• Calculating eligible fuel quantities

    There are a variety of methods and measures to help you work out how much fuel is eligible for fuel tax credits.

    Find out about:

    Methods to help calculate the eligible quantity

    To work out the quantity of fuel when claiming fuel tax credits, you can use any apportionment method considered fair and reasonable for your circumstances.

    You can use any of the following commonly used methods for apportionment:

    • Constructive method – where you add up all the eligible quantities of each fuel type that attract the same fuel tax credit rate
    • Deductive method – where you subtract any ineligible fuel, such as fuel you used in light vehicles on a public road, from the total fuel acquired
    • Percentage use method – where you determine a reliable percentage of eligible fuel usage for a sample period and apply this over a number of BAS periods
    • Estimated use method – where you make a fair and reasonable estimate of the quantity of fuel you acquire for use in a BAS period for    
      • eligible and ineligible activities
      • multiple activities with different fuel tax credit rates.

    You may find one method better suits your circumstances. You may wish to review the method you're currently using – for example, if you need to undertake reconciliations because you used the rate that applied when you used the fuel, instead of when you acquired it, and the rate changed between when you acquired the fuel and when you used it.

    If rates change during a BAS period, separate the fuel acquired before the rate change from the fuel acquired after a rate change, before applying your method. However, if you claim less than $10,000 in fuel tax credits in a year, you may use a simplified method.

    Once you've calculated the eligible quantity of fuel, you can work out your fuel tax credits.

    Before calculating your fuel tax credit entitlements for fuel you use in a heavy vehicle travelling on public roads, work out how much fuel is consumed by the auxiliary equipment.

    You can use the commonly used methods and reliable measures to apportion fuel used in heavy vehicles for travelling on public roads or to power the auxiliary equipment of the heavy vehicle.

    See also:

    Constructive method

    When using the constructive method, you add up the eligible quantity (litres or kilograms) of each fuel type you acquired with the same fuel tax credit rate.

    Example: 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 quarterly BAS period. The total amount of fuel comes to 50,000 litres.

    As Tim uses 100% of the diesel and petrol he purchases for activities eligible for fuel tax credits at the same rate, he doesn't have to complete separate calculations to work out the amount of fuel tax credits he can claim.

    Tim uses the total of 50,000 litres to calculate his fuel tax credits for the BAS period.

    If the rate changes during the BAS period, Tim needs to separate his tax invoices and records for fuel purchased before and after the rate change. He can then do separate calculations to work out the amount of fuel tax credits he can claim.

    End of example

     

    Example: 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-powered 10 tonne GVM truck with an elevated work platform. Daniel also has a four-wheel drive (4WD) utility he uses:

    • 75% of the fuel is used for travel on public roads to and from construction sites
    • 25% of the fuel is for driving on-site to undertake maintenance or repairs.

    There is a bulk-diesel 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.

    His records show the total fuel used in the monthly BAS period was as follows:

    Diesel

    • 8,250 L for use in his cranes in building/construction
    • 125 L for on-site use in the 4WD utility
    • 375 L for on-road use in the 4WD utility (not eligible for fuel tax credits)

    Petrol

    • 2,750 L for on-road use in his truck greater than 4.5 tonne GVM for travelling on public roads
    • 1,250 L for operating the elevated work platform
    Daniel works out the fuel tax credits he can claim as follows:

    Calculation

    Use

    9625 L (8,250 + 125 + 1250) 

    Use rate for 'All other business uses'

    2,750 L

    Use rate for 'In a heavy vehicle for travelling on public roads'

     

    End of example

    Deductive method

    Using the deductive method, you subtract the quantity of ineligible fuel (for example, fuel used in light vehicles on public roads) from the total fuel you acquired.

    Example: Deductive method where part of the fuel is not eligible

    Marilyn's Mining operates a gold mine in an isolated location, with exclusively diesel-powered equipment and vehicles.

    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).

    Five forklifts 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 logbooks which record how many litres went into each vehicle.

    The company uses the deductive method to calculate fuel tax credits, which means the fuel used for the passenger vehicles is subtracted from the total quantity of fuel purchased during the quarterly BAS period.

    The total fuel purchased for the BAS period is 500,000 L. The vehicle logbooks show 15,245 L were used in passenger vehicles travelling on public roads, which is ineligible for fuel tax credits.

    The quantity of eligible fuel is the total fuel purchased minus the ineligible amount:

    500,000 L − 15,245 L = 484,755 L

    Marilyn's Mining's fuel tax credits are calculated using 484,755 L.

    End of example

    Percentage use method

    The percentage use method is where you determine a reliable percentage of eligible fuel usage for a sample period, then apply this over a number of BAS periods.

    To use this method, you must keep detailed records of your taxable fuel usage during an appropriate sample period of your choice. You must be able to show your fuel usage in the sample period accurately reflects your standard business activities.

    If the ratio of eligible to non-eligible fuel you use remains consistent over BAS periods, you can use a percentage to calculate your eligible quantities of fuel.

    You can use the percentage use method for one or more fuel types. You need to do a sample period for each type of fuel and monitor the percentage of fuel you use that is eligible.

    If you use fuel for activities with different fuel tax credit rates, you can't adopt a single percentage for that fuel type. You'll need to calculate and monitor percentages for each fuel or activity with a different fuel tax credit rate.

    Once you've established a reliable use percentage, you can apply this to fuel you acquire to work out the fuel tax credits you can claim. You must review your sample percentage if your business operations change in a way that substantially affects how much eligible fuel you use in a financial year.

    The benefit of using this method is that, apart from the sample period, you do not need to keep notebooks or detailed records of the fuel you have used. However, you still need to keep all of the following:

    • records of your fuel purchases
    • evidence your activities are eligible for fuel tax credits
    • details of any fuel that is lost, stolen or otherwise disposed of.

    Example: Percentage use method when fuel usage does not change

    Griffin Transport operates four 8 tonne GVM diesel trucks, two 4 tonne GVM diesel trucks and one diesel 4WD passenger vehicle.

    Over a typical 12 week period, Griffin Transport keeps records that show the diesel fuel they purchase is used in three different ways:

    • 66% in the 8 tonne GVM trucks for travelling on public roads – eligible for fuel tax credits
    • 31% in the 4 tonne GVM trucks – ineligible for fuel tax credits
    • 3% in the company 4WD travelling on public roads – also ineligible.

    Therefore, 66% of Griffin Transport's total diesel 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 use amount the company uses on its next BAS is 66%.

    The diesel acquired 17,500 L of diesel during the quarterly BAS period, so eligible litres are 66% of 17,500 L, which equals 11,550 L.

    Griffin Transport uses 11,550 L to calculate its fuel tax credits.

    If the rate changes during the BAS period, Griffin Transport needs to separate the fuel purchased before and after the rate change. They can then work out 66% of each amount, and do separate calculations to work out the amount of fuel tax credits they can claim.

    End of example

    Estimated use method

    The estimated use method is where you make a fair and reasonable estimate of the quantity of fuel you acquire for use in a BAS period for:

    • eligible and ineligible activities
    • multiple activities with different fuel tax credit rates.

    When you estimate what proportion of the fuel will be eligible for fuel tax credits, you must be able to show how you arrived at your estimate, and that it's fair and reasonable.

    Example: Estimated use method for eligible and ineligible activities

    Richard runs a small potato farm 15km from Manjimup. His only diesel road vehicle is a 4WD utility. The utility is used on the farm for various farm activities and, on average, is used two times per week to travel to Manjimup for groceries, and social and recreational activities.

    Richard is aware diesel he uses in making the journeys to Manjimup is not eligible for fuel tax credits. Richard also uses diesel fuel in his machinery and equipment for his agricultural activities.

    Based on the vehicle's fuel consumption, he estimates each of these journeys uses 3 L of diesel. He acquires four 200 L  rums of fuel each quarter. Some of this diesel is used to fuel his vehicle and the rest in agricultural activities.

    Richard is registered for GST and lodges his BAS on a quarterly basis. As he lodges his BAS quarterly, Richard calculates and claims his fuel tax credits quarterly. The quarterly fuel quantities are calculated as follows:

    • total diesel purchased (200 L × 4 drums per quarter) = 800 L
    • fuel used on public roads (2 trips per week × 12 weeks = 24 trips)
      24 trips × 3 L per trip = 72 L
    • fuel used in agriculture = 800 L − 72 L = 728 L.

    Richard uses 728 L to calculate his fuel tax credits.

    If the rate changes during the BAS period, Richard needs to separate the fuel purchased before and after the rate change. He can then work out the amount of fuel that is eligible for each period, and do the calculations to work out the amount of fuel tax credits he can claim.

    End of example

    Measures to help calculate eligible quantities

    You can use any appropriate, reliable measure as the basis for working out your eligible quantities of fuel. Some examples of reliable measures are:

    • odometer readings of kilometres travelled
    • route distances if a vehicle travels on fixed routes
    • kilowatt hours of electricity generated
    • hours of operation for the vehicle or equipment
    • average hourly fuel consumption of the vehicle or equipment.

    You can use statistical sampling as part of any method.

    The examples below include commonly used measures. However, there may be other measures more appropriate for your circumstances, depending on the activity you undertake.

    Average hourly fuel consumption measure

    If you keep records of the hours your vehicle or equipment (including auxiliary equipment) is used in your business activities – for example, for billing or maintenance purposes – you may use this measure to work out your fuel tax credits.

    You'll need to establish an average hourly fuel consumption rate for your vehicle or equipment. You can do this by keeping records of the operating times, and the fuel used during an appropriate sample period of your choice, provided it accurately reflects your circumstances.

    Manufacturers may also provide fuel consumption rates based on different operating conditions – for example, light, medium and heavy use. To work out the consumption rate, you'll need to consider the conditions in which your vehicle or equipment is used during the BAS period.

    If you use the average fuel consumption rate measure, you need to keep appropriate records that detail how the eligible quantity used was worked out.

    Example: Average fuel consumption if you record hourly use

    Tom is the owner and operator of an earthmoving contracting business. He purchases diesel fuel in bulk for use in a number of small excavators he uses to carry out work in road construction activities and agricultural activities, such as land grading, dam construction and maintenance on farms.

    The excavators are transported from job to job with his 6 tonne truck and trailer. Tom refuels his truck at the bowser, and is eligible to claim fuel tax credits at the full rate, minus the road user charge, for the travel it undertakes on public roads.

    While Tom does not routinely record the volume of fuel that goes into each excavator at the time of refuelling, he does record the operational hours for each excavator per job for billing purposes.

    To work out the average litres used per hour, Tom itemised the hours of work completed by each excavator for the different activities over a typical 12-week sample period, and recorded the quantity of fuel used.

    After the sample period of 12 weeks, Tom's records show he used:

    • 9,125 L undertaking 365 hours of eligible agricultural activities, indicating an average hourly consumption of 25 L per hour
    • 8,300 L undertaking 415 hours of eligible road construction activities, indicating an average hourly consumption of 20 L per hour.

    Tom could also use the fuel consumption rates published by the manufacturer to work out the average litres used per hour in his excavators.

    To calculate the total fuel used in a later BAS period, Tom uses the operational hours recorded for the period and the average hourly consumption for each excavator based on the sample period. His calculations for the BAS period are as follows:

    • agricultural activities (320 hours × 25 L) = 8,000 L
    • road construction activities (390 hours × 20 L) = 7,800 L

    Note: if the conditions in which Tom uses his equipment vary, he should consider if average hourly fuel consumption is the most appropriate way to calculate his fuel tax credits.

    If the rate changes during the BAS period, Tom needs to separate the operational hours recorded before and after the rate change. He can then work out the litres for each activity, and do separate calculations to work out the amount of fuel tax credits he can claim.

    End of example

    Sampling measure

    If you're using a number of the same or similar vehicles or equipment in similar ways, you can use a sample that is a reasonable representation of the fleet or equipment, to calculate your fuel tax credits.

    A significant number of similar vehicles or equipment is not required in the sample size, provided the circumstances and conditions of their use is consistent.

    A sampling size will be appropriate where:

    • a fleet consisting of different types of vehicles, equipment or assets is sorted into groups, based on vehicle and equipment type, age and use (then each group is tested)
    • the sample size delivers a consistent result
    • the sample is representative of the population from which it is drawn.

    The sample of the population should also reflect a reasonable representation of:

    • events, routes or fuel usage
    • vehicle load and conditions of use

    Seasonal changes that affect fuel usage should be taken into consideration.

    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.

    Regardless of business operations changing, we recommend you resample every five years.

    Example: Percentage use method and statistical sampling for medium-to-large fleets of vehicles or equipment

    Sharon operates Sharon Enterprises Pty Ltd and carries on a bauxite mining business 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:

    • within the mine site – eligible for fuel tax credits
    • to travel from the mine site to the local town on public roads – ineligible for fuel tax credits.

    Sharon's records show she is able to distinguish between fuel used in light vehicles versus fuel used in heavy vehicles and at the mine site. 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 the percentage use method is the most appropriate for her operations. Therefore, she needs to conduct a survey on a defined sample of her light vehicle fleet, to determine an eligible off-road percentage of fuel that can be claimed for fuel tax credits.

    Sharon determines that out of the fleet, only 50 vehicles travel to the local town, and the remainder operate solely within the mine site undertaking certain uses. Sharon samples five of the 50 vehicles that operate on public roads, as this is representative of the ineligible fuel usage.

    She selects five vehicles that travel on the mine site and on public roads. Each vehicle in the sample is provided with a logbook to record the distance and purpose of the travel, and 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 for the vehicles that operate on the mine site and public roads is for travel off-road.

    Her records show the following fuel consumption for the BAS period:

    • light vehicles used exclusively on mine site – 15,000 L
    • light vehicles that travel on public roads and mine site – 5,000 L
    • heavy vehicles and plant – 250,000 L.

    Sharon calculates her eligible litres as follows:

    • Light vehicles used on mine site 15,000 L
    • Light vehicles that travel on public roads and the mine sites 5,000 × 90% = 4,500 L
    • Heavy vehicles and plant 250,000 × 100% = 250,000 L
    End of example

    See also:

    • FTD 2010/1 Fuel tax: Apportionment used when determining total fuel tax credits in calculating the net fuel amount under section 60-5 of the Fuel Tax Act 2006
    • PCG 2016/8 Fuel tax credits – apportioning fuel for fuel tax credits
    • PCG 2016/11 Fuel tax credits – apportioning taxable fuel used in a heavy vehicle with auxiliary equipment
      Last modified: 05 Jul 2017QC 18683