11 Apr Small Business Fuel Tax Benefits for Your Quarterly BAS
All small businesses, no matter what industry, want to claim as many deductions as possible. After all, you pay so much tax during the financial year, you may as well claw back as much as you can from your business expenses. When doing so, it’s important to think smart about the kinds of benefits you can claim.
One of the tax benefits of operating a small business is fuel credits, which are claimed on your quarterly Business Activity Statement (BAS). These credits could possibly make a sizable difference to your quarterly tax load. Of course, fuel credits will only make a difference if you use a vehicle or machinery during the day-to-day operations of your business, but if you do, the fuel you use could be used to offset your tax load.
Let’s look simply at what a BAS is: The Australian Taxation Office defines a BAS as “a tax reporting requirement for businesses issued by the ATO on a quarterly basis. It’s used for reporting and paying goods and services tax (GST), pay as you go (PAYG) instalments, PAYG withholding tax and other tax obligations.”
What Are the Tax Benefits of Fuel Tax Credits?
The cost of fuel you purchase for your business includes a fuel tax, which is an excise or customs duty that is included in the price. Under the right circumstances, a small business can claim these duties (called fuel credits) against their BAS per quarter as necessary, but you must be registered for GST and for fuel tax credits. Once you have registered for this, instead of receiving the normal instalment notice, you’ll get a quarterly BAS instead.
You can claim fuel tax credits in much the same way as you claim GST credits, but you must make these claims within 4 years. In order to make a claim, you simply need to lodge a BAS with the credits you’re claiming. The tax benefits of fuel credits for a small business can be claimed when fuel has been used in the operation of machinery, industrial plants, equipment, heavy vehicles, and light vehicles (if they have driven on private roads or off public roads).
There are some fuels and activities that cannot be claimed under the fuel credit scheme, however. For example, you cannot make a fuel credit claim for a light vehicle if it is less than 4.5 gross vehicle mass (GVM) or for driving on public roads. Rates can also be different depending on where the vehicle is being driven; for example, the rate for a heavy truck driving on a public road can be different to when it is driven on a private road or off-road.
As you can appreciate, calculating the tax benefits of your fuel credits can be quite complicated, not only in knowing when you can make a claim, but also because the rules keep changing, as do the actual rates themselves; fuel rates are updated twice a year in February and August and are indexed to the CPI. The latest tax benefits include an increase in the fuel credits to 14.2 cents/litre from February 2017.
How can you claim the tax benefits of fuel tax credits?
As a small business, currently the rules state that if you claim less than $10,000 in fuel tax credits per year, you can use either (or both) of the following methods to calculate your claim:
- Using one rate in a BAS period (the rate that applies at the end of the BAS period).
- Work out your litres based on the cost of the fuel you purchased.
You can use whichever of these methods best suits your needs and you can switch between the methods without informing the tax office. Of course, to receive these tax benefits you must keep accurate records of:
- The type of fuel you purchased
- The date of purchase
- The activity the fuel was used for, and
- The number of kilometres and the location
- You also require an invoice, docket or financial statement as proof of purchase.
If you need assistance with your small business tax claims, submitting your quarterly BAS, or have questions about the kinds of benefits you can claim against your BAS, call the Conrad Carlile office on 07 3871 1522 or complete our online enquiry form for more information or to make an appointment with one of our trusted advisors.