The fuel tax credit scheme refunds fuel tax to users of heavy vehicles, machinery, plant and equipment, and light vehicles used off public roads.
The scheme provides businesses with a credit for the fuel tax (excise or customs duty) that is included in the price of fuel. The scheme is designed to relieve industries of the excise or duty that they pay on the petrol or diesel they use.
This article provides an overview of the fuel tax credit scheme, including when an entitlement to a credit arises, and which fuels and activities attract fuel tax credits.
Who is entitled to a fuel tax credit?
Fuel tax credits may be claimed where all of the following three conditions are met:
- You acquire, manufacture or import ‘taxable fuel’. This is fuel that is liable for duty under excise or customs legislation (e.g. diesel and petrol), with certain minor exceptions.
- You acquire, manufacture or import this fuel for use in carrying on your enterprise. On this point, fuel is not ‘used’ if it is sold or otherwise disposed of. Accordingly, an entity is not entitled to a fuel tax credit for taxable fuel that they manufacture and sell to another entity, distributor or a retail outlet (FTD 2009/1). A credit is also not available if the fuel is stolen or otherwise disposed of.
- You are registered for GST or required to be registered. This requirement does not apply to non-profit bodies where the fuel is used in an emergency services vehicle.
Fuel tax credits may also be claimed if you manufacture or acquire:
- kerosene, heating oil or other prescribed fuel to sell it for use in domestic heating; or
- kerosene, mineral turpentine, white spirit or other prescribed fuel to repackage it in containers of 20 litres or less for sale, for a use other than in an internal combustion engine.
In order to be entitled to claim fuel tax credits, the fuels must constitute ‘eligible fuels’, and you must undertake ‘eligible activities’.
What are the ‘eligible fuels’ that attract fuel tax credits?
To be eligible to claim fuel tax credits, the fuel must be ‘taxable fuel’. That is, fuel tax (excise or customs duty) must be paid on it.
Eligible liquid fuels include petrol (e.g. unleaded, premium unleaded and high octane), diesel, fuel oil, kerosene, mineral turpentine, white spirits, toluene and heating oil.
You can claim fuel tax credits for blended fuels. The rate you can claim depends on the amount of biodiesel or ethanol in each blend.
Blended fuels are blends of two or more liquid fuels, e.g. diesel with biodiesel, or petrol with ethanol. Petrol/ethanol blends are treated as entirely petrol (i.e. taxable fuel and eligible for credits) if the ethanol component does not exceed 10%. Diesel/biodiesel blends are treated as entirely diesel (i.e. taxable fuel) if the biodiesel component does not exceed 20%.
Transport gaseous fuels (duty paid)
You can claim credits on transport gaseous fuels, because duty has been paid on these fuels.
Transport gaseous fuels include:
- liquified petroleum gas (LPG) or liquified natural gas (LNG) intended for use in an internal combustion engine of a motor vehicle or vessel, either directly or by filling another tank connected to such an engine;
- compressed natural gas (CNG) that is imported or compressed for use in a motor vehicle; and
- all gaseous fuels for mixed-use (that is, both transport and non-transport use) or when the end-use is unknown.
Transport gaseous fuels are not limited to use in transport activities. They can also be used in all other business activities that are undertaken off a public road.
Non-transport gaseous fuels (not duty paid) — ineligible for fuel tax credits
Non-transport gaseous fuels that are not duty paid are not eligible for fuel tax credits.
Non-transport gaseous fuels include:
- LPG and LNG delivered only for use other than in an internal combustion engine of a motor vehicle or vessel (e.g. in residential heating or burner applications);
- LPG delivered for use in forklifts;
- CNG imported or compressed only for use in forklifts, or not for use in a motor vehicle; and
- CNG compressed at a residential premises (including for use in a motor vehicle) using equipment capable of compression at a rate not more than 10kg of natural gas per hour and not for sale.
Accordingly, fuel tax credits cannot be claimed on the above non-transport gaseous fuels.
What are the ‘eligible activities’ for fuel tax credits?
Businesses can claim credits for fuel used in road transport activities for vehicles travelling on public roads, using:
- vehicles with a gross vehicle mass (GVM) greater than 4.5 tonnes; and
- diesel vehicles acquired before 1 July 2006 with a GVM of at least 4.5 tonnes.
The GVM of a vehicle is the GVM accepted by the authority that registered the vehicle. Trailers are not included in the GVM of a rigid vehicle. In the case of prime movers, the GVM is the gross combination mass.
The term ‘vehicle travelling on a public road’ is not defined in the Fuel Tax Act 2006. The Australian Tax Office considers the term is not restricted to registered vehicles, and should be construed broadly to include any vehicle that can be authorised to travel on a public road by the relevant road traffic authority. This may include plant, equipment or machinery that is capable of locomotion. It is not necessary that the vehicle be self-propelled, or that it be for the carriage of people or passengers (FTR 2008/1).
Depending on your circumstances, you may also need to meet an environmental criterion for heavy diesel vehicles if they were manufactured before 1 January 1996.
Fuel tax credits do not apply to:
- fuel used in light vehicles, i.e. vehicles with a GVM of 4.5 tonnes or less travelling on a public road (e.g. a car or small van); and
- fuel used in pre-1996 heavy vehicles, i.e. vehicles with a GVM of more than 4.5 tonnes, travelling on public roads, that do not meet specified environmental criteria.
How are fuel tax credits calculated?
Fuel tax credit rates are indexed twice a year, based on the upward movement of the consumer price index. Because of this, the applicable rate of credit generally needs to be determined as at the date the fuel is acquired.
Further, as different credit rates apply to different types of business activity carried on, it is necessary to identify how many litres of fuel have been used in each of those activities. The claim will be the total of these separate calculations.
For fuel acquired from 1 August 2023 to 4 February 2024, the rates for liquid fuels and most blended fuels are 20 cents per litre for heavy vehicles, and 48.8 cents per litre for off-road activities (including to power auxiliary equipment of a heavy vehicle).
The fuel tax credit rate for fuel used in heavy vehicles for travelling on public roads is reduced by the road user charge (which is subject to change). Accordingly, vehicles with a GVM greater than 4.5 tonnes travelling on a public road are normally only entitled to a reduced rate of credit.
Fuel used in auxiliary equipment (e.g. a cement mixer or refrigeration unit) in heavy vehicles while travelling on public roads is not reduced by the road user charge. The current road user charge is 28.8 cents per litre.
How are fuel tax credits claimed?
Fuel tax credits are claimed by business taxpayers on their business activity statement (BAS) in a similar manner to GST input tax credits and are attributed to the same tax period as the GST input tax credit for the fuel.
Entitlement to a fuel tax credit ceases to the extent that the credit has not been taken into account in an assessment within the 4-year entitlement period.
A claimant for fuel tax credits must keep records that record and explain all transactions and acts that are relevant to the claim.
If you are an Australian business or individual requiring advice on any aspect of the fuel tax credit scheme, or would like to discuss your entitlement to fuel tax credits, please contact us.
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