Fuel Tax Credits Refund Opportunity
Tax Compliance

Fuel Tax Credits Refund Opportunity

FuelAn important development has occurred in relation to the opportunity to obtain a refund of additional fuel tax credits from the Australian Taxation Office (“ATO”).

Background

As a result of the decision in Linfox v Commissioner of Taxation [2012] AATA 517, the ATO now accepts that businesses which are currently entitled to claim fuel tax credits for fuel used to operate heavy on-road vehicles may be eligible to claim further credits in respect of the fuel used to power any auxiliary equipment on the vehicles.

Many taxpayers have found it difficult to determine how much of the fuel consumed in the course of operating their heavy on-road vehicles relates to the operation of the auxiliary equipment and have therefore not been in a position to readily determine their refund entitlement

 

FuelAn important development has occurred in relation to the opportunity to obtain a refund of additional fuel tax credits from the Australian Taxation Office (“ATO”).

Background

As a result of the decision in Linfox v Commissioner of Taxation [2012] AATA 517, the ATO now accepts that businesses which are currently entitled to claim fuel tax credits for fuel used to operate heavy on-road vehicles may be eligible to claim further credits in respect of the fuel used to power any auxiliary equipment on the vehicles.

Many taxpayers have found it difficult to determine how much of the fuel consumed in the course of operating their heavy on-road vehicles relates to the operation of the auxiliary equipment and have therefore not been in a position to readily determine their refund entitlement

Draft Practice Statement Law Administration (General Administration) – PS LA 3648 (GA)

On 19 September 2013 the ATO published a draft Practice Statement, PS LA 3648 (GA), which contains “safe harbour” percentage rates for the purpose of calculating the amount of fuel that powers auxiliary equipment used in conjunction with heavy on-road vehicles.

Where a taxpayer calculates their refund entitlement based on the relevant percentage rate in the Practice Statement, the ATO will accept this percentage as a fair and reasonable estimate of the fuel used to power the auxiliary equipment on the vehicle.

The draft Practice Statement will go through a period of public consultation before it is finalised. Notwithstanding this consultation period, the draft can now be used by taxpayers to calculate and lodge their refund claim.

Safe Harbour Rates

In the Practice Statement the ATO has identified five categories of auxiliary equipment. It has nominated safe harbour percentage rates that can be used to determine how much fuel is used to power the equipment and to work out the additional fuel tax credits available in respect of that fuel. These rates are reproduced below:

Item Vehicle%
1Concrete transit vehicle30
2Commercial bus or coach5
3Refrigerated vehicle10
4Waste management collection vehicle – urban25
Waste management collection vehicle – non urban10
5All other vehicles with auxiliary equipment5

Examples of auxiliary equipment

The ATO has also set out a list of auxiliary equipment that may be fitted to a heavy on-road vehicle and that can qualify for additional fuel tax credits. This list is reproduced below –

  • The mechanisms for loading and unloading goods transported;
  • The mixing barrel and associated loading and unloading mechanism of a concrete transit vehicle;
  • The bin lift and compacting mechanism of a garbage compactor;
  • The waste jetter and vacuum system of vehicles used in the cleaning of drains;
  • The gas pump of a gas tanker; Winches and towing equipment of a tow truck;
  • Elevated platforms (buckets) and snorkels;
  • Truck mounted drilling equipment;
  • Truck loading crane;
  • Brushing mechanism of street sweepers;
  • The refrigeration unit of a refrigerated trailer; and
  • Air conditioning of commercial buses and coaches for passenger comfort.

Claiming the refund

Once you have determined that you are eligible for additional fuel tax credits, you now have the opportunity to calculate and claim your refund using the safe harbour percentage rates contained in the draft Practice Statement.

In the event that you choose to use the percentage rates in the draft Practice Statement and following the consultation period the rates are increased, you will have the opportunity to revise your claim.

If you believe that the percentage rate(s) published in the Practice Statement are too low in respect of auxiliary equipment used on your particular vehicle(s), you are entitled to conduct your own fuel use analysis for the purposes of making a refund claim.

Once you have quantified your claim, the additional fuel tax credits can be claimed on the next BAS that you lodge.

Please contact MB+M for assistance with your refund claim.

Article provided by Pitcher Partners