23 June 2006

New Fuel Tax Credit System is Good News For Business

The Senate last night passed legislation to implement a new fuel tax credit system from 1 July 2006. The new fuel tax credit system will lower compliance costs and remove the burden of fuel tax from thousands of individual businesses and households.

This is good news for business and regional Australia in particular.

The introduction of the fuel tax credit system is part of the Government’s programme of reform to modernise and simplify the fuel taxation system, as announced in the energy white paper, Securing Australia’s Energy Future, on 15 June 2004.

The new fuel tax credit system will effectively reduce fuel tax collections from businesses and households by $1.5 billion over the period to 2012-13. In addition, the Government’s decision not to increase the road user charge will effectively reduce fuel tax on heavy vehicles by a further $1.2 billion over the forward estimates.

The immediate benefits of the new arrangements for business will be:

  • A $100 million per year reduction in fuel tax on electricity generation;
  • the extension of fuel tax credits to around 54,000 heavy petrol vehicles; and
  • the removal of complex metropolitan area restrictions for heavy vehicles.

Under the reforms, the existing complex system of fuel tax concessions will be replaced by a single fuel tax credit claimable via the business activity statement (BAS) similar to the way that GST input tax credits are claimed.

On 1 June 2006, I announced a two year transitional measure that will allow businesses to make an early claim for payment of fuel tax credit entitlements to assist them in adjusting to the new BAS claiming arrangements.

For more information visit www.ato.gov.au/fuelschemes or phone the Tax Office on 132866 between 8.00am and 6.00pm Monday to Friday.