Pitfalls in claiming fuel tax credits and how to avoid them
Fuel tax credit rates are updated every year (generally on 1 February, but this year they changed on 5 February). It is therefore a timely that the ATO has made public some common errors that taxpayers make when calculating and claiming fuel tax credits.
The tips that follow will help taxpayers avoid these errors, or you can watch this webinar recording for more information on getting fuel tax credit claims right.
Make sure the fuel is eligible The ATO says a common mistake is to claim for fuel tax credits for fuel used for private purposes, or for travelling on a public road in vehicles with a gross vehicle mass (GVM) of 4.5 tonnes or less.
There are exceptions to what can be claimed, and so there is an eligibility tool that may prove handy.
Ensure the right rate is used As mentioned above, fuel tax credit rates can change, so it’s important to make sure the right rate is in fact being used. You can check the rates on the ATO website before lodging a BAS, or go to the ATO’s fuel tax credit calculator.
Claims for less than $10,000 in a year, a taxpayer can use the rate that applies at the end of a BAS period for the whole of that period. This is known as the simplified method for fuel tax credit claims.
Is the “activity” relevant? The ATO points out that rates can differ depending on the activity the fuel was used for. A common error is to claim credits using the “other business uses” rate for heavy vehicles travelling on public roads.
The best way to clear this up, according to the ATO, is to use its calculator (link above), but also to refer to its guidance on apportioning use in heavy vehicles to power auxiliary equipment.
Checking calculations A common mistake is to use the cost of fuel when calculating fuel tax credits, instead of the quantity of fuel multiplied by the relevant rate.
Fuel tax credits can be worked out using the following formula:
Quantity of eligible fuel x Correct fuel tax credit rate = Fuel tax credits
The resulting amount is what is entered at label 7D on the BAS (remember to keep a record of calculations). Remember however the availability of the simplified method.
Keeping records Accurate records are essential to ensure every fuel tax credit is accounted for. The ATO says a taxpayer needs to show:
the type and quantity of fuel acquired for business activities
the date it was acquired
that the fuel was used in a business
the business activities it was used in, such as whether it was for travelling on a public road or in other activities
that the correct fuel tax credit rate was used when calculating a claim.
This article is intended to be a guide only. None of the comments contained in the article are intended to be advice, whether legal, financial or professional. You should not act solely on the basis of the information contained in this article because many aspects of the material have been generalised and the tax laws apply differently to different people in different circumstances. Further, as tax and related laws change frequently, there may have been changes to the law since this article was published. Specific advice should always be obtained from a tax professional.