Fuel Tax Credit Claim
A Fuel Tax Credit Claim is a request to the ATO for a refund of the excise duty paid on fuel used in business machinery, equipment, and heavy vehicles. It is governed by the Fuel Tax Act 2006.
A claim form to register for the Fuel Tax Credit scheme and recover fuel tax credits from the Australian Taxation Office.
20 free credits on signup — no card needed
About this Document
The Fuel Tax Credit Claim is a vital business activity for tradespeople, transport operators, and other businesses across Australia. It is the mechanism used to claim a credit for the fuel tax (excise or customs duty) that is included in the price of fuel you use in your business operations, machinery, and heavy vehicles. This guide explains the purpose of the claim, the eligibility criteria set by the Australian Taxation Office (ATO), and the correct way to calculate and report these credits in your Business Activity Statement (BAS). Understanding this document helps ensure your business does not pay more tax on fuel than necessary and remains compliant with Australian tax law. Fuel tax credits are part of the Australian tax system designed to prevent businesses from paying tax on fuel used for business purposes. The credit offsets the excise duty included in the price of fuel when you buy it at the bowser. When you use that fuel in eligible machinery or vehicles, the government returns that money to you through the credit system. This document is not just a form you fill out once. It is an ongoing record keeping and calculation process that feeds into your quarterly or monthly BAS. You must keep detailed records of every litre of fuel you buy and how you use it. The ATO requires evidence of the fuel purchase, such as receipts or tax invoices, and records showing the fuel was used in an eligible way. This guide focuses on the practical steps you need to take. We will discuss the difference between using fuel in heavy vehicles for travelling on public roads versus using fuel in machinery or equipment on private land. This distinction is because the credit rate changes depending on how the fuel is used. Using fuel in a heavy vehicle travelling on a public road attracts a reduced credit rate because it includes a road user charge. Using fuel in a bulldozer on a construction site or a generator in a workshop attracts the full credit rate. The legal framework for this claim comes from the Fuel Tax Act 2006. This Act sets out the rules for who can claim, what fuel types are eligible, and how to calculate the credit. As a business owner, you must also comply with the Income Tax Assessment Act 1997 and the Taxation Administration Act 1953. These laws dictate how you report income and deductions and your record keeping obligations. To make a claim, you need an Australian Business Number (ABN). You must be registered for Goods and Services Tax (GST) if your annual turnover is $75,000 or more, though you can claim fuel tax credits even if you are not registered for GST. The claim process involves calculating the total quantity of eligible fuel used during the BAS period. You multiply this quantity by the relevant credit rate for that fuel type and usage. The ATO publishes new rates regularly, usually every February and August, to reflect changes in the Consumer Price Index (CPI). You must use the correct rate for the specific dates you acquired the fuel. Mistakes in this calculation are common and can lead to penalties. A common error is claiming the full credit rate for heavy vehicles travelling on public roads. This is not allowed because the road user charge is not refundable. Another mistake is claiming credits for fuel used in a light vehicle, such as a sedan or ute, that weighs less than 4.5 tonnes gross vehicle mass (GVM). Generally, you cannot claim fuel tax credits for fuel used in light vehicles travelling on a public road. However, there are exceptions for specific off-road uses, such as agriculture or mining. This guide will walk you through identifying eligible activities. Eligible activities include using fuel in machinery, plant, and equipment. Examples include excavators, tractors, forklifts, harvesters, chainsaws, and cement mixers. If you use a ute or van to travel between job sites, that is usually a private road use and is not eligible for a credit. But if you take the doors off that ute and use it exclusively on a mine site, it becomes eligible. You must be able to prove how you used the vehicle. The record keeping requirements are strict. You must keep a logbook or similar document if you use fuel for both eligible and ineligible purposes. This allows you to apportion your fuel usage accurately. If you cannot prove the fuel was used for an eligible purpose, the ATO will deny the claim. Penalties for incorrect claims can be severe. The ATO applies penalties for failure to take reasonable care. If you claim credits you are not entitled to, you will have to pay back the debt plus interest and potential penalties. It is safer to claim conservatively and keep excellent records. The safety and industrial relations aspects of fuel use also matter. Under the Work Health and Safety Act 2011 (WHS Act), you have a duty of care to manage the risks associated with fuel storage and handling. While this does not directly change your tax claim, it relates to the broader operation of your business assets. Storing fuel safely and maintaining machinery in good working order is a legal requirement. This guide assumes you are running a legitimate business. The ATO monitors claims closely. They use data matching to cross reference your fuel purchases against your reported business activity. If you claim large amounts of fuel tax credits but your business income is low, you may trigger an audit. To prepare your claim, you need your fuel purchase records for the period. You need your logbook or evidence of usage. You need the current ATO fuel tax credit schedule. You need your BAS form. The calculation involves separating your fuel purchases into different categories. Category one is fuel used in heavy vehicles travelling on public roads. Category two is fuel used in all other eligible machinery, equipment, and heavy vehicles not travelling on public roads. You might also have a category for gaseous fuels, which have different rates. Once you have the total litres for each category, you apply the rate. The result is your total fuel tax credit claim. You report this amount at label 7D on your BAS. The credit reduces the amount of GST you owe to the ATO. If your credits are higher than your GST liability, the ATO will refund the difference. Cash flow management is a key benefit of this scheme. By claiming your credits regularly, you recover money that can be reinvested into your business. Most businesses claim quarterly to match their GST cycle. However, if your fuel tax credits are more than $10,000 per year, you must lodge your BAS monthly. This ensures you receive your credits sooner and do not build up a large liability. Changes to legislation happen occasionally. For example, there have been changes to the eligibility of fuels like biodiesel and ethanol. You must check the ATO website or speak with a tax professional to ensure your understanding of the law is current. This document type is relevant to almost every trade. Builders, plumbers, electricians, and rs all use machinery that runs on eligible fuel. Transport companies and couriers rely heavily on these credits for their bottom line. Farmers and miners also have significant claims. Even small businesses like painters who use generators for power tools can benefit. The distinction between business and private use is a grey area for many sole traders. If you run a plumbing business from home and drive your van to work, that trip from home to the first job is usually private. You cannot claim a credit for that fuel. You can only claim for the travel between jobs. Accurate logbooks are the only way to substantiate this. You do not need to send your calculations to the ATO separately. You simply record the final dollar figure on your BAS. However, you must keep your working papers and records for five years. If the ATO asks to see them, you must provide them. Failure to produce records can result in the ATO amending your assessment. This guide covers the essential elements of the Fuel Tax Credit Claim. It provides the foundation you need to manage this aspect of your tax affairs correctly. Remember that this information is general in nature. Tax law is complex and subject to change. For specific advice regarding your circumstances, you should consult a registered tax agent or the ATO. Taking the time to understand this process will save you money and protect your business from compliance risks. It is a core skill for any Australian business owner who uses fuel.
Key Facts
- You cannot claim fuel tax credits for fuel used in light vehicles under 4.5 tonnes travelling on a public road.— Fuel Tax Act 2006 (Cth)
- You must keep records of fuel purchases and usage for five years.— Taxation Administration Act 1953 (Cth)
- Fuel tax credit rates change twice a year, in February and August, based on CPI movements.— Australian Taxation Office (ATO)
- Heavy vehicles travelling on public roads receive a reduced credit rate because of the Road User Charge.— Fuel Tax Act 2006 (Cth)
- You must have an Australian Business Number (ABN) to claim fuel tax credits.— Australian Business Register
- If your claim amount is more than $10,000 per year, you must lodge your Business Activity Statement monthly.— A New Tax System (Australian Business Number) Act 1999
Sources
Required Sections
Eligibility Criteria
Details on who can claim and what fuel uses qualify.
Eligibility Criteria
To claim Fuel Tax Credits, your business must acquire fuel for use in your business operations and you must be the registered entity that paid for the fuel. You cannot claim credits for fuel used in a private vehicle. The Australian Taxation Office (ATO) requires accurate records to substantiate every claim.
Vehicle Types and Weight Limits
Eligibility depends heavily on the type of vehicle you operate and its Gross Vehicle Mass (GVM). You must determine if your vehicle is a 'light vehicle' or a 'heavy vehicle' for tax purposes.
- Heavy Vehicles: A vehicle is generally considered heavy if its GVM exceeds 4.5 tonnes. This typically includes trucks, prime movers, and some larger commercial utes or vans. Heavy vehicles used for travelling on public roads are eligible for credits on the fuel used to power the engine. The credit rate reduces the excise included in the fuel price, effectively refunding the road user charge portion.
- Light Vehicles: Vehicles with a GVM of 4.5 tonnes or less are classed as light vehicles. This includes standard utes, vans, and cars. Generally, you cannot claim credits for fuel used by light vehicles travelling on public roads. Excise was removed from petrol and diesel used by these vehicles many years ago, so there is no tax credit to recover.
On-Road versus Off-Road Use
The distinction between on-road and off-road use is critical for tradespeople and businesses operating machinery.
- On-Road Use: This refers to travel on public roads. Heavy vehicles travelling on-road receive a credit at a rate determined by the Fuel Tax Act 2006. Light vehicles receive no credit for on-road travel.
- Off-Road Use: You may be eligible to claim the full rate of Fuel Tax Credit if you use fuel in machinery or vehicles in off-road business activities. This covers heavy vehicles travelling on private property (such as mine sites or large construction camps) and machinery like excavators, bulldozers, and generators. ly, for heavy vehicles, you can also claim credits for auxiliary equipment used while the vehicle is stationary or travelling on public roads. This includes running a concrete mixer, a refrigeration unit, a crane, or a compressor.
Legislative Framework
Your claim rights and obligations are set out in the Fuel Tax Act 2006 and administered by the ATO. You must register for an Australian business number (ABN) and for Fuel Tax Credits before you lodge your Business Activity Statement (BAS). Ensure you calculate the correct environmental credit rate based on the fuel you use and the financial year, as these rates are adjusted periodically by legislation.
Calculating Your Credits
Step-by-step guide on how to calculate the claim amount.
Calculating Your Credits
To calculate the total fuel tax credit amount for your business activity statement (BAS), multiply the total quantity of eligible fuel by the relevant credit rate. The basic formula is straightforward.
The Formula
Total Quantity of Eligible Fuel (in litres) x Relevant Fuel Tax Credit Rate = Total Fuel Tax Credit Amount
You must perform this calculation separately for each fuel type and business activity because different rates apply. For example, the rate for diesel used in heavy vehicles travelling on public roads differs from the rate for petrol used in machinery on a job site.
Determining the Correct Rate
The Australian Taxation Office (ATO) adjusts fuel tax credit rates regularly, usually on 1 February and 1 August each year. These changes align with movements in the consumer price index (CPI). You cannot use a fixed rate from a previous year.
To find the current rate, consult the ATO website or use the ATO app. Specifically, refer to Schedule 6 of the Fuel Tax Act 2006. The ATO provides a detailed table on their website titled 'Fuel tax credit rates' that lists every fuel type and usage category. You must select the rate that matches the exact use of the fuel and the date you acquired it.
Handling Mixed Usage
Many tradespeople use one fuel storage tank for multiple purposes. A common scenario involves a ute with a diesel auxiliary motor (like a refrigeration unit or a generator) that powers tools on site. The fuel used for the auxiliary motor earns a full fuel tax credit, while the fuel used to power the vehicle driving on a public road earns a reduced rate under the Fuel Tax Act 2006 (specifically the road user charge).
When you have mixed usage, you cannot simply claim the total litres purchased at the highest rate. You must determine the correct split. Use one of the following ATO-approved methods to calculate the eligible quantities.
- Manufacturer's specifications: Use the fuel consumption rate provided by the equipment manufacturer to estimate litres used.
- Ratio of use: Estimate the percentage of time the equipment runs compared to the vehicle.
- Tank readings: If the auxiliary system has a separate fuel tank, use the dipstick readings to measure actual fuel drawn.
You keep records of how you worked out this split. If an audit occurs, you must demonstrate that you correctly apportioned the fuel between the different activities to claim the right credit. Incorrect calculations lead to adjustments and potential penalties.
Record Keeping Requirements
Information on the documents required for evidence.
You must keep accurate records to claim Fuel Tax Credits (FTC). The Australian Taxation Office (ATO) requires these records to prove you acquired the fuel and used it in an eligible way. Without the correct documents, the ATO may reject your claim or adjust it during an audit.
Required Documents
You need documents that prove three things. You bought the fuel, you used it in your business, and the use qualifies for the credit.
- Tax Invoices or Receipts: Keep the original tax invoices or receipts from your fuel supplier. These must show the supplier’s Australian Business Number (ABN), the date of purchase, the type and quantity of fuel, and the amount paid. A simple EFTPOS receipt without ABN details is usually not enough on its own.
- Fuel Acquistion Registers: If you buy bulk fuel and store it in tanks, you must maintain a fuel acquisition register. This register needs to record the quantity of fuel you have purchased and stored.
- Usage Records: You must be able to show how the fuel was used. For most vehicles, this means maintaining a logbook. The logbook must contain records of the distances travelled and the purpose of each journey. If you have different vehicles with different tax rates, such as a heavy diesel truck and a light ute, keep separate records to calculate the correct credit for each vehicle.
- Biodiesel Records: If you use biodiesel or alternative fuels, keep records showing the blend percentage, such as B20 or B100. The credit rate depends entirely on the fuel blend.
Record Keeping Duration
You must keep your records for five years. The five-year period starts from the date you lodge the relevant activity statement or income tax return. Do not throw these records away even if you stop operating or sell your business. The law requires you to retain them.
Storage Method
You can store records digitally or on paper. If you choose digital storage, you must be able to produce a readable copy that the ATO can access. Using a reputable accounting app or cloud-based software is acceptable, provided you back up your data securely.
Legislation and Standards
These requirements come from the Taxation Administration Act 1953 and the Fuel Tax Act 2006. The ATO also follows the guidelines set out in Taxation Ruling TR 96/7 and TR 97/21, which detail how long you must keep records and the standards for electronic record keeping. Complying with these rules ensures your claim stands up to scrutiny and prevents penalties.
Completing the BAS
Where to report the claim on the Business Activity Statement.
Where to enter the total
Locate section 1B on your Business Activity Statement. This section is specifically titled 'Fuel tax credits'. You must enter the total amount of fuel tax credits you are claiming for the reporting period at label 7C.
It is vital to distinguish this from other labels. Do not record your fuel tax credits at label T1 or T2, which are reserved for GST amounts. Label 7C is a distinct field designed to capture your entitlement under the Fuel Tax Act 2006. When you calculate your claim using the ATO fuel tax credit calculator or your own records based on the A New Tax System (Goods and Services Tax) Act 1999, transfer the final figure directly to label 7C.
Ensure the amount you enter reflects the accurate calculation for the specific fuel types acquired and the business activities undertaken. This figure must align with your business records for the period.
Effect on net GST
Many business owners assume fuel tax credits act like a deduction to reduce their sales tax liability. This is incorrect. Fuel tax credits are a refundable tax credit. They operate independently of the GST calculations.
The amount you enter at label 7C does not change the net GST amount you owe or are refunded on your Activity Statement. Your net GST is calculated by subtracting your total GST credits (label 1B) from your total GST payable (label 1A). The fuel tax credit total at label 7C does not appear in this GST equation.
Instead, the fuel tax credit amount is treated as a separate refund. The Australian Taxation Office will process your BAS and pay you the full amount listed at label 7C, provided you have met all lodgment and obligations. This payment occurs regardless of whether you have a GST liability to pay or are already receiving a GST refund.
For example, if you owe $5000 in GST but have $2000 in fuel tax credits, you must pay the ATO $5000. The ATO will then pay you a separate refund of $2000. You generally cannot use the fuel tax credits to directly offset the GST debt on the form itself. This process ensures that the credits under the Fuel Tax Act 2006 are administered separately from your GST obligations under the A New Tax System (Goods and Services Tax) Act 1999.
Common Mistakes to Avoid
Frequent errors made by businesses and how to fix them.
Common Mistakes to Avoid
Getting your Fuel Tax Credit (FTC) claim wrong costs time and money. The Australian Taxation Office (ATO) audits these claims closely. You must understand the rules under the Fuel Tax Act 2006 to ensure you do not overclaim or claim for ineligible fuel.
Claiming for Private Use
You cannot claim credits for fuel used for non-business purposes. This includes personal travel in work vehicles. If a ute or van is used for work during the week but used for family trips on the weekend, you must separate the private usage. You only claim credits for the business portion. The Fuel Tax Act 2006 specifically excludes fuel used for private purposes from eligibility. To stay compliant, keep accurate logbooks that detail business kilometres versus private kilometres. If you do not keep these records and cannot substantiate the business use percentage, the ATO may adjust your claim entirely.
Using the Wrong Rate
The credit rate changes regularly. It is not a fixed figure. The rate depends on when you acquired the fuel, what type of fuel it is, and how you used it. For example, diesel used in heavy machinery for mining has a different rate calculation compared to diesel used in agriculture. You must use the rate that applied on the day you purchased the fuel. The ATO publishes a rate schedule on their website. Claiming a rate from a previous financial year or applying a generic rate for all fuels is a common error that leads to penalties.
Claiming for Light Vehicles on Public Roads
This is one of the most misunderstood areas. Generally, you cannot claim FTC for fuel used in a light vehicle with a gross vehicle mass (GVM) of 4.5 tonnes or less that travels on a public road. Public road fuel usually includes an excise amount that is not refundable as a credit because it is effectively covered by the road user charge.
However, there are exceptions. You can claim credits if the light vehicle is travelling off public roads, such as on a farm, a mine site, or a construction site. You must be able to prove the vehicle was used off-road. If the vehicle travels on a public road to get between job sites, you cannot claim for that portion of the fuel. You need to apportion your fuel usage carefully if the vehicle operates both on and off public roads. Relying on the "one third of actual expenses" method for vehicle deductions does not automatically apply to fuel tax credits, so check your specific eligibility under the relevant tax rulings.
Ineligible Fuels and Activities
Not all fuels attract a credit. You cannot claim credits for fuels like unleaded petrol, avgas, or kerosene unless you use them in specific exempt industries such as agriculture or mining. , you cannot claim for fuel used in heavy vehicles travelling on public roads if you have already received a fuel grant under the Energy Grants Credits Scheme Act 2003. Check the eligibility of your specific activity and fuel type before lodging your Business Activity Statement (BAS).
Frequently Asked Questions
What is a Fuel Tax Credit Claim?
When do I need a Fuel Tax Credit Claim?
Is a Fuel Tax Credit Claim legally required in Australia?
Can I claim fuel tax credits for my work ute?
What records do I need to keep for my claim?
How often do the fuel tax credit rates change?
Do I need to be registered for GST to claim fuel tax credits?
What happens if I claim the wrong amount?
Explore More Documents
Ready to create your document?
Use our free template or generate a custom version tailored to your needs.
20 free credits on signup — no card needed
We recommend professional review for your specific situation.