Fuel Tax Credits (FTCs) – advice for Australian business owners

Fuel Tax Credits

The Australian Taxation Office (ATO) offers some relief in the form of Fuel Tax Credits (FTCs) to business owners who consume fuel in the course of their business. These credits essentially refund the taxes/duties/duties that are included in the price of the fuels used in the course of doing business.

In July 2008, the ATO made FTCs available to more businesses by expanding the list of eligible activities. Although the expansion of eligible activities for fuel tax credit refunds has been in place for some time, it was somewhat overshadowed at the time by the government’s tax break for investment in new operating equipment. However, it is of equal importance. BAS Agent Services in Australia

While the investment allowance provides a one-time tax deduction, the FTCs are calculated at the same time as the GST on the Business Activity Statement (BAS), which means the cash flow benefits are available throughout the year.

Who is eligible?

Taxpayers can claim back fuel tax credits if:

  1. you operate a business and conduct eligible activities
  2. you register for FTCs
  3. they use eligible fuels in their facilities and equipment or vehicles in connection with that activity
  4. you are also registered for GST.

What fuels can you claim?

Credits can be claimed for:

– Diesel and gasoline

– Kerosene, fuel oil, toluene, fuel oil

– mineral turpentine and white spirit

Regardless of the activity or use, credits cannot be claimed for:

– Aviation fuels

– Alternative fuels, such as liquefied petroleum gas, compressed natural gas, liquefied natural gas, ethanol, biodiesel

Also Check: BAS Services in Australia

Eligible equipment and activities

In most cases, it is the activity and fuel that determines eligibility for credits, not the equipment used. Fuel used in most equipment, tools, machinery, and heavy vehicles is eligible. However, an important exclusion is fuel used in vehicles with a gross vehicle weight rating of less than 4.5 tons that travel on public roads. (e.g., passenger cars, small vans, or pickup trucks).

The range of eligible activities is now very broad and may include fuel consumed in the course of an activity involving

  • agriculture
  • fishing
  • forestry
  • mining
  • rail transport
  • Construction industry
  • Manufacturing industry
  • Nursing and medicine
  • Maritime transport
  • Wholesale/Retail
  • Real estate management
  • Gardening and landscaping

For example, a nursing facility that runs its air conditioning systems on eligible fuels can claim credits on its BAS, much like a landscaper who uses fuel to run bobcats, chainsaws or lawn mowers.

Eligible activities may also extend to the generation of electricity for your business and “non-fuel” uses, including fuel used for cleaning supplies, burner applications, or as an input/component in the manufacturing of products.

Claiming the Fuel Tax Credit.

Roughly speaking, the formula is: Refundable liters x applicable tax rate = amount recovered. The credit is part of the payment or refund for that BAS, either reducing a payment or increasing a refund. Rates vary by activity and fuel. As of July 1, 2010, rates are either 15.543 cents per gallon, 19.0715 cents, or 38.143 cents per gallon. Melbourne Bookkeeping Services

Income tax remains in place

Although FTCs are effectively a cash refund from the government, they are not completely free. All FTCs received are included in the calculation of the recipient’s annual tax liability as taxable income. FTCs are also considered pay-as-you-go income and therefore are included in the calculation of quarterly income tax rates, if applicable.

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