Federal Budget Fuel Excise Reduction: Will All Businesses Benefit?

The uncertainty around availability of fuel has seen fuel prices soar across Australia. The 2022–2023 Federal Budget proposed an answer for this by way of a temporary (six-month) reduction to fuel excise.

The six-month reduction is now law, and will end at midnight on 28 September 2022.

For petrol and diesel, this means an excise reduction from 44.2 to 22.1 cents per litre, which is already being felt by users at the pump. But who will actually benefit from this Budget promise and what does it mean for businesses claiming fuel tax credits (FTCs)?

Snapshot: who will benefit?

Individuals:

  • all fuel uses of individuals – benefit of 22.1 cents per litre.

Businesses:

  • businesses operating light vehicles on public roads – benefit of 22.1 cents per litre;
  • businesses operating heavy vehicles on public roads – benefit of 4.3 cents per litre;
  • businesses operating vehicles on private roads – no benefit; and
  • businesses using fuel for non-vehicle use (auxiliary, machinery, plant and equipment) – no benefit.

What should businesses do?

For businesses that currently claim FTCs, it’s important to understand the impact of these changes on their FTC entitlement and to adjust their FTC process accordingly.

We expect there will be increased complexity for businesses claiming FTCs in the first few weeks of the temporary measure and the weeks following its conclusion. This is because the changes in fuel excise are expected to trickle through from fuel suppliers depending on where businesses are located and how they purchase their fuel. Businesses will be required to determine which rate of fuel excise has been applied to fuel purchases to determine the rate of fuel tax credit available.

Important: Clients should not act solely on the basis of the material contained here. Items herein are general comments only and do not constitute or convey advice per se. Also, changes in legislation may occur quickly. We, therefore, recommend that our formal advice be sought before acting in any of the areas.

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