The uncertainty around availability of fuel has seen fuel prices soar across Australia. The 2022–2023 Federal Budget proposed an answer for this by way of a temporary (six-month) reduction to fuel excise.
The six-month reduction will end at midnight on 28 September 2022 (that is, it won’t apply to fuel and similar petroleum-based products on or after 29 September 2022). These changes have already been legislated through the Excise Tariff Amendment (Cost of Living Support) Bill 2022 and the Customs Tariff Amendment (Cost of Living Support) Bill 2022, which both received Royal Assent on 31 March 2022 and are now law.
For petrol and diesel, this means an excise reduction from 44.2 to 22.1 cents per litre, which is already being felt by users at the pump. But who will actually benefit from this Budget promise and what does it mean for those businesses claiming fuel tax credits (FTCs)?
Individuals:
Businesses:
Businesses operating vehicles on public roads will see a financial benefit from this measure.
Immediately prior to the Budget announcement, businesses operating light vehicles (4.5 tonnes or less) were not entitled to a FTC and heavy vehicles (over 4.5 tonnes) were entitled to a FTC of 17.8 cents per litre for petrol and diesel. While businesses will not be entitled to claim a FTC in respect of their heavy vehicle fuel usage for the duration of this measure, the minimum benefit available is the 22.1 cents per litre fuel excise reduction. This translates to 22.1 cents per litre more for light vehicles and 4.3 cents per litre more for heavy vehicles.
There is also a timing advantage for businesses, given the benefit will be received in real time at the pump rather than waiting to receive a FTC refund through their BAS.
Businesses operating vehicles on private roads or using fuel for non-vehicle use will not see a financial benefit from this measure.
Immediately prior to the Budget announcement, businesses operating vehicles on private roads or using fuel for non-vehicle use (eg auxiliary, machinery, plant and equipment) were entitled to a FTC of 44.2 cents per litre for petrol and diesel. Under this new measure, the FTC available will reduce in line with the reduction in fuel excise. As such, businesses will be entitled to a 22.1 cents per litre fuel excise reduction at the pump and a 22.1 cents per litre FTC.
While this means that there is no reduction in the overall cost of fuel for these businesses, there will be a timing advantage, given they will now receive half of the benefit in real time at the pump rather than waiting to receive a FTC refund through their BAS.
For businesses that currently claim FTCs, it is important they understand the impact of these changes on their FTC entitlement and adjust their FTC process accordingly.
We expect there will be increased complexity for businesses claiming FTCs in the first few weeks of the temporary measure and the weeks following its conclusion. This is because the changes in fuel excise are expected to trickle through from fuel suppliers depending on where businesses are located and how they purchase their fuel. Businesses will be required to determine which rate of fuel excise has been applied to fuel purchases to determine the rate of fuel tax credit available.
Source: www.ato.gov.au/Newsroom/smallbusiness/GST-and-excise/Fuel-tax-credit-rates-have-changed/
www.ato.gov.au/Business/Fuel-schemes/Fuel-tax-credits---business/