Ameer Randolph
The diesel fuel rebate, officially known as the Fuel Tax Credits Scheme, is a subsidy for fossil fuel use. It works by refunding fuel tax paid by certain fuel users. The rebate is claimed through the Australian Tax Office (ATO) and is available to businesses that use fuel in their operations, such as machinery, plant equipment, heavy vehicles, and light vehicles travelling off public roads or on private roads. The eligibility and credit amount depend on factors such as the type of fuel, where the equipment is driven, and when the fuel was acquired. The ATO also makes adjustments to the fuel tax credit rates twice a year, in February and August, based on the consumer price index (CPI).
| Characteristics | Values |
|---|---|
| Name | Fuel Tax Credits Scheme, Diesel Fuel Rebate |
| Type | Subsidy for fossil fuel use |
| Beneficiaries | Coal and iron ore miners, agriculture industry |
| Value | $10.2 billion in 2024-25 |
| Cost | Over $200 billion since 1990-91 |
| Organisations in support | Organisation for Economic Cooperation and Development (OECD), International Energy Agency (IEA), International Institute for Sustainable Development (IISD) |
| Eligibility | Businesses that use fuel in business operations, machinery, plant and equipment, heavy vehicles, and light vehicles travelling off public roads or on private roads |
| Requirements | Registered for goods and services tax (GST) and for fuel tax credits, record-keeping of fuel acquisition and use in an eligible activity |
| Exclusions | Fuel that has been previously claimed, stolen, or used for private purposes |
| Calculation | Based on type of fuel used, where equipment is driven, and when the fuel was acquired |
| Frequency of rate changes | Twice a year (February and August) |
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What You'll Learn
The Diesel Fuel Rebate, also known as the Fuel Tax Credits Scheme
The Fuel Tax Credits Scheme is administered by the Australian Tax Office (ATO), which allows businesses to claim credits for the fuel tax (excise or customs duty) included in the price of the fuel used in their business activities. This includes fuel used in machinery, plant equipment, heavy vehicles, and light vehicles travelling off public roads or on private roads. The ATO defines a public road as "any road that is available for use or generally accessible as of right by members of the public". Off-road locations are, therefore, all areas that the general public does not have the right to access.
To be eligible for the rebate, businesses must be registered for goods and services tax (GST) and fuel tax credits. They must also keep records that show the acquisition and use of the fuel in eligible activities. The ATO provides guidelines and templates to assist with record-keeping. Additionally, the Department of Infrastructure and Regional Development has prepared guidelines on environmental criteria for organisations and individuals seeking a fuel tax credit for diesel use in heavy vehicles.
The fuel tax credit rates are indexed twice a year, in February and August, based on the consumer price index (CPI). The rates vary depending on the type of fuel used, where the equipment is driven, and when the fuel was acquired. The ATO recalculates these rates every six months. As of December 2022, the "Off-Road Rate" included heavy and light vehicles off public roads, operational machinery, and auxiliary equipment. Businesses can claim their fuel tax credits on their BAS (Business Activity Statements). Retrospective claims for up to four years may also be possible in certain circumstances.
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Eligibility criteria for businesses
The Fuel Tax Credits Scheme, also known as the Diesel Fuel Rebate, is a subsidy for fossil fuel use. Businesses that operate fuel-powered equipment in Australia can claim a rebate on some of the excise and/or customs duty taxes that they pay for fuel. The rebate is claimed through the Australian Tax Office (ATO) by submitting a Business Activity Statement (BAS).
To be eligible for the Diesel Fuel Rebate, businesses must meet certain criteria. Firstly, the business must be registered for goods and services tax (GST) and fuel tax credits. They must also use fuel in their business activities, including machinery, plant equipment, heavy vehicles, and light vehicles travelling off public roads or on private roads. The type of asset and where it is used determines eligibility. For example, operating machinery such as generators, excavators, tractors, and backhoes would qualify for the rebate. Heavy vehicles travelling on public roads or private property, idling off public roads, and/or operating auxiliary equipment may also be eligible.
To support their claim, businesses must keep records that show they acquired the fuel and used it in an eligible activity. These records can be maintained using the optional templates provided by the Department of Infrastructure and Regional Development. Additionally, the vehicle must meet certain environmental criteria. For instance, if the vehicle was manufactured on or after January 1, 1996, it would be eligible for the fuel tax credit. Vehicles manufactured before 1996 but retrofitted with an engine manufactured after that date may also qualify. Furthermore, if the vehicle is part of an accredited audited maintenance program that meets certain emissions performance and auditing standards, it may be eligible for the rebate.
It is important to note that the rebate cannot be claimed for fuel that has previously been claimed, has been stolen, or is used for private purposes. Businesses must generally claim their credits within four years, starting from the day after they lodge their BAS for the tax period in which they acquired the fuel. The ATO also recalculates the fuel tax credit rates every six months, so businesses should stay updated with the current rates.
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Environmental criteria for heavy diesel vehicles
The Australian government offers fuel tax credits to businesses that use fuel in their business activities. These fuel tax credits are indexed twice a year, in February and August, in line with the consumer price index (CPI). The fuel tax credit rates also vary depending on the type of fuel used, such as liquid fuels like petrol and diesel, or gaseous fuels like liquefied natural gas.
For heavy diesel vehicles, there are specific environmental criteria that must be met to be eligible for the fuel tax credit. These criteria are outlined by the Department of Infrastructure and Regional Development, in consultation with industry stakeholders and the Australian Taxation Office. To support claims for the fuel tax credit, businesses must maintain records that demonstrate the acquisition and eligible use of the fuel.
- Vehicle Manufacture Date: The vehicle must have been manufactured on or after January 1, 1996. Vehicles manufactured before 1996 but retrofitted with an engine manufactured on or after this date may also qualify.
- Accredited Audited Maintenance Program: The vehicle must be part of an accredited audited maintenance program that meets minimum requirements related to emissions performance and auditing. These programs must be accredited by the Transport Secretary.
- DT80 Test: The vehicle must pass the Australian Transport Council's in-service emission standard for diesel vehicles, also known as the "DT80" test. This test must be performed by a suitably equipped test facility recognised by the Australian Taxation Office.
- Regular Engine Maintenance: Regular engine maintenance must be conducted on the vehicle, adhering to either the manufacturer's specified maintenance schedules or the generic maintenance schedule endorsed by the Transport Secretary.
It is important to note that claimants need to satisfy only one of these criteria to be eligible for the fuel tax credit. These criteria specifically apply to diesel vehicles over 4.5 tonnes gross vehicle mass used in on-road business activities.
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Retrospective claims for past fuel tax credits
In Australia, businesses that have not been claiming their full allowed FTC rebate may be able to file a retrospective fuel tax credit claim for up to four years. Retrospective FTC claims are typically filed by businesses that didn't receive the full rebate that they were entitled to, whether for on-road or off-road use. To file an accurate retrospective off-road FTC claim, businesses must know the type of fuel used, the quantity, and the portion of on-and-off-road activity. This should be known for each type of equipment the off-road FTC is being claimed for.
Many businesses cannot compile accurate fuel records from the past four years. If complete records are not available, businesses may be able to establish a pattern using telematics software to form the basis of a retrospective FTC claim. For example, EROAD's FTC Solution can help capture a consistent pattern of six-month fuel usage to support a retrospective claim. To file a retrospective claim, businesses must know how much fuel they have used, what type of fuel they have purchased for each business activity, and how much of that was used in off-road activity.
To be eligible for fuel tax credits, businesses must be registered for goods and services tax (GST) and for fuel tax credits. To support claims for a fuel tax credit, businesses must keep records that show the acquisition of the fuel and its use in an eligible activity. Eligible activities include the use of machinery (e.g. generators, excavators, tractors, backhoes, etc.), heavy vehicles travelling on public roads or private property, light vehicles travelling on private property, and the use of auxiliary equipment (e.g. air conditioning, refrigeration, tipping/pumping equipment, etc.).
Fuel tax credit rates are indexed twice a year – in February and August – in line with the consumer price index (CPI).
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Impact on climate change
The diesel fuel rebate, also known as the fuel tax credit, is a government incentive that allows businesses and individuals to claim credits for the fuel tax included in the price of diesel fuel. This rebate is designed to provide financial relief for fuel expenses, particularly for businesses that rely heavily on diesel for their operations. While the rebate aims to support businesses, it has also been recognised that diesel fuel contributes significantly to air pollution and climate change.
Diesel fuel, derived from crude oil, produces a range of harmful emissions when burned. Diesel-fueled vehicles are major sources of pollutants such as ground-level ozone and particulate matter. To address this issue, various countries have implemented standards and regulations to reduce emissions and improve air quality. For example, the U.S. Environmental Protection Agency (EPA) established standards for the sulfur content of diesel fuel, leading to the development of Ultra-Low-Sulfur Diesel (ULSD) fuel, which has a significantly lower sulfur concentration.
The impact of diesel emissions on climate change is significant. Climate change affects various aspects of our environment, including air and water quality, weather patterns, sea levels, ecosystems, and agriculture. To mitigate this impact, governments and organisations have introduced initiatives to reduce diesel emissions and promote cleaner alternatives. For instance, the Diesel Emissions Reduction Act (DERA) in the United States provides grants and rebates for projects that utilise verified diesel emission reduction technologies. Similarly, the clean diesel program aims to aggressively reduce pollution from diesel engines through control strategies and partnerships with national, state, and local entities.
In recent years, there has been a growing trend towards removing or reducing diesel fuel rebates to discourage the use of diesel and incentivise the adoption of cleaner energy sources. For example, the UK government announced in 2020 that it would remove the entitlement to use rebated diesel from most sectors starting in April 2022 to meet its climate change and air quality targets. This change aims to ensure that users of diesel fuel pay the standard tax rate, reflecting the harmful impact of their emissions. Additionally, it encourages users of polluting fuels to improve energy efficiency, invest in cleaner alternatives, or reduce their overall fuel consumption.
While the removal of diesel fuel rebates may have a negligible impact on businesses and civil society organisations, it is expected to positively impact climate change efforts. By disincentivising the use of diesel fuel, governments hope to accelerate the transition to cleaner and more sustainable energy sources, reducing the harmful emissions that contribute to global warming and climate change. This approach aligns with the goals of various international agreements and initiatives aimed at mitigating the impacts of climate change and creating a more sustainable future for generations to come.
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Frequently asked questions
The diesel fuel rebate is a subsidy for fossil fuel use, also known as the Fuel Tax Credits Scheme.
The scheme largely benefits coal and iron ore miners. The subsidy is also estimated to be worth $1.3 billion to the agriculture industry in 2024-25.
The scheme works by refunding fuel tax paid by certain fuel users.
To be eligible for the rebate, you must be registered for goods and services tax (GST) and for fuel tax credits. The fuel must also be used in your business.
You can claim the rebate by submitting your BAS (Business Activity Statements) to the Australian Tax Office (ATO).
