Expenses & deductions
Fuel tax credits
Claiming for fuel use
Need to be registered
Fuel for vehicles and machinery is already taxed (via an excise duty) when you buy it, so what the law provides is a credit that will allow businesses to claim back the tax that has already been 'paid' on that fuel.The fuel tax credit scheme allows businesses that use fuel in the course of carrying on business to claim a tax credit via their activity statement, in much the same way that other indirect taxes are claimed such as GST.
Generally, necessary business expenses that are made to produce assessable income are available as tax claims. The petrol that powers your car or truck is no different.
If you use fuel in your business, such as to drive machinery, plant, equipment and vehicles, then you will probably be able to claim a fuel tax credit.
Alternative fuels such as LPG, ethanol or aviation fuel are excluded for now (but see the following paragraphs), as are most light vehicles (of less than 4.5 tonnes on public roads). But the fuel used needs to have had excise or customs duty paid on it, which would include for example petrol, diesel, kerosene, heating oil, toluene and fuel oil.
Alternative fuels, namely the biofuels ethanol and biodiesel, and the gaseous fuels including liquefied petroleum gas (LPG), liquefied natural gas (LNG) and compressed natural gas (CNG), will be brought fully into the tax system, which started with a gradual phasing in from July 1, 2011.
Tax rates will be based on energy content, with the fuels being placed into one of the following three energy content bands:
- high (energy content greater than 30 megajoules per litre, or per cubic metre in the case of compressed natural gas);
- medium (between 20 and 30 megajoules per litre), or
- low (less than 20 megajoules per litre).
Need to be registered
To make claims, you'll need to be registered for GST, registered for fuel tax credits, and be undertaking an eligible activity and meet environmental criteria. The fuel tax period will be the same as your GST tax period, and there is a four year time limit on claiming fuel tax credits after July 1, 2010 (although you can claim in the current BAS, and not have to revise the corresponding period's reports).
Heavy diesel vehicles might have to meet emission standards. And there are limited situations where being registered for GST isn't required, like a householder needing to run a generator for electricity, or a non-profit body operating an emergency vehicle.
Once registered, the Tax Office will add another label to your business activity statement form. You'll need to keep the usual records that show the activities your business undertakes, but include any fuel use records as well. When it's time to do your BAS, work out how much fuel you've used, apply the correct rate, and multiply them to see how much you can claim.
An individual fuel user, not registered for GST, can still make a claim if generating electricity for domestic use, but will have to still be registered for fuel tax credits. Domestic use means for a house or cabin, a relocatable home, houseboat or caravan, but they must be a person's 'permanent place of residence' (so not a yacht or vacationing caravan).
Industries covered
Refer here for the fuel tax credit rates from July 1, 2014. To claim fuel tax credits, you will need to keep a record of litres used, but you can opt to make a calculation of the percentage of business use of your total fuel consumption, or estimated litre usage if you're a small user, as long as these are based on a reasonable method of calculation.You can either add up the litres of eligible use fuel (called the 'constructive' method), or deduct ineligible litres (called the 'deductive' method). Or there is the 'percentage use' method, suited to where you use only one fuel and in limited vehicles or equipment and come to an average over a period of time and use. And then there is the 'alternative percentage use' method, which is suited to fleet calculations. See this Tax Office page for the various methods.
If you keep records of the number of hours fuel-burning equipment is used, there is even an 'average consumption rate' method. The number of options to work out eligible litres should give any business an appropriate method depending on that business's situation.
To help with the sums, the Tax Office has a fuel tax credit online calculator you may want to use. There is also a fuel tax eligibility tool here, and a calculation worksheet.
The eligible activities for claiming fuel tax credits is being gradually expanded up to 2012, and at the moment applies to the use of vehicles bigger than 4.5 tonnes GVM (gross vehicle mass) for use in most industries, albeit at varying rates.
Click here for the rates available for various activities. The rate varies according to the fuel used and the activity for which it was used.
For agricultural activities for example, you can claim the credit for fuel used in the process of growing produce for sale (the 2014-15 rate is 38.143 cents per litre).
Industries covered
The general principle that a legitimate business expense incurred in the course of operating vehicles and equipment to produce assessable income may qualify for a credit applies to all industries covered by the fuel tax credit scheme.
But also covered is fuel used for generating electricity for a business, and fuel not used in an engine but as a cleaning agent or sealer, in plastics and paint manufacturing or for adhesives. These other business activities, and machinery, plant and equipment, are credited at the full rate of 38.143 cents. The full rate has applied from July 1, 2012.
The type of equipment and machinery includes augers, chainsaws, backhoes, lawn mowers, pumps, hoists, cement mixers and so on. The main requirement is that you bought the fuel for qualifying business use, and applied the right rate when making your claim.
If you have lingering doubts about whether your business or business activity is eligible, you can always apply for a private ruling. A non-profit organisation that has chosen to not register for GST can still claim fuel tax credits providing the fuel is used for emergency vehicles or vessels.
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