Guide for fuel tax credit claimants Keeping records and calculating eligible litres Outlines the records you need to keep and how to calculate your eligible litres when you claim fuel tax credits. NAT 15230-11.2009
Our Commitment to you We are committed to providing you with guidance you can rely on, so, we make every effort to ensure that our publications are correct. If you follow our guidance in this publication and it turns out to be incorrect, or it is misleading and you make a mistake as a result, we must still apply the law correctly. If that means you owe us money, we must ask you to pay it but we will not charge you a penalty. Also, if you acted reasonably and in good faith we will not charge you interest. If you make an honest mistake in trying to follow our guidance in this publication and you owe us money as a result, we will not charge you a penalty. However, we will ask you to pay the money, and we may also charge you interest. If correcting the mistake means we owe you money, we will pay it to you. We will also pay you any interest you are entitled to. If you feel that this publication does not fully cover your circumstances, or you are unsure how it applies to you, you can seek further assistance from us. We regularly revise our publications to take account of any changes to the law, so make sure that you have the latest information. If you are unsure, you can check for a more recent version on our website at www.ato.gov.au or contact us. This publication was current at November 2009. About this guide This guide explains what records you need to keep and how you calculate your eligible litres when you claim fuel tax credits. The records you currently keep for your business will generally be enough to support your claims if they show that you: n acquired the fuel n used it in your business, and n applied the correct rate when calculating your claim. Since 1 July 2006, businesses have been able to claim fuel tax credits for fuel they use in heavy vehicles and in a range of other business activities. On 1 July 2008, eligibility expanded to cover taxable fuel used in other business activities, machinery, plant and equipment. The only fuels for which businesses cannot claim a fuel tax credit are aviation fuels, alternative fuels and fuels used in light vehicles of 4.5 tonne gross vehicle mass or less, travelling on a public road. If you are a householder and you generate electricity for domestic use, you may also be eligible for fuel tax credits. For more information, refer to Fuel tax credits for domestic electricity generation and non-profit emergency vehicles or vessels (NAT 15621). Commonwealth of Australia 2009 This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without prior written permission from the Commonwealth. Requests and inquiries concerning reproduction and rights should be addressed to the Commonwealth Copyright Administration, Attorney General s Department, 3 5 National Circuit, Barton ACT 2600 or posted at http://www.ag.gov.au/cca Published by Australian Taxation Office Canberra November 2009 JS 14936
Contents RECORDS YOU NEED TO KEEP 2 CALCULATING YOUR ELIGIBLE LITRES 3 Methods you can use to calculate eligible litres 3 Basic calculation methods 3 Other methods 5 Percentage use method 5 Alternative percentage use method 6 Estimated use method 8 Average fuel consumption rate method 8 Keeping records of adjustments and mistakes 10 More information 10 keeping records and calculating eligible litres 1
RECORDS YOU NEED TO KEEP To work out your fuel tax credits and to support your claims, you need to keep records showing the amount of fuel you acquire, manufacture or import for your business activities and how you use that fuel. Start keeping the records you need now so you are ready to calculate and claim your fuel tax credits when the time comes. You need business and tax records to show which activities you re carrying out, as well as to support your actual claims. Records demonstrating your business activities include: n business expenses relating to eligible activities n sales and production records n lease documents for agricultural land or equipment n share farming contracts n vehicle and equipment use and maintenance records n work contracts n government requirements (such as licences). Other records that will support your claims for fuel tax credits include: n tax invoices for the fuel you have acquired n records showing how you used the fuel and any loss, sale or disposal of the fuel n records of how you calculated your fuel tax credits you may want to use Fuel tax credits calculator online at www.ato.gov.au/fuelschemes For heavy diesel vehicles manufactured before 1 January 1996 and used on a public road, keep records showing they meet one of the environmental criteria for example, if you service your vehicle according to an approved maintenance program. If you claim less than $300 in fuel tax credits in a financial year, you do not have to keep records showing you acquired fuel. However, the fuel you acquire must be intended for use or actually used in an eligible activity. Your records must be in English (or easily translated into English) and you must keep them for five years after you make the claim as we may ask to examine them within this period. You don t need to send your records to us unless we ask you to. If we do examine your claims and you can t support them with adequate records, you may have to repay all or part of the fuel tax credits you have received. You may also have to pay penalties. A tax invoice must be marked tax invoice and include all of the following: n date of purchase n purchaser s name n type of fuel n quantity purchased n price n supplier s name and Australian business number. For more information about tax invoices: n refer to Valid tax invoices and GST credits (NAT 12358) n phone us on 13 28 66 between 8.00am and 6.00pm, Monday to Friday. 2 keeping records and calculating eligible litres
CALCULATING YOUR ELIGIBLE LITRES Before you can claim your fuel tax credits on your business activity statement (BAS), you need to calculate what you are entitled to. To do this, follow these three steps: Step 1 Work out how many eligible litres of fuel you have used for each business activity that has a different fuel tax credit rate. Step 2 Check what fuel tax credit rate applies to each of your activities. Step 3 Work out the amount of your fuel tax credits in dollars by multiplying the number of eligible litres by the relevant fuel tax credit rate (Step 1 Step 2). You can claim fuel tax credits at the time you acquire, manufacture or import the fuel into Australia. Remember, fuel tax credit rates vary depending on how you use taxable fuel in your business. Methods you can use to calculate eligible litres To calculate your eligible litres, you can use one of the basic calculation methods below or one of the other methods, depending on your business and amount of fuel for which you can claim fuel tax credits. We have included some examples so you can see how the different calculation methods may apply to your situation. Once you have calculated your eligible litres, you can work out your fuel tax credits. Calculation methods Basic methods Constructive method Deductive method When to use If you prefer to add up the eligible litres of each type of fuel, see examples 1 and 2 If you prefer to deduct your ineligible fuel, see example 3 For more information about rates and activities: n visit our website at www.ato.gov.au/fuelschemes n use our fuel tax credit calculator online at www.ato.gov.au/fuelschemes to calculate the amount of fuel tax credit you can claim n refer to Fuel tax credits for business (NAT 14584) n phone us on 13 28 66 between 8.00am and 6.00pm, Monday to Friday. Other methods Percentage use method Alternative percentage use method Estimated use method Average fuel consumption rate method When to use If your eligible fuel use is consistent over time, see example 4 If you have medium to large fleets of vehicles or equipment, see example 5 If the amount of fuel you re likely to claim in a financial year is less than $5,000, see example 6 If you keep records of the hours your equipment is used, see example 7 Basic calculation methods To work out how many litres are eligible, you can use either of the following: n The constructive method this is where you add up the eligible litres of each type of fuel you acquired to use in your business. n The deductive method this is where you subtract the litres of ineligible fuel (for example, fuel used in cars on a public road for business purposes) from the total fuel you have acquired. The following examples use these basic calculation methods. keeping records and calculating eligible litres 3
Methods you can use to calculate eligible litres The fuel tax credit rates used in these examples are valid for the situation described and the reporting period. Rates may vary, in particular the rate for fuel used in heavy vehicles travelling on a public road, which is subject to variations in the road user charge. EXAMPLE 1: Constructive method applied to different rates Daniel operates a mobile crane service in the building and construction industry. He uses a diesel-powered crane and a petrol-driven 10 tonne gross vehicle mass (GVM) truck with an elevated work platform. Daniel also has a 4WD utility he uses: n 75% of the time for travel on public roads to and from construction sites n 25% of the time for driving on-site to undertake maintenance or repairs. There is a diesel bulk storage tank for the cranes and 4WD, and Daniel purchases petrol for the truck at a service station. He records the fuel he takes out of bulk storage in a fuel book located by the tank. Once a month he enters details from the fuel book and the petrol receipts into a spreadsheet to record the number of litres and type of fuel he used for each business activity. Daniel s records show the total fuel used in the BAS reporting period for September 2009 was as follows: n diesel 8,250 litres for use in his cranes in building/ construction eligible from 1 July 2008 n diesel 125 litres for on-site use in the 4WD utility eligible n diesel 375 litres for on-road use in the 4WD utility ineligible n petrol 2,750 litres for on-road use in his truck and cranes over 4.5 tonne GVM for travelling on public roads eligible n petrol 1,250 litres for operating the elevated work platform eligible from 1 July 2008. Daniel works out the fuel tax credits he can claim as follows: 8,375 litres (8,250 + 125) $0.190715 per litre = $1,597.24 + 2,750 litres $0.16443 per litre = $452.18 + 1,250 litres $0.190715 per litre = $238.39 Total = $2,287.81 EXAMPLE 2: Constructive method where all fuel is eligible Tim s Bus Company operates four diesel-powered 15-tonne GVM buses and four petrol-powered 10-tonne GVM trucks. All the fuel Tim purchases for the buses and trucks is used for travelling on public roads. Tim adds up the tax invoices and records of fuel he purchased during the BAS quarterly reporting period ending September 2009. The total amount of fuel comes to 50,000 litres. As Tim uses 100% of the diesel and petrol he purchases for activities that are eligible at the same rate, he doesn t have to complete separate calculations to work out the amount of fuel tax credit he can claim. Tim s Bus Company s fuel tax credit entitlement is: 50,000 litres $0.16443 per litre = $8,221.50 EXAMPLE 3: Deductive method where part of the fuel is not eligible Marilyn s Mining operates a gold mine with exclusively diesel-powered equipment and vehicles and it is in an isolated location. The company also operates 10 small passenger vehicles for transporting miners to the local airstrip and for travelling into town for supplies and off-site recreation (ineligible for fuel tax credits). A further five fork-lifts and front end loaders are used exclusively on the mine site for the construction of private access roads for use in the gold mining activities. All vehicles are fuelled on-site from the bulk storage tanks operated by the company. This fuel is recorded by reference to tank meters and is supported by vehicle log books which record how many litres went into each vehicle. The company uses the deductive method to calculate fuel tax credits, which means subtracting the fuel used for the passenger vehicles from the total quantity of fuel purchased during the BAS reporting period. The total fuel purchased for the period is 500,000 litres. The vehicle log books show that 15,245 litres were used in passenger vehicles travelling on public roads, so they are ineligible for fuel tax credits. This means the quantity of eligible fuel is the total minus the ineligible amount: 500,000 litres 15,245 litres = 484,755 litres Marilyn s Mining s fuel tax credit entitlement is: 484,755 litres $0.38143 per litre = $184,900.10 4 keeping records and calculating eligible litres
Methods you can use to calculate eligible litres Other methods If it suits your business operations, you may prefer to use one of the following variations to the basic calculation methods to work out your fuel tax credits. Percentage use method If your eligible use is consistent over time, you can adopt the percentage use method to calculate your eligible litres. This method is easiest if you use one type of fuel for a single activity. To use this method, you must keep detailed records of the fuel you used for each activity for 12 weeks. You can adopt the percentage use method for one or more fuel types. You need to do a sample for each type of fuel, and set and monitor the sample percentage for that fuel. If you use a fuel for activities that qualify at different fuel tax credit rates, you won t be able to adopt a single percentage for that fuel. You ll need to set and monitor percentages for each fuel that has a different fuel tax credit rate. Once you ve established a reliable percentage, you can apply this to subsequent fuel you acquire to work out how much you can claim. You must be able to show that the 12-week detailed record is an accurate representation of your business activity. You must review your sample percentage if your business operations change in a way that substantially affect how much eligible fuel you use in a financial year. You can continue to use this percentage for the next five years if: n your entitlement is less than $10,000 in any financial year n your fuel usage does not substantially change, for example it does not change by 15% or more than 5,000 litres in a financial year. The benefit of using this method is that, apart from the 12-week period, you don t need to keep notebooks or detailed records of the fuel you ve used. However, you still need to keep records of your fuel purchases, evidence that you are eligible and details of any fuel that is lost, sold or disposed of. EXAMPLE 4: Percentage use method when fuel usage doesn t change Griffin Transport operates four 8-tonne GVM diesel trucks, two 4-tonne GVM diesel trucks and one diesel four-wheel drive passenger vehicle. The managing director chooses the percentage use method to calculate the company s fuel tax credits. Over a typical 12 week period, Griffin Transport keeps records that show the diesel fuel they purchase is used in three different ways: n 66% in the 8-tonne GVM trucks travelling on a public road (eligible for fuel tax credits at the rate of $0.16443 per litre) n 31% in the 4-tonne GVM trucks (ineligible for fuel tax credits), and n 3% in the company four-wheel drive (also ineligible). This means 66% of Griffin Transport s total fuel purchases for that period are eligible for fuel tax credits. As the company continues to operate the same number of trucks without substantially changing their pattern of fuel use, the percentage figure they use on their next BAS is 66%. Diesel fuel acquired during the BAS quarterly reporting period ending September 2009 totalled 17,500 litres, so eligible litres are 66% of 17,500 litres or 11,550 litres. Griffin Transport s fuel tax credit entitlement is: 11,550 litres $0.16443 per litre = $1,899.17 As Griffin Transport s claims for diesel are under $10,000 for the financial year, they can use the sample percentage of 66% to work out their fuel tax credits for five years before conducting a review. If their claim for diesel was more than $10,000 for the financial year, they must recalculate their percentage annually, keeping a 12-week detailed record of fuel use each time they do their annual review. keeping records and calculating eligible litres 5
Methods you can use to calculate eligible litres Alternative percentage use method You may use this method regardless of the amount of your entitlement in a financial year. Where your eligible use is consistent over time, you can calculate your eligible litres using the alternative percentage use method. This method is most suitable if you have medium to large fleets of vehicles or equipment, but can be used by any business with consistent eligible fuel usage. To use this method, you need to apply a statistically sound sample to your fleet of vehicles or equipment used for that activity over a four week period. Table 1 below shows a sampling table which you could use, but you can use other sampling tables which provide a 95% confidence level and a tolerable error of 10%. Once you have established a reliable percentage through your sampling, you can work out how much you can claim by applying this percentage to subsequent fuel you acquire for that activity. You must be able to show that the four week sampling period is representative of your business operations. Vehicles or equipment used in the sample should be randomly selected from the sample set. The benefit of using this method is that, apart from the four week sampling period, you do not need to keep notebooks or detailed records of the fuel you ve used in that activity. However, you still need to keep records of your fuel purchases, evidence that you are eligible and details of any fuel that is lost, sold or disposed of. Table 1: Sample size required to provide a 95% confidence level and a tolerable error of 10% No. of vehicles in fleet Sample size No. of vehicles in fleet Sample size You should review your sample percentage if your business operations change in a way that affects how much eligible fuel you use in a financial year. However we recommend that you resample every five years. 10 9 130 45 20 16 140 46 30 21 150 47 40 26 160 48 50 29 170 49 60 32 180 50 70 35 190 50 80 37 200 51 90 39 225 53 100 41 250 54 110 42 275 55 120 44 300 56 If your fleet size falls between two values in the table, use the lower value. If your fleet size is greater that 300, use an appropriate statistical tool to calculate your sample size. 6 keeping records and calculating eligible litres
Methods you can use to calculate eligible litres EXAMPLE 5: Alternative percentage use method for medium to large fleets of vehicles or equipment Sharon operates Sharon Enterprises Pty Ltd and carries on a bauxite mining enterprise with 200 light vehicles (4WDs, utilities and dual-cabs) in addition to equipment and heavy vehicles used solely off-road. The light vehicles are used: n within the mine site (an activity that became eligible for fuel tax credits from 1 July 2008 at half the full fuel tax credit rate), and n to travel from the mine site to the local town on public roads (which is ineligible). Sharon s records show she is able to distinguish between fuel that is used in light vehicles versus fuel used in the heavy vehicles and in the plant. However, the number of light vehicles within Sharon s enterprise makes it difficult to distinguish between eligible and ineligible use with full confidence. Sharon determines that the alternative percentage use method is the most appropriate claim calculation method for her operations. Therefore, she will need to conduct a survey on a defined sample of the light vehicle fleet to determine an eligible off-road percentage of fuel that can be claimed for fuel tax credits. Sharon uses Table 1 to determine the appropriate number of vehicles that she is required to sample. She determines that she will need to sample 51 vehicles to ensure that her survey period achieves a 95% confidence level and a tolerable error of 10% and is representative of the whole light vehicle fleet for the site. She selects the 51 vehicles randomly from the light vehicle fleet and each vehicle in the sample is provided with a log book in which to record: n the distance and purpose of the travel, and n whether the travel was off-road or on a public road. The sampling is carried out over a four week period and confirms that 90% of the light vehicle use is for travel off road. This activity became eligible for fuel tax credits from 1 July 2008 at half the full fuel tax credit rate. Her records show the following fuel consumption for the four weeks: Light vehicles: 20,000 litres Heavy vehicles and plant: 250,000 litres Sharon calculates her fuel tax credits as follows: Light vehicles: 20,000 90% = 18,000 litres $0.190715 per litre = $3,432.87 Heavy vehicles and plant: 250,000 100% = 250,000 litres $0.38143 per litre = $95,357.50 Sharon s fuel tax credit entitlement is $98,790.37 ($3,432.87 + $95,357.50). keeping records and calculating eligible litres 7
Methods you can use to calculate eligible litres Estimated use method If the amount of fuel you re likely to claim in a financial year is less than $5,000, you can use the estimated use method. If you operate a small business or use eligible fuel on a small scale or seasonal basis, check what proportion of last year s fuel acquisitions you used for eligible activities, as this may provide a guide. When you estimate what proportion of your fuel will be eligible, you must be able to show how you arrived at your estimate and that it is reasonable. To use this method, you must still keep records showing that you acquired the fuel and be able to demonstrate your eligibility. You must also keep details of any fuel you have lost, sold or disposed of. EXAMPLE 6: Estimated use method for small claims Richard and Michael operate a small farm and lodge their BAS annually. They have one 8-tonne GVM tray truck which is mainly used on the farm. Richard and Michael know from claims they made in the previous year that they received a total of $3,500 in fuel tax credits. As their farming business has not significantly changed, they don t expect to claim more than $5,000 in fuel tax credits for the current financial year. This means they can adopt the estimated use method to work out how much to claim. In July 2009, they acquired 10,000 litres of diesel in bulk. Based on the previous year s usage, they estimate the quantity of fuel they will use during the year as follows: Diesel fuel used in a truck travelling on = 1,040 litres public roads (20 litres per trip 52 trips) + Diesel fuel used in agriculture = 8,960 litres Average fuel consumption rate method If you keep records of the hours your equipment is used in your business activities (for example, for billing or maintenance purposes), you may prefer to use the average fuel consumption rate method. To use this method you simply work out your equipment s eligible litres by multiplying its operating hours for an activity by its average hourly fuel consumption rate. You will need to establish average hourly fuel consumption rates for your equipment. You can do this by keeping records of the operating times and the actual fuel used over a sample period that you choose depending on your circumstances. For example, if the pattern of use is fairly constant, a four week sample period may be appropriate to calculate the average hourly fuel consumption. When you work out the average hourly fuel consumption, make sure you allow for the different operating conditions that the equipment is used in. Alternatively you can use the fuel consumption rates published in the manufacturer s performance guide. Manufacturer guides generally provide fuel consumption rates under different operating conditions, for example, light, medium and heavy. The conditions that the equipment is used in during the claim period should be taken into consideration when working out the appropriate consumption rate. If you use the average fuel consumption rate method, you will need to keep appropriate records that detail how the eligible quantity was worked out. Total diesel fuel used in current year = 10,000 litres The fuel used for both the truck travelling on a public road and in the agricultural activities was for business use. Richard and Michael multiply the amounts from last year by the relevant fuel tax credit rate. Richard and Michael s fuel tax credit entitlement is: 1,040 litres $0.16443 per litre = $171.01 + 8,960 litres $0.38143 per litre = $3,417.61 Total = $3,588.62 8 keeping records and calculating eligible litres
Methods you can use to calculate eligible litres EXAMPLE 7: Average fuel consumption rate method if you record your equipment s hourly use Tom is the owner/operator of LET Earthmoving Pty Ltd, an earthmoving contracting business. He has a number of small excavators that he transports from job to job with his six-tonne truck and trailer. He refuels his truck at the bowser and claims this fuel under the road transport activity (full fuel tax credit rate less the road user charge). The excavators are refuelled from 200 litre drums and he does not routinely record the volume of fuel that goes into each. Each month he receives a tax invoice from his fuel supplier showing the amount of bowser fuel supplied, the number of drums supplied and the price payable. Tom uses his excavators in agricultural activities (full fuel tax credit rate) and in road construction activities (half fuel tax credit rate). For billing purposes, he keeps records of the number of hours an excavator is used on each job. To work out the amount of fuel that he can claim for use in the excavators, Tom needs to refer separately to the number of hours he uses the equipment for n agricultural jobs n road construction jobs. So that he can work out his average litres per hour, Tom starts recording (temporarily) the amount of fuel he puts into the excavators when filling them up. Taking into account the pattern of use of his equipment, Tom decides to use a four week sample period. If Tom wanted to, he could use the fuel consumption rates published by the manufacturer for his excavators. Number of litres eligible for the half fuel tax credit rate under All other activities, machinery, plant and equipment eligible from 1 July 2008 : = total hours for the quarter used in road construction activities calculated average litres per hour = 600 hours 20 litres = 12,000 litres for the quarter. If the conditions in which Tom uses his equipment vary, he should consider whether the published manufacturer s fuel consumption rates or his calculated rates reflect the conditions. For example, if Tom takes his excavator to a job in a particularly wet area where the conditions are harder and more fuel is used, Tom should re-calculate the average use of fuel and apply that to the hours he is on that job. As an example, if Tom was using these calculations to work out his fuel tax credits for the September 2009 quarter, his entitlement would be: Agricultural activities = $3,909.66 (10,250 litres $0.38143 per litre) Road construction activities = $2,288.58 (12,000 litres $0.190715 per litre) Road transport activities = $394.63 (2,400 litres (from his tax invoice) $0.16443 per litre) Total = $6,592.87 After a period of four weeks Tom s records show: n agricultural activities averaged 25 litres per hour (calculated by using 3,125 litres of diesel in 125 hours) n road construction activities averaged 20 litres per hour (calculated by using 3,300 litres of diesel in 165 hours) At the end of each quarter, Tom can work out the total number of litres of fuel used in agricultural activities and the total number of litres used in road construction as follows: Number of litres eligible for the full fuel tax credit rate under Specified activities eligible since 1 July 2006 (which includes agriculture): = total hours for the quarter used in agricultural activities calculated average litres per hour = 410 hours 25 litres = 10,250 litres for the quarter. For more information about: n keeping records and calculating eligible litres refer to Fuel Tax Determinations FTD 2006/1 and FTD 2006/2. To obtain a copy, visit our website at www.ato.gov.au/fuelschemes and select Fuel tax credits for GST registered businesses then select Legislation and rulings then select Fuel tax credit legislative instruments and public rulings. n claiming fuel tax credits refer to Fuel tax credits how to complete your business activity statement (NAT 15531) use our online calculator at www.ato.gov.au/ fuelschemes or our Fuel tax credits calculation worksheet (NAT 15634). keeping records and calculating eligible litres 9
Keeping records of adjustments and mistakes If you make an adjustment, correct a mistake or claim an amount you failed to claim on an earlier BAS, make sure you keep the records detailing the nature and extent of the change, correction or adjustment. For information about making adjustments or correcting mistakes, refer to Fuel tax credits making adjustments and correcting mistakes (NAT 15681). More information To obtain copies of our publications or for more information: n visit our website at www.ato.gov.au/fuelschemes n phone our publications ordering service on 1300 720 092, 24 hours a day, 7 days a week n phone us on 13 28 66 between 8.00am and 6.00pm, Monday to Friday. If you do not speak English well and need help from the Tax Office, phone the Translating and Interpreting Service on 13 14 50. If you are deaf, or have a hearing or speech impairment, phone the Tax Office through the National Relay Service (NRS) on the numbers listed below: n TTY users, phone 13 36 77 and ask for the Tax Office number you need n Speak and Listen (speech-to-speech relay) users, phone 1300 555 727 and ask for the Tax Office number you need. n internet relay users, connect to the NRS on www.relayservice.com.au and ask for the Tax Office number you need. 10 keeping records and calculating eligible litres