Apr 05, 2022 / News

Taxation

Fuel Excise – What’s Changing with your Business’s Fuel Tax Credits

Much attention has been given to the 2022 Budget measure of temporarily halving of the fuel excise for petrol and diesel, from 44.2 cents/litre to 22.1 cents.  Less so to what will change with Fuel Tax Credits (FTC) claimable by businesses.  Any business entitled to claim FTCs will have an immediate impact on their March 2022 activity statement, as the FTC rates will change for the last two days of the period.

Generally, GST-registered businesses are entitled to a credit for most types of fuels acquired.  This includes for use by vehicles and certain non-vehicle uses, such as for plant and machinery.  Exclusions include aviation fuel and fuel used by vehicles weighing 4.5 tonnes or less travelling on public roads. The exclusion means, for example, that no credit is available for fuel used by an ordinary car travelling on public roads. However, a credit is available for fuel used by such vehicles when off a public road.

After the benefit of the FTC, the remainder fuel excise borne is referred to as the Road User Charge (RUC).  There are two broad categories of fuel use: 1) Vehicles >4.5 tonnes used on public roads, and 2) All other eligible business use.  The first category has a partial or nil FTC, and thus there is a RUC impost.  The second category has a full FTC, and thus the RUC impost is nil.   

Changes to FTC rates

In line with the temporary halving of fuel excise rates from 30 March 2022, so too have the FTC rates been reduced.  Here is a summary of the changes for the main types of fuels used.

Vehicles >4.5 tonnes, on-public road use (partial or nil FTC) 

Businesses using petrol and diesel (44.2 cents fuel excise) in heavy vehicles on public roads did receive a FTC of 17.8 cents/litre, leaving a RUC impost of 26.4 cents/litre (ie, 44.2 cents minus 17.8 cents).  From 30 March, the fuel excise is halved to 22.1 cents/litre, and the FTC is reduced to nil.  That leaves a RUC impost of 22.1 cents/litre, which is a 4.3 cent/litre reduction in the RUC impost.

No FTC is available for other types of fuels, and so the fuel excise amount itself is the RUC.  Thus, the halving of the fuel excise rates means the RUC impost will accordingly be halved for this temporary period (eg, 14.4 cents down to 7.2 cents for LPG, and 30.3 cents down to 15.2 cents for LNG/CNG).

All other eligible business use (full FTC)

Other eligible business fuel uses include for plant and machinery, and off-public road travel by vehicles of any weight (eg, tractors, regular cars on farms and mine sites, as well as vehicles >4.5 tonnes).  This category also includes the portion of fuel used by a >4.5 tonne vehicle for auxiliary power (eg, powering refrigeration) while travelling on a public road.

The FTC rate here was equal to the fuel excise rate, leaving a RUC impost of nil.  The FTC rates have been halved to match the reduced fuel excise rates.  Accordingly, the RUC impost remains unchanged at nil.

March 2022 activity statements

The change in FTC rates takes effect for the last two days of the March activity statement period.  The correct FTC rates is determined by the day on which you acquire the fuel (to match the fuel excise included).  Accordingly, it is important to correctly distinguish fuel acquired on 30 and 31 March, as the FTC rates are different per the above table.  The change in FTC rates is significant, and so correct cut-off is important for any business that acquires significant quantities of fuel. 

The fuel excise and FTC rates will return to normal on 29 September 2022.

More broadly, a number of GPS-based software applications are available to efficiently capture fuel use data and document FTC supporting calculations.

Talk to your trusted Nexia Edwards Marshall advisor about how we can help you correctly determine your full FTC entitlement, thus maximising the money that stays in your business.

The material contained in this publication is for general information purposes only and does not constitute professional advice or recommendation from Nexia Edwards Marshall. Regarding any situation or circumstance, specific professional advice should be sought on any particular matter by contacting your Nexia Edwards Marshall Adviser.