Fuel tax credits - practical compliance methods for small claimants

In meeting their fuel tax credit obligations an entity must: (a) calculate the number of litres of taxable fuel they acquired in the tax period (b) identify the rate of the fuel tax credit in force on the day the taxable fuel was acquired, and (c) retain records relevant to the fuel tax credit entitlements they have claimed.

Currently, these requirements can result in significant compliance costs and administrative burdens for small claimants that are disproportionate to their fuel tax credit claims. To alleviate some of these costs and burdens, this Guideline provides some acceptable, practical compliance methods to assist small claimants in meeting their obligations.

For the approaches covered by Method 1 and Method 2, this Guideline applies to tax periods ending on or after 31 March 2016. For the approach covered by Method 3, this Guideline applies to tax periods commencing both before and after the date of issue of this Guideline.

This Guideline applies: (a) to an entity that has an entitlement to fuel tax credits for taxable fuel under section 41-5 of the Fuel Tax Act 2006, and (b) the entitlement is for acquisitions of liquid taxable fuels, and (c) the total fuel tax credit entitlement for tax periods during the previous 12 months is $10,000 or less, and (d) there is a reasonable expectation that the total fuel tax credit entitlement in the current 12 month period will be $10,000 or less.

The criteria in the paragraph above determine who is a 'small claimant' for the purpose of applying the compliance methods outlined in this Guideline. The Commissioner accepts that, due to unforeseen fluctuations or changes in business activity, an entity may in fact exceed the $10,000 entitlement in the current 12 month period. Some discretion and flexibility will be applied to determine whether the circumstances resulting in an excess over $10,000 are consistent with the reasonable expectation described in the paragraph above.

This Guideline does not apply where the disentitlement rules of Subdivision 41-B of the Fuel Tax Act 2006 apply to the taxable fuel and, in particular, to taxable fuel acquired for use in a vehicle with a gross vehicle mass of 4.5 tonnes or less travelling on a public road.

The accepted methods set out: (a) how an entity can work out litres acquired of taxable fuel (b) the day on which all taxable fuel is taken to be acquired in the tax period (c) alternative records that can be used to substantiate fuel tax credit claims.

A small claimant entity may choose to use any or all of the methods.

Method 1 allows a small claimant to work out the number of litres of fuel acquired using the following formula: Litres = Total $ / Average GST inclusive price of fuel Total $ means the total dollar spend on taxable fuel during the relevant tax period. Average GST inclusive price of fuel for the tax period is: (a) the average fuel price for the relevant fuel type (b) in your area of operation (c) as shown on the Australian Institute of Petroleum (State and National prices) website (www.aip.com.au /pricing/retail.htm)

This method is relevant in the circumstances of commercially available accounting software that only accepts dollar values in respect of fuel acquisitions (for example, MYOB, Xero, Cashflow Manager, QuickBooks) and fuel acquisition records that display dollar amounts and do not display the quantity of fuel dispensed.

Where there is a change in the rate of fuel tax credit in a tax period because of indexation, it will be accepted that all the fuel was acquired on the last day of the tax period.

The fuel tax credit rate for all the taxable fuel acquired during the tax period will then be the one rate.

If the small claimant entity uses the 'Fuel tax credit calculator' it will be accepted that 1 litre of the total taxable fuel acquired in the tax period was acquired on the first day of the tax period and the remaining taxable fuel was acquired at the end of the tax period.

It will be accepted that a small claimant has met their record-keeping requirements to substantiate fuel tax credit entitlements where they can provide documentation of a kind mentioned in the relevant item in the Substantiation Table - accepted records.

For entities that have not claimed fuel tax credits in previous years, the entity must reasonably demonstrate that the quantity of taxable fuel for which fuel tax credits are claimed would be used in carrying on their enterprise and is consistent with the pattern of fuel use in subsequent tax periods.