Identify your opportunities in the complex landscape of fuel tax credits

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The landscape of fuel tax credits (FTC) is constantly evolving due to ongoing economic and technological developments. This dynamic environment presents both challenges and opportunities for businesses with significant fuel consumption.

Notable observations include:

Temporary Fuel Excise Duty Reduction

Between March 30, 2022, and September 28, 2022, the temporary halving of fuel excise duty provided not only fuel cost savings to business depending on their operations, but also an opportunity for businesses to review their existing FTC processes to ensure their calculations appropriately handled these changes and the correct claiming of FTC was maintained.

Technological Advancements

Commercial GPS and telematic products are consistently improving and offering new features that assist with the optimisation of FTC refund appointments for business. Features which have significantly improved in recent times include detailed route history, fuel expense tracking, and idle vehicle management. These advancements provide businesses with additional data types and sources to optimise their FTC apportionment methodologies and reduce errors.

ATO Scrutiny

The ATO continues to scrutinise instances of misuse of FTC public guidance, such as PCG 2016/11 and PCG 2016/8 which each deal with the apportionment of fuel for the purposes of claiming FTC. Given further information that may be relevant to business including more sophisticated GPS and telematics, or a change in a business operation, the ATO expects that apportionment methodologies are revisited to ensure they are fair and reasonable and representative of current operations. It is also important to note that where burn rates are applied in an apportionment methodology, these need to be reevaluated within a 5-year time period to remain fair and reasonable.

In an inflationary economy combined with increased presence of ATO compliance and governance requirements, it is critical for businesses to be prepared and optimised in respect of its FTC processes and entitlements.

ATO compliance activities

Given the current FTC landscape outlined above, the ATO has confirmed it is actively monitoring the potential impacts of GPS technology claims, unsubstantiated methodologies, incorrect assumptions, and lack of testing to support assumptions. Additionally, they have identified fraudulent claims made using the FTC label on the business activity statement (BAS) and are working to improve their risk models and detection methods to prevent such behaviour.

Furthermore, the ATO has confirmed there has been an increase in label 7C adjustments in the BAS as a result of taxpayers identifying overclaims made in previous BASs. These overclaims have typically been in relation to the excise rate reduction as discussed above, highlighting the importance of ensuring FTC compliance during this period.

Other key risk areas identified by the ATO include:

  • issues relating to on and off-road apportionment,
  • claims for battery powered sleeper cabins,
  • differences in eligibility to claim depending on whether a client used cash or accrual accounting,
  • instances where businesses are claiming for AdBlue, and
  • The increase in use of hybrid vehicles and how these impact apportionment methodologies that rely on data captured by GPS telematics. 

Maximising FTC refunds

Correct application of FTC guidance to develop apportionment methodologies for claiming FTCs that are fair, reasonable, and representative of a business’ operations allows businesses to optimise the direct cash refunds they can receive on fuel expenses incurred for qualifying activities.

Many businesses may already be aware of their entitlements relating to the portion of fuel used in heavy vehicles for uses other than travelling on a public road, such as auxiliary equipment and ‘off-road’ travel (including travel at mine sites, oil and gas sites, farmland, forestry roads and national park roads). However, there may be further opportunities available to increase FTC entitlements. For example, fuel used in light vehicles that that conduct some portion of their travel ‘off-road’  or outdated apportionment methodologies for operations comprising of both ‘on-road’ and ‘off-road’ parts.

By correctly assessing the fuel use activities and entitlements for your business, refunds of up to 49.6 cents per litre can be claimed for fuel already purchased and used in your business over the last four years in qualifying activities. Grant Thornton is currently working with businesses to maximise their FTC entitlements to ensure that no cash is left on the table.

What should you do?

It is critical that businesses are equipped with the correct information and understanding when it comes correctly applying the FTC legislation to capture and optimise their FTC entitlements.

If you are a business that has claimed FTCs, it is prudent to review your current FTCs methodologies and your historical BASs to ensure calculations have been made in line with current guidance. If you use fuel in your business operations but have not previously claimed FTCs, we would be happy to discuss with you to identify whether there is opportunity for you to do so.

If you have any questions regarding how to identify FTC refunds or optimise FTC processes and entitlements for your business, please reach out to our FTC specialists at Grant Thornton.

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