the cents per litre rate (CPL rate).
The fuel excise tax applies to all types of fuel, which include diesel, petrol and alternative fuels like biodiesel and ethanol.
Besides excise and customs duty, GST (goods and services tax) is also applied to fuel. It is a 10% tax on the cost of goods and services and is applicable to the fuel’s total cost, including the excise and customs duty.
In Australia, fuel tax is administered and collected by the Australian Taxation Office. The ATO is responsible for implementing the excise and customs duty rates and also for collecting the payment of the fuel tax by the fuel suppliers and importers.
Claim fuel tax credits – Steps you can follow
First, you must figure out if you are eligible to claim fuel tax credits. As long as the purchased taxable fuel is used in business, you can claim credits for the fuel tax. Taxable fuel can be:
- Liquid fuel (Diesel, Petrol, fuel oil, kerosene and other fuels)
- Fuel blend (Diesel blends, petrol blends and other fuel blends)
- Gaseous fuel (LPG, CNG, LNG)
You can use the ATO’s website to be extra sure that you fit the eligibility criteria.
The next step is to ensure that you are registered for both fuel tax credits and GST (goods and services tax). After these, follow the given steps:
Check the time limits to make a claim.
Generally, a business or an individual must claim the credits within four years. This time is counted from the day after the Business activity statement (for the tax period in which the individual got the fuel) was lodged.
Review the amount of fuel that can be claimed.
The amount of fuel tax credit a person can claim will depend upon the kind of fuel used and the type of activity it is used in. You will have to consider the date or time you got the fuel, its type and the activity you are using it for.
Calculate your fuel tax credits.
Fuel tax credits are claimed through your BAS, but before you claim credits, you must calculate them. For this, you can use the fuel tax credit tools the ATO provides on their official website.
You can use their fuel tax credit calculator to know the amount that you need to report on your business activity statement (BAS). It can also help you with adjustments that need to be made for fuel tax credits from the previous business activity statements.
The best part about the fuel tax credit calculator is that it applies the latest FTC rate and is quite simple and quick to use.
Check the fuel tax credit rates.
Every year, in February and August, fuel tax credit rates are adjusted as per the consumer price index (CPI). Since having more than one FTC rate in a BAS period is possible, you must check the rates every time you do your BAS. Here’s a table:
| Eligible fuel type | Used in heavy vehicles for travelling on public roads | All other business uses (including to power auxiliary equipment of a heavy vehicle) |
|---|---|---|
| Liquid fuels – for example, diesel or petrol Unit: cents per litre | 20.5 | 47.7 |
Blended fuels: B5, B20, E10 | 20.5 | 47.7 |
Blended fuel: E85 | 0 | 20.415 |
Liquefied petroleum gas (LPG) (duty paid) | 0 | 15.6 |
Liquefied natural gas (LNG) or compressed natural gas (CNG) (duty paid) | 0 | 32.7 |
B100 | 0 | 11.1 |
If you claim less than $10,000 in FTC each year, the ATO has a simpler way for you to calculate your claim (you can use their website for this).
Now all there’s left is to claim your fuel tax credits on your BAS, and do not forget to include these at ‘Assessable Government industry payments’ in your tax return.
If you are having difficulties claiming Fuel Tax Credits, it is time to seek professional advice. At Clear Tax Accountants, we are a team of professional tax accountants in Melbourne who can help you take care of your tax matters by providing reliable accounting services in Melbourne.
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