Fuel Excise Reduction – will businesses benefit?

For petrol and diesel, this means a reduction from 44.2 to 22.1 cents per litre (cpl), which will likely be felt by users at the pump in the coming weeks. But who will actually benefit from this budget promise and what does it mean for those businesses claiming Fuel Tax Credits (FTCs)?

Snapshot - who will benefit?

Individuals

• All fuel uses - Benefit of 22.1 cpl

Business

• Light vehicles travelling on public roads - Benefit of 22.1 cpl
• Heavy vehicles travelling on public roads - Benefit of 4.3 cpl
• Vehicles travelling on private roads - No benefit
• Non-vehicle use (auxiliary, machinery, plant and equipment) - No benefit
  
  

Businesses operating vehicles on public roads

Businesses operating vehicles on public roads will see a financial benefit from this measure.

Immediately prior to the budget announcement, businesses operating light vehicles (4.5 tonnes or less) were not entitled to a FTC and heavy vehicles (over 4.5 tonnes) were entitled to a FTC of 17.8 cpl for petrol and diesel. While businesses will not be entitled to claim a FTC in respect of their heavy vehicle fuel usage for the duration of this measure, the minimum benefit available is the 22.1 cpl fuel excise reduction. This translates to 22.1 cpl more for light vehicles and 4.3 cpl more for heavy vehicles.

There is also a timing advantage given the benefit will be received in real time at the pump, rather than waiting to receive a FTC refund through their Business Activity Statement.

Businesses operating vehicles on private roads and fuel for non-vehicle use

Businesses operating vehicles on private roads or using fuel for non-vehicle use will not see a financial benefit from this measure.

Immediately prior to the budget announcement, businesses operating vehicles on private roads or using fuel for non-vehicle use (e.g. auxiliary, machinery, plant and equipment) were entitled to a FTC of 44.2 cpl for petrol and diesel. Under this new measure, the FTC available will reduce in line with the reduction in fuel excise. As such, businesses will be entitled to a 22.1 cpl fuel excise reduction at the pump and a 22.1 cpl FTC.

Whilst this means that there is no reduction in the overall cost of fuel for these businesses, there will be a timing advantage given they will now receive half of the benefit in real time at the pump, rather than waiting to receive a FTC refund through their Business Activity Statement.

What should you do?

If you are a business that currently claims FTCs, it is important that you understand the impact of these changes on your FTC entitlement and adjust your FTC process accordingly.

We expect that there will be increased complexity for businesses claiming FTCs in the first few weeks of the temporary measure and the weeks following its conclusion. This is on the basis that the changes in fuel excise are expected to trickle through from fuel suppliers depending on where businesses are located and how they purchase their fuel. Businesses will be required to determine which rate of fuel excise has been applied to fuel purchases to determine the rate of fuel tax credit available.

If you have any questions regarding FTCs, or how these changes impact your business, our FTC specialists would be happy to support you.

Federal Budget Report 2022-23

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