Navigating Fuel Tax Credits – What You Need to Know and Look Out For

The ATO has recently ramped up its scrutiny of fuel tax credit claims, with businesses now facing closer reviews and a higher risk of audit if their records don’t stack up.

Fuel tax credits are an area prone to errors, with common mistakes including incorrect fuel use categorisation, miscalculating eligible litres, and overlooking changes in rates. With the ATO using data-matching technology and industry benchmarks to detect irregularities, it’s more important than ever to ensure claims are accurate and supported by strong documentation.

What are Fuel Tax Credits?

Fuel tax credits allow businesses to claim a credit for the fuel tax (excise or customs duty) included in the price of fuel used in eligible business activities. This includes fuel used in machinery, plant, equipment, heavy vehicles, and light vehicles operating off public or private roads.

The credit amount depends on factors such as the type of fuel, when it was acquired, and how it is used, with rates changing regularly.

Fuels eligible for Fuel Tax Credits

To be eligible for fuel tax credits, the fuel must be taxable. That is, fuel tax (excise or customs duty) must be paid on it. A list of eligible fuels that can be claimed are listed below:

• Petrol – for example, unleaded, premium unleaded and high octane.
• Diesel.
• Other fuels such as kerosene, mineral turpentine, heating oil and some solvents.  

Fuels ineligible for Fuel Tax Credits

Certain fuels are not eligible for fuel tax credits. These include fuels on which no excise or customs duty has been paid, such as non-transport gaseous fuels, as well as aviation fuels like aviation gasoline and aviation kerosene.

Fuel Tax Credit Rates

Fuel tax credit rates depend on whether the fuel is used on or off public roads:

• Off-road use (machinery, equipment, farm vehicles, generators, etc.) generally qualifies for the full rate.
• On-road use (heavy vehicles over 4.5 tonnes GVM travelling on public roads) is claimable at a reduced rate, because the road user charge is deducted to contribute to public road upkeep.

To be eligible for fuel tax credits, your business must:

• Be registered for GST and fuel tax credits.
• Use fuel in eligible business activities.

Eligible Activities

The ATO identifies three main categories of eligible activities:

1. Road Transport

Eligible vehicles must:

• Be used in carrying on a business.
• Have a GVM greater than 4.5 tonnes when travelling on public roads. Diesel vehicles purchased before 1 July 2006 can have a GVM of 4.5 tonnes.
• Includes fuel used in vehicle operations (engine, brakes, lights, power steering, windscreen wipers, etc.).
• Includes fuel powering auxiliary equipment on heavy vehicles (e.g., on-board refrigeration, mixers).

2. Packaging or Supplying Fuel

• Packaging certain liquid fuels in containers of 20 litres or less, where eligible under ATO rules.
• Supplying transport LPG (if duty paid) in cylinders of 210 kg or less for non-transport uses.
• Supplying certain liquid fuels (e.g., kerosene, heating oil) for domestic heating, when you reasonably believe they’ll only be used for that purpose.

3. All Other Business Uses

• Fuel used off public roads or on private roads.
• Light vehicles used off-road for business purposes.
• Agriculture, fishing, forestry, mining, construction, landscaping, and other primary industries.
• Marine and rail transport (including emergency vessels).
• Non-movement uses, e.g., powering machinery, plant, generators.
• Burner applications and electricity generation (commercial, stationary, portable generators).

Ineligible activities

While many business activities qualify for fuel tax credits, some common uses are not eligible:

• Light vehicles (4.5 tonnes GVM or less) when travelling on public roads.
• Private or domestic use, such as personal cars, boats, or equipment.
• Fuel that is lost, stolen, or given away before use.
• Motorcycles, motor scooters and similar vehicles on public roads.

Record Keeping

Good record keeping is essential to support any fuel tax credit claim. The ATO expects businesses to keep clear records showing:

• The amount of fuel acquired and the purchase date.
• How the fuel was used, including separation of personal and business use.
• The method used to calculate the claim.

Acceptable records include tax invoices, logbooks, odometer readings, fuel usage spreadsheets, or GPS data for heavy vehicles. Records must be kept for at least five years to demonstrate both the litres purchased and their link to eligible business activities. Without proper documentation, claims may be reduced or denied during an audit.

With so many rules, rates and record-keeping requirements to navigate, it’s worth raising any questions about your fuel tax credit claims with your Hall Chadwick QLD advisor. With our guidance, your fuel tax credit claims stay accurate, compliant, and fully ‘on the right road’ with the ATO.