When did you last review your FTC percentages? Fuel Tax Credits: What you need to know

Article by Sam Moir Byfields Associate

For most farmers, the Fuel Tax Credit (FTC) system is a vital financial measure. It allows businesses to claim a credit via their Business Activity Statement (BAS) - effectively offsetting some of the excise or customs duty built into the price of fuel. 

How It Works 

• The amount of FTC you can claim depends on: 

• When the fuel was acquired 

• What type of fuel was used 

• How the fuel was used 

Rates change regularly, so it’s essential to check the current rates on the ATO website each time you complete your BAS. 

Increased ATO Audit Activity 

We are seeing a sharp rise in ATO audits looking closely at how farmers work out their Fuel Tax Credit claims. There is a lot of money on the line, and if the numbers aren’t worked out properly, it can land you in hot water with the tax office. 

Apportionment Methods 

To determine the quantity of fuel eligible for FTC, the ATO allows several apportionment methods: 

• Constructive Method – Add up all eligible quantities of each fuel type that attract the same FTC rate. 

• Deductive Method – Subtract ineligible fuel (e.g., fuel used in light vehicles on public roads) from the total fuel acquired. 

• Percentage Use Method – Apply a reliable percentage of eligible fuel usage from a sample period across multiple BAS periods. 

• Estimated Use Method – Estimate the quantity of fuel used for eligible and ineligible activities during a BAS period. 

Many of our clients use accounting programs (such as Agrimaster) that calculate the FTC claim based on the ‘percentage use method’. At some point (potentially many years ago) someone entered percentages in the setup section of the program and these percentages drive the FTC calculations for each BAS. 

We are finding that many farming businesses are underclaiming FTC’s because the usage percentages set up years ago have never been reviewed, even though the scale and operations of the business have since expanded. 

Why It Matters 

You might be underclaiming and missing out on credits - or worse, overclaiming and exposing your business to audit risk. 

If you are uncertain about your FTC calculations or worried about audit risk, speak with your accountant or contact the team at Byfields. We can review your claims to ensure you are receiving your full entitlement while remaining fully compliant.