Fuel tax credits (FTC) allow businesses that acquire, manufacture, or import taxable fuel for use in certain activities to claim back some or all of the fuel excise duty embedded in the fuel price. For businesses with significant fuel consumption — transport, mining, agriculture, construction, and manufacturing — FTC claims can be material. Getting them right requires tracking fuel purchases by eligible use, applying the correct rates for each rate period, and claiming at label 7D on the BAS.
Who Is Eligible
Fuel tax credits are available to businesses that are registered for GST and that use fuel in:
- Machinery, plant, or equipment in carrying on a business (other than on-road use of light vehicles)
- Heavy vehicles (over 4.5 tonnes GVM) travelling on public roads
- Non-road use (mining, farming, construction, power generation)
- Vessels and aircraft (specific rate categories apply)
Fuel for use in light vehicles (under 4.5 tonnes GVM) travelling on public roads is generally not eligible — the road user charge is fully embedded in the fuel excise and is not recoverable. Petrol used in light vehicles is explicitly excluded from the FTC regime.
Agricultural use has a particularly generous rate — fuel used in machinery on the farm (tractors, harvesters, irrigation pumps) is eligible at the full rate, including diesel that attracts the road user charge component.
Fuel Tax Credit Rates and Rate Changes
FTC rates are adjusted twice a year (in February and August) in line with the Consumer Price Index. The ATO publishes the current rates on its website; the bookkeeper must check the current rate for the relevant fuel type and use category at each BAS period.
As of 1 July 2025, the indicative rates (which change — always verify with the ATO):
- Diesel for off-road use in machinery: approximately 50 cents per litre (the full excise rate)
- Diesel for heavy vehicle on-road use: approximately 20 cents per litre (after deducting the road user charge of approximately 30 cents per litre)
- Petrol for off-road use: approximately 50 cents per litre
- Liquid petroleum gas (LPG) and compressed natural gas (CNG): lower rates apply
For businesses that span BAS periods with rate changes (the February and August changes split across quarters), the calculation must be done at the correct rate for each date of acquisition.
Calculating the FTC Claim
The FTC is calculated on the eligible litres of fuel multiplied by the applicable rate per litre. The process:
- Identify all fuel purchases for the BAS period from tax invoices
- Categorise by use: off-road machinery, heavy vehicle on-road, on-road light vehicles (not eligible), private use (not eligible)
- Calculate the eligible litres for each category
- Apply the correct rate for the fuel type and use category
- Sum the total FTC and enter at label 7D on the BAS
For businesses with simple, all-eligible fuel use (a farmer whose entire diesel consumption goes into tractors and pumps), the calculation is straightforward: total litres × current off-road rate.
For businesses with mixed use (a transport company whose trucks use fuel for both eligible heavy vehicle travel and exempt fuel stored for off-road machinery), the split must be documented.
Fuel Use Records: What the ATO Requires
The ATO expects businesses to be able to demonstrate the eligible use of the fuel claimed. Acceptable records include:
- Fuel purchase invoices (showing litres purchased, price per litre, date)
- Fuel bowser readings or dip records for on-site fuel storage tanks
- Equipment logs showing hours of operation by piece of equipment
- Vehicle telematics or logbooks distinguishing on-road from off-road travel
- A reasonable methodology note if exact litres per use category are estimated
The ATO's Small Business Entity (SBE) safe harbour allows small businesses with simple fuel use patterns to use a simplified calculation — but the simplified method must be documented and applied consistently.
Common Mistakes in FTC Claims
Claiming for light vehicle on-road fuel: the most common error. Only heavy vehicles (over 4.5 tonnes GVM) on public roads are eligible. Cars, utes, and vans in the company fleet are almost always excluded.
Using the wrong rate for the period: rates change in February and August. Using the previous period's rate is a systematic error that either over- or under-claims.
Not separating eligible and ineligible use: businesses that use the same fuel tank for both eligible machinery and ineligible light vehicles need a documented split. Claiming 100% eligibility when some fuel went to cars is an error.
Missing the deadline: FTC claims must be made within four years of the fuel acquisition. Businesses that haven't been claiming — often because they didn't know they were eligible — can amend prior BAS periods to claim missed credits, subject to the four-year limitation.
Private use by employees: if employees use company fuel for private purposes (personal use of a vehicle or equipment), that private use component is not eligible for FTC. If FBT is being paid on the private use, the fuel component is excluded from the FTC calculation.
Reconlink Integration: Coding Fuel Credits
In bank reconciliation practice, fuel tax credit refunds from the ATO appear as GST refunds on the bank statement — they are paid as part of the net BAS refund or offset against GST payable. The BAS label 7D (fuel tax credits) feeds into the net refund/liability calculation alongside the GST labels.
When coding fuel-related transactions, set up dedicated account codes for eligible fuel purchases and a separate code for the FTC receivable accrual if you are accruing the credit before the BAS is lodged. This makes reconciliation of the FTC balance to the BAS lodgement straightforward.