Fuel Tax Credits

Fuel tax credits allow eligible Australian businesses to claim a credit for the fuel excise or customs duty included in the price of fuel they use in their business activities. The credit rate depends on the type of fuel, how it is used, and when it was purchased. For industrial businesses -- mining, agriculture, manufacturing, transport -- fuel tax credits can represent a significant reduction in operating costs, with some large mining operations claiming tens of millions of dollars in fuel tax credits annually.

Fuel tax credits are claimed through the Business Activity Statement (BAS). The credit reduces the business's net GST and PAYG instalment liability, or results in a refund if the credits exceed those liabilities. The ATO publishes updated fuel tax credit rates quarterly, as rates change based on the consumer price index and fuel excise adjustments.

Eligible uses

The highest fuel tax credit rates apply to fuel used in heavy vehicles (over 4.5 tonnes GVM) travelling on public roads, and to fuel used in machinery and plant that are not travelling on public roads -- such as excavators, generators, stationary engines, and off-road mining and agricultural equipment. Lower rates apply to light vehicles and to fuel used in activities partially subject to road user charge.

Fuel used in private or domestic activities is not eligible. Fuel used in passenger vehicles (where the vehicle is a car and the person has a car home-to-work component) has a different treatment. The eligible business use percentage must be calculated accurately to avoid overclaiming, which the ATO treats as a compliance risk for businesses with large fuel tax credit claims.

AP coding requirements for fuel tax credit claims

Claiming fuel tax credits requires that fuel purchases are tracked with sufficient detail to support the claim: the type of fuel (diesel, petrol, aviation fuel, etc.), the quantity, the use (on-road or off-road, type of vehicle or equipment), and the period of purchase. AP teams processing fuel invoices from service stations, bulk fuel suppliers, and fuel card providers need to capture this information at the invoice level.

Bulk fuel invoices typically state the quantity and type clearly; fuel card statements may aggregate multiple transactions and require line-item analysis. AP automation platforms that can extract and categorise fuel purchase data from supplier invoices reduce the manual work involved in assembling the fuel tax credit claim and improve the accuracy of the BAS calculation. Maintaining a consistent fuel expense coding structure -- with separate accounts for on-road and off-road fuel, or by fuel type -- makes it easier to calculate credits accurately each quarter without manual reclassification.

The ATO requires businesses claiming fuel tax credits to keep records of all fuel purchases and the quantities used in eligible and ineligible activities. These records are subject to the standard five-year retention requirement. For businesses with high fuel tax credit claims, a documented fuel usage methodology -- how the business determines the eligible percentage -- provides additional protection if the claim is reviewed.