A Simpler Method is Available for Calculating Fuel Tax Credits

AUTHOR: Jason Donoghue

If your business operates within the road transport industry, you may be familiar with the process behind registering for fuel tax credits (FTC) for your heavy vehicles – vehicles with a gross mass greater than 4.5 tonnes.

Fuel tax credit rates generally change twice a year – in February and August, based on CPI and therefore it’s vital to be aware of these changes to ensure you are maximising your fuel rebate claim via your Business Activity Statement.

Businesses operating in the road transport industry can claim fuel tax credits for travel on both public roads and off roads, albeit at different rates. The claim rate for public roads currently sits at 16.5 cents per litre, whereas off road travel incurs a higher rebate of 42.3 cents per litre.

The ATO has recently announced a new guidance document to assist road transport operators in calculating their fuel tax credit entitlement.

The Practical Compliance Guide (PCG) 2021/2, which can be applied to fuel purchased from 1 October 2020 onwards, aims to assist operators who are not actively tracking litres used on public roads versus litres used off road. By using this guide, you can’t use the ATO guidelines on apportioning for fuel used in auxiliary equipment as set out in PCG 2016/11.

The guide allows business owners to either use a kilometre-based approach where they have a logbook kept for kilometres travelled on road versus off-road, or if no logbook is kept, multiply the total kilometres by 98.4% to determine on-road use. The kilometres travelled via public road is then multiplied by the diesel consumption rate as outlined in Schedule One to calculate litres attributable to public road travel only.

The figure derived is then deducted off the total litres (usually accessible via monthly fuel statements) to derive the litres used for off-road travel.

To be able to rely on the PCG guide, the following conditions must be satisfied:

• They must be registered for GST and eligible to claim FTC.
• They use a heavy vehicle for travelling on public and off road.
• The total fuel tax credit entitlement for the last 12 months before that tax period is $10,000 or less; and
• There is a reasonable expectation that your total FTC will be $10,000 or less for the current 12-month period.

It’s important to note that due to the fuel tax credit rebate in the guide being capped at $10,000 for the year, this method would best suit start-ups and smaller road transport operators.

Diesel consumption rates as per PCG (Schedule 1):

If you require help breaking down these new guidelines, PVW Partners has expert advisers that can assist.

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ABOUT THE AUTHOR:

Jason is a Townsville local who is focused on helping clients achieve their business goals. He has over five years' experience in advising on taxation, accounting, and business advisory matters.

Additionally, Jason acts as treasurer for TIPACL, a not-for-profit organisation who provides disability support services under the National Disability Insurance scheme.