The fuel tax credit scheme refunds fuel tax to users of heavy vehicles, machinery, plant and equipment and light vehicles used off public roads. 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?

The scheme provides businesses with a credit for the fuel tax that is included in the price of fuel. Fuel tax credits may be claimed where the following conditions are met:

  1. 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;
  2. you acquire, manufacture or import this fuel for use in carrying on your enterprise; and
  3. you are registered for GST, or required to be registered.

The fuels must also constitute ‘eligible fuels’, and you must undertake ‘eligible activities’.

What are the ‘eligible fuels’ that attract fuel tax credits?

To claim fuel tax credits, the fuel must be ‘taxable fuel’, on which excise or customs duty has been paid.

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.

Blended fuels

The rate of fuel tax credit you can claim for fuel blends depends on the amount of biodiesel or ethanol in each blend.

Blended fuels are blends of two or more liquid fuels. 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 the transport of gaseous fuels, which include:

  • liquified petroleum gas (LPG) or liquified natural gas (LNG) intended for use in an internal combustion engine of a motor vehicle or vessel;
  • 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.

Non-transport gaseous fuels (not duty paid)

Non-transport gaseous fuels that are not duty-paid are not eligible for fuel tax credits. Such fuels include:

  • LPG and LNG are delivered only for use other than in an internal combustion engine of a motor vehicle or vessel;
  • LPG delivered for use in forklifts;
  • CNG is imported or compressed only for use in forklifts; and
  • CNG is compressed at residential premises using equipment capable of compression at a rate not more than 10kg of natural gas per hour and not for sale.

What are the ‘eligible activities’ for fuel tax credits?

Road Transport

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 ATO considers the term ‘vehicle travelling on a public road’ includes any vehicle that can be authorised to travel on a public road by the relevant road traffic authority, and may include plant, equipment or machinery that is capable of locomotion.

Non-eligible activities

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. 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.

The credit rate for fuel used in heavy vehicles for travelling on public roads is reduced by the road user charge, which is currently 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 four-year entitlement period.

If you would like to discuss your entitlement to fuel tax credits, please contact Tamara Cardan, Tax Counsel at Rigby Cooke, on 03 9321 7862.