Understanding Fuel Tax Credit

Previously, only a limited sector of the business industry can claim fuel tax credits. In the previous law in countries such as Australia and the United Kingdom, for instance, only businesses that use fuel for vehicles that are greater than 4.5 tons and travel on public road can avail of tax credits. Businesses in the field of rail transport, fishing and forestry, agriculture and mining are only who ones who can claim a tax credit from fuel use. However, changes in these laws have made fuel tax credit more flexible, hence increasing its eligibility range.

Now, various businesses involved in activities like landscaping, construction, wholesale and retail, and manufacturing can also claim fuel tax credits regardless of their industry or field of specialization.

So how can a business be eligible for a fuel tax credit?

First off, the business has to be registered for fuel tax credits. This means businesses who previously received such tax credit no longer have to register; only those who are newly eligible due to the law expansion should register. Of course, the number one requirement for fuel tax credit eligibility—the one that shouldn’t even be clarified—is this: the business should use fuel in its activities.

However, this doesn’t make all fuel-consuming businesses eligible. For one, if the business uses a vehicle that consumes fuel is less than 4.5 tonne GVM and travels on a public road, it is not eligible—although a special note should be given to the specification that the vehicle should be travelling on the public road. In addition, a business should not use any alternative fuels to be eligible for the fuel tax credit. Those that use LPG or biodiesel, either in parts or in whole, are not qualified for the tax credit. Take note: the tax credit is only for business that purely uses fuel.

If the fuel is used for aviation, the business cannot claim the tax credit.

Still, eligibility does not end here. So vehicles that travel on public road but are below 4.5 tonne are not eligible for the tax credit—but what about vehicles that are not used for travelling? Under the expanded eligibility rules, businesses that use vehicles and machinery that consume fuel are eligible if they are used for other activities besides travelling. Businesses that use backhoes, compactors, cranes, excavators, drills, blowers and vacuums, asphalt pavers, tractors, front-end loaders, and other similar machinery and vehicles are eligible for tax credits.

Although the rules vary from country to country, the type of vehicle used is also considered as a factor for eligibility. For instance, in America, vehicles manufactured before a certain date cannot be used for fuel tax credits. Also, in America, the credit can only be claimed by the vehicles’ original buyer (which means second-hand vehicles cannot be used for fuel tax credit eligibility) Businesses can only claim a certain maximum amount for the tax credit. All the business has to do is keep their business activity statements and records to prove that fuel was bought for this particular vehicle and for this particular purpose.

 

 

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