Fuel Tax Credits for Owner-Drivers and Farmers: A Guide

What are fuel tax credits?

Fuel tax credits are a refund of the fuel tax, which is the excise or customs duty, that is included in the price of fuel you buy for business use. In practical terms, if you use diesel to run farm machinery, a generator or a heavy truck, you can claim back part of the tax you paid at the bowser, as long as the use qualifies.

The credit is claimed through your Business Activity Statement (BAS), so it is usually a regular cash flow benefit rather than a once-a-year event. For owner-drivers and primary producers who use large volumes of fuel, the amounts can be significant.

Who can claim fuel tax credits?

To claim fuel tax credits you must be carrying on an enterprise, hold an ABN, be registered for GST, and be registered for fuel tax credits with the ATO. You then claim for fuel used in eligible activities.

The general GST registration threshold is $75,000 in annual turnover, although a business can choose to register below this. Rideshare operators must register from their first dollar of income. If you run a primary production or transport business that is not yet registered, speak with your agent about the position before you claim.

Can farmers claim fuel tax credits?

Yes. Farmers and other primary producers can generally claim fuel tax credits for fuel used in machinery, plant and equipment, such as tractors, harvesters, irrigation pumps, generators and heaters. Fuel used in vehicles on private property that are not travelling on public roads may also be eligible.

Where a farm vehicle is used partly for business and partly for private purposes, only the business portion can be claimed. Records need to show how you divided the fuel between uses. Fuel used in a light vehicle on public roads is not eligible, even for a farm business.

Can owner-drivers claim fuel tax credits on trucks?

Owner-drivers can claim for fuel used in heavy vehicles. In general, this means vehicles with a gross vehicle mass (GVM) of more than 4.5 tonnes travelling on public roads. For these vehicles, the credit rate is reduced by the road user charge, which is set to recover some of the cost of road use.

Light vehicles with a GVM of 4.5 tonnes or less travelling on public roads are not eligible. A ute or van used for business generally cannot claim fuel tax credits on public roads, although other deductions may be available.

What are the fuel tax credit rates?

The rates depend on the type of fuel and how it is used, and they are adjusted during the year. They also differ between off-road use and use in heavy vehicles on public roads. Because they change, we do not quote a figure here.

Before preparing each claim, check the current rates and the date the rate applies on the fuel tax credit rates page of ato.gov.au. If you buy fuel across a rate change, your claim may need to use more than one rate.

How do I claim fuel tax credits, and what records do I need?

You report the litres of eligible fuel and the credit amount on your BAS, in the fuel tax credit section. You will need tax invoices for the fuel, a record of how you used it, and, for heavy vehicles, the kilometres travelled on public roads. The ATO expects records to be kept for five years.

A simple system is usually enough. Many owner-drivers keep a logbook or use fleet fuel cards that itemise litres, and farmers record machine hours or a fuel usage log. The aim is to be able to show how each litre claimed was used. You generally have a limited time to make a claim, so please check the time limit with the ATO.

• Tax invoices showing litres purchased.
• A record of the activity the fuel was used for.
• Kilometres travelled on public roads, for heavy vehicles.
• Evidence of any private use, so it can be excluded.

What is the difference between fuel tax credits and cents per km?

Fuel tax credits and the cents per km method are often confused, but they are separate. Fuel tax credits are a GST-style credit claimed on your BAS for eligible fuel. The cents per km method is one way for individuals to claim a deduction for car expenses in their income tax return, using a set rate for each business kilometre, up to a maximum of 5,000 km a year.

The cents per km rate is set by the ATO and can change each year, so check the current rate on ato.gov.au. Trucks and heavy vehicles do not generally use the cents per km method, which applies to cars. If you claim car expenses using this method, you cannot also claim fuel as a separate deduction for the same vehicle.

What does a claim look like? An illustrative example

The numbers in this example are illustrative only and are not current rates or based on a real client. Assume a farmer buys 10,000 litres of diesel in a quarter, and 8,000 litres are used in eligible machinery. The farmer records the usage and keeps the invoices.

If the applicable credit rate were a figure per litre, the claim would be 8,000 litres multiplied by that rate, reported on the BAS. The remaining 2,000 litres, used in a light vehicle on public roads, would not be claimed. The actual rate must be taken from ato.gov.au for the relevant period.

Speak with a registered tax agent about your claims

ANH Accounting is a Sydney advisory firm established in 2018, a Xero partner, and a Registered Tax Agent (RN 26258346). If you run a transport or farming business and want to be sure you are claiming correctly, we offer a free 30-minute session. There is no obligation, and we can review your records and BAS process with you.