Fuel Tax Credits

The Fuel Tax Act 2006 (FTA06) provides a single system of fuel tax credits applicable to fuel used in vehicles used for both private and business purposes.  Fuel tax credits are claimed on the taxpayers Business Activity Statements.  The fuel tax credit must be included as assessable income for income tax purposes and is not subject to GST.  

Who can claim the Fuel Tax Credits:

– Businesses registered for GST
– Businesses registered for fuel tax credits
– The registered business must use fuel to undertake a business activity such as Primary production: Agriculture, fishing, forestry and Non-primary production: Road transport, marine transport, rail transport, generation of electricity, mining, non-fuel use, nursing or medical.

There are two types of fuel:

– Liquid fuels which include petrol, diesel and other combustible fossil fuels such as kerosene, mineral turpentine, white spirit, toluene, heating oil and some solvents.
– Gaseous fuels – are liquefied petroleum gas (LPG), liquefied natural gas (LNG) and compressed natural gas (CNG).

Methods to calculate the eligible litres for Fuel Tax Credits:
– Basic methods
– Percentage use calculation method, and
– Small claimants method

Basic Method
– Approaches: constructive calculation or a deductive calculation
– Constructive method: Involves adding up the litres of each eligible fuel type intended for use in eligible activities.
– Deductive method: Involves subtracting the litres of non business use fuel from total fuel acquired to determine the suitable litres

Percentage use calculation method
– Relies upon a consistent usage pattern over time.  
– Businesses must maintain a detailed record of fuel usage for at least 12 weeks (using either constructive or the deductive basic methods)
– Separate percentages are calculated for activities entitled to different fuel tax credit rates
– The percentage method can be used for five years provided the pattern of use remains reasonable the same. And the fuel tax credit entitlement is less than $10,000 in any financial year.  

Small claimants method
– Small business operators or taxpayers that only use a small scale of eligible fuel may estimate the fuel tax credit using the small claimants method.
– However, the estimate must be reasonable and the claimant must be able to demonstrate how the estimate was established.