Fuel tax credits are one of the more lucrative and commonly underclaimed concessions available to Australian businesses. The ATO estimates eligible businesses leave millions of dollars unclaimed each year, primarily because the rules appear complicated at first glance.
What are fuel tax credits?
When you purchase fuel in Australia, the price includes an excise component collected by the federal government. For certain business uses, you can claim back some or all of that excise via the fuel tax credit system. Claims are lodged through your BAS at label 7C.
The credit rate depends on the type of fuel (diesel, petrol, LPG), how the fuel is used (road transport, off-road, non-transport), and the current rate (updated on 1 February and 1 August each year with CPI indexation).
Who can claim?
You can claim FTC if you are registered for GST and use fuel in an eligible business activity.
Heavy vehicles (over 4.5 tonnes GVM) on public roads The full excise rate minus the road user charge applies. For diesel, the net credit is around $0.189/L as of the latest indexation.
Off-road business use This is where the biggest credits sit. Fuel used in machinery or vehicles that do not operate on public roads attracts a higher rate because no road user charge applies. Examples include:
- Farm equipment: tractors, harvesters, irrigation pumps, grain augers
- Mining equipment operating within a mine site
- Forklifts and reach stackers in warehouses
- Generators and stationary plant
- Marine vessels (fishing, aquaculture, commercial)
Light vehicles on private roads Light vehicles under 4.5 tonnes travelling on private roads (farm tracks, mine haul roads) are eligible for the full off-road rate.
Common eligible activities for farming clients
Agricultural businesses typically have several FTC-eligible activities running in parallel:
- Crop production: tractors, seeders, headers, sprayers, augers
- Livestock: quad bikes on private property, stock movement vehicles on farm tracks
- Irrigation: diesel pumps for irrigation infrastructure
- Transport: vehicles over 4.5 tonnes GVM on public roads
- Electricity generation: diesel generators for grain drying or cold storage
For a typical cropping operation, FTC claims of $15,000 to $50,000 per year are not unusual for larger enterprises.
Common mistakes
Claiming for on-road light vehicles: Light vehicles on public roads are not eligible.
Missing the claim window: FTC must be claimed within 4 years of the BAS period in which the fuel was acquired.
Using incorrect rates: Rates change twice a year. Always verify against the ATO fuel tax credit tool before lodging.
Not separating on-road from off-road for heavy vehicles: The rates differ substantially.
Record-keeping requirements
The ATO requires tax invoices for fuel purchases, records of how the fuel was used, and evidence supporting any apportionment calculation. Records must be kept for 5 years from the date of the BAS lodgement.