Fuel Tax Credits Explained for Australian Businesses

What Are Fuel Tax Credits?

Fuel tax credits (FTC) give eligible businesses a refund for the fuel tax (excise or customs duty) included in the price of fuel used in their operations. It's not a concession or a discount — it's a direct credit against your BAS that reduces the tax you pay.

The ATO estimates that tens of thousands of eligible Australian businesses underclaim or don't claim fuel tax credits at all. If your business uses diesel, petrol, LPG, or certain alternative fuels in qualifying activities, this guide covers what you need to know.

Who Is Eligible?

To claim fuel tax credits, your business must:

• Be registered for GST
• Have an ABN
• Use fuel in an eligible business activity

Eligible activities are broader than most business owners realise. They include:

• Off-road use: Vehicles, machinery, and equipment used in agriculture, forestry, fishing, mining, construction, or manufacturing on private roads or off-road altogether
• Heavy on-road vehicles: Vehicles with a gross vehicle mass (GVM) over 4.5 tonnes used on public roads
• Light vehicles on private property: Cars and utes used on farms, mine sites, or private roads
• Diesel generators and stationary plant: Fuel used to power stationary engines, generators, or refrigeration units
• Marine vessels: Fuel used in boats for business purposes

What's NOT Eligible?

Light vehicles (under 4.5 tonnes GVM) used on public roads are the main exclusion. This catches out many small business owners who assume their ute or van qualifies — if it's driven on public roads and weighs under 4.5 tonnes, the fuel tax credit doesn't apply to those road kilometres.

Also excluded:

• Fuel used in private vehicles (even if the vehicle is owned by the business)
• Fuel used for domestic heating or cooking in a business premises
• Fuel purchased duty-free

Fuel Tax Credit Rates

Rates are indexed to the consumer price index (CPI) twice a year — in February and August. As of early 2026, the headline rate for liquid fuels (diesel, petrol) used in eligible heavy vehicles and off-road equipment sits above 49 cents per litre. Rates vary by fuel type and activity.

Use the Fuel Tax Credit Calculator to apply the current ATO rates to your actual fuel volumes and get an instant estimate of your claimable credit.

How to Calculate Your Claim

The calculation is straightforward once you've separated eligible from non-eligible fuel use:

1. Record total fuel purchased (keep all tax invoices — you'll need the GST-inclusive amounts)
2. Identify how much was used in eligible activities vs. on public roads in light vehicles
3. Apply the current ATO rate per litre for each category
4. The result is your fuel tax credit amount for that BAS period

You can also use the Fuel Cost Calculator to understand your overall fuel spend and break it down by vehicle or activity type before applying the credit rates.

How to Lodge Your Claim

Fuel tax credits are claimed on your Business Activity Statement (BAS). There's a specific label — Label 7D — where you enter the total credit amount. The ATO then applies this against your BAS liability or issues a refund if your credits exceed what you owe.

You can claim credits going back four years if you've been missing them. An amendment to past BAS statements is straightforward through myGov or via a registered BAS agent.

Record-Keeping Requirements

The ATO requires you to keep records that prove:

• The quantity of fuel acquired (tax invoices showing litres purchased)
• The nature of the business activity the fuel was used for
• Any apportionment calculation if the fuel was used for a mix of eligible and non-eligible activities

Most businesses keep fuel receipts and logbooks. If you're using vehicles for mixed purposes, a logbook or GPS fleet record is essential to defend your apportionment in an audit.

Apportionment — Mixed Use Vehicles

Many businesses use the same vehicle or machine for both eligible and non-eligible purposes. In these cases, you need to apportion your fuel use. Common approaches:

• GPS data: The most defensible method — exact kilometres on private land vs public roads
• Odometer readings: Record readings at key points to estimate private vs public road splits
• ATO's approved worksheets: For smaller claims, the ATO provides simplified calculation worksheets that allow reasonable estimates

GST Interaction

Fuel tax credits are separate from GST input tax credits. You can claim both. The GST component of fuel is claimed separately via your regular input tax credit — the fuel tax credit sits on top of that. Use the GST Calculator to separate out the GST component of your fuel purchases.

For a deeper dive on business tax compliance, a good small business tax guide covers the interaction between BAS obligations, input tax credits, and fuel tax credits in plain language.

Who Claims the Most?

Industries with the highest FTC claims in Australia:

• Agriculture and farming
• Mining and resources
• Road freight and transport (heavy vehicles)
• Construction
• Landscaping and grounds maintenance

If you're in any of these industries and haven't formally reviewed your FTC entitlement, there's a very good chance you're leaving money on the table every quarter.