Fuel tax credit rates and eligible fuels

JOHN PITITTO, Partner of Mead Partners – Chartered Accountants reports on how fuel tax credits can impact your business.

Background of fuel tax credits

On 1 July 2006, fuel tax credits were introduced for fuel used in heavy vehicles and in a range of other business activities.

Eligibility was expanded on 1 July 2008 to include (at a half rate) taxable fuels used in other business activities, machinery, plant and equipment as part of a gradual implementation. From 1 July 2012, these activities became eligible for the full fuel tax credit rate, but the rate for most is reduced by a carbon charge.

From 1 December 2011, excise or customs duty applies to gaseous fuels – that is, liquefied petroleum gas (LPG), liquefied natural gas (LNG) and compressed natural gas (CNG) – for transport use in most instances. From this date, fuel tax credits became available for duty paid gaseous fuels acquired, manufactured or imported for use in eligible off-road business activities.

Non-transport use of gaseous fuels is eligible in certain circumstances.

From 1 July 2012, under clean energy laws, a carbon charge has been applied to certain taxable fuels that are combusted. Also, there have been changes to non transport gaseous fuels that affect fuel tax credit rates for certain activities.

From 1 July 2013, carbon charge amounts increased and there were other changes to non-transport LPG and LNG that affect fuel tax credit rates for certain activities.

Fuel tax credits provide you with a credit for the fuel tax (excise or customs duty) included in the price of fuel you use for your business activities in:

• machinery
• plant
• equipment
• heavy vehicles

You may also be entitled to fuel tax credits for non-transport gaseous fuels that have been subject to the carbon pricing mechanism and used in specified agriculture, fishing or forestry activities.

The only fuels that are not eligible are:

• aviation fuels (aviation gasoline and aviation kerosene) – unless you have been declared by the Clean Energy regulator as a designated opt-in person under the opt-in scheme
• fuels you use in light vehicles of 4.5 tonne gross vehicle mass (GVM) or less,travelling on a public road
• fuel you acquired but did not use because it was lost, stolen or otherwise disposed of
• some alternative fuels, such as ethanol or biodiesel that have already received another grant or subsidy

You must be registered for both GST and fuel tax credits before you can make a claim. You claim fuel tax credits on your business
activity statement (BAS).

Most businesses can claim fuel tax credits – it is just the rate that varies and this depends on what fuel you use and how you use it in your business activities.

Fuel tax credits – changes from 1 July 2014

• From 1 July 2014, some fuel tax credit rates are changing.
• For fuel you acquire for your business, you will claim:
  • different rates because of an increase in carbon charge amounts
  • more for transport gaseous fuels
• There is no change to the rate for fuels used in heavy vehicles for travelling on public roads.

Go to the rates table to see how these rates are changing from 1 July 2014.

https://www.ato.gov.au/Business/Fuel-schemes

Now that fuel tax credit rates are changing it is important to ensure you keep good records to support your claim

Proposed Changes

The Australian Government is proposing to remove the carbon charge for fuels acquired from 1 July 2014.

They are also proposing to index excise duty rates for most fuels every six months from 1 August 2014.

If one or both of these changes become law, fuel tax credit rates will change.

Fuel used in heavy vehicles for travelling on public roads

There will be no change to the road user charge from 1 July 2014. After subtracting the road user charge of 26.14 cents per litre, the fuel tax credit rate for liquid fuels (for example, diesel or petrol) used in heavy vehicles for travelling on public roads is 12.003 cents per litre.

Fuel tax credits – criteria for heavy diesel vehicles

A heavy vehicle has a GVM greater than 4.5 tonnes. Diesel vehicles acquired before 1 July 2006 can equal 4.5 tonnes GVM.

If you use a heavy diesel vehicle in your business for travelling on a public road and the vehicle was manufactured before 1 January1996, the vehicle must meet one of three environmental criteria outlined below before you can claim fuel tax credits.

• be registered in an audited maintenance program that is accredited by the transport Secretary
• meet Rule 147A of the Australian Vehicle Standards Rules 1999 (the ‘DT80’ test)
• comply with a maintenance schedule endorsed by the transport Secretary

If your heavy vehicle was manufactured before January 1996 but has been retrofitted with an engine manufactured on or after 1 January 1996, the engine must meet all of the following criteria:

• be certified to the Australian Design Rule (ADR) 70/00 (or later) emission standard (currently ADR 80/00 or ADR 80/01)
• be properly installed
• retain all the original (or equivalent) components

Other off-road activities where the fuel is combusted

Fuel tax credits for these activities are reduced by an amount of carbon charge relevant to the fuel you use. Carbon charge amounts change annually until 30 June 2015, then six monthly thereafter due to changes in the carbon price.

For the latest rates for these activities, refer to Fuel tax credit rates and eligible fuels. you need to use the rate that applied when you acquired the fuel.

If your activity is not listed here, you may be eligible for a fuel tax credit under another activity with a different fuel tax credit rate.

Examples of these activities

The following are examples of off-road activities – that is, activities not undertaken on a public road – where the fuel is combusted (Note: it is not a complete list):

• mining
• marine and rail transport
• nursing and medical services
• burner applications
• electricity generation by commercial generator plant, stationary generator or a portable generator
• construction
• manufacturing
• wholesale/retail
• property management
• landscaping
• dredging
• panel beating
• greenhouse heating
• in cement kilns
• quarrying
• in industrial furnaces

Example: Quarrying

Michael’s Sand Supplies Pty Ltd quarries sand to use in landscaping. He claims fuel tax credits for the diesel he uses in his excavators. From 1 July 2012, this activity is subject to the carbon charge.

For diesel acquired from 1 July 2012 to 30 June 2013, Michael can claim 31.933 cents per litre for this activity – which is the full fuel tax credit rate of 38.143 cents minus the carbon charge for diesel.

Michael can claim 31.622 cents per litre for diesel he acquires from 1 July 2013 to 30 June 2014.

Records you need to keep

To work out your fuel tax credits accurately and support your claims, you need to keep records that show:

• the date you acquired the fuel
• the quantity and type of fuel you acquired, manufactured or imported for your business activities
• how you used that fuel

You should keep records from the start of your business activity so you are ready to calculate and claim your fuel tax credits and you must keep them for five years after you make a claim as we may ask to see them.

**All information sourced from the ATO Website.

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