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What Does A Rise In Petrol Prices Mean For Your Tax?

With the rise in petrol prices making everyone’s eyes turn to the Federal government for some relief, businesses may be feeling the pinch of the additional expense in running their vehicles.

Whether you’re a business owner or simply an individual that uses their car for work-related purposes, fuel is a taxation topic that you might want to revisit with your tax agent.

Fuel Tax Credits (Businesses)

As a business owner, you may be eligible to claim fuel tax credits. This provides businesses with a credit for the fuel tax (excise or customs duty) that’s included in the price of fuel used in

  • machinery
  • plant
  • equipment
  • heavy vehicles
  • light vehicles travelling off public roads or on private roads.

This amount depends on when the fuel is acquired, what fuel is used and the activity you use it in. The rate of tax credits may change regularly, so it’s important to check the rates each time you do your business activity statement (BAS).

To make a claim for fuel tax credits you must be registered for:

  • GST when you acquired the fuel
  • Fuel tax credits when you lodge the claim.

These fuel tax credits can be claimed for eligible fuel that was acquired, manufactured/imported and used in your business.

Some fuels and activities may be ineligible to claim fuel tax credits on. These include

  • fuels used in light vehicles of 4.5 tonnes GVM or less, travelling on public roads (for example, a car, small van, taxi or ride-sourcing services)
  • fuel used for private purposes – including light vehicles (for example, utes)
  • transport gaseous fuels used in a heavy vehicle which has a GVM greater than 4.5 tonnes for travelling on public roads
  • the fuel you acquired but didn’t use because it was lost, stolen or otherwise disposed of
  • fuel that had no excise or customs duty paid on it. For example, used oil that has only been subject to filtering and de-watering and used as fuel oil in burner applications is not eligible for fuel tax credits.

Consulting with a tax professional about the fuel tax credit may be an avenue to pursue if you are a business owner concerned about the increase in expenditure around fuel.

Claiming Fuel As A Work-Related Deduction (Individuals)

In general, there are three rules to how you need to claim fuel as a work-related deduction:

  1. You must have spent the money yourself (ie. you weren’t reimbursed by your work).
  2. The fuel must directly relate to you earning your income.
  3. And you have to keep records to prove the expense.

The second point is not just for those whose primary income is derived from driving, such as couriers and rideshare drivers. Any work-related trip where fuel was used can be claimed EXCEPT your commute. This is technically classified as private, and cannot be claimed.

There are limited circumstances where it may be okay to claim such travel as a deduction. These include:

  • Travelling between one workplace and another (ie. if you have two jobs or are an itinerant worker).
  • Driving from home directly to an alternate workplace.
  • When you have to carry bulky tools or equipment that are essential to your job.

If you’re someone who often finds it difficult to make large lump sum payments for goods or services, you may want to consider looking into “Buy Now Pay Later” services.

Buy now pay later essentially means that, rather than paying in a full lump sum payment for a product or services rendered, there may be an option to pay through instalments of a certain amount over a set period to make the sum of the full amount in total. This method should allow you to pay in full for the product or service without overly straining your finances – you pay back what you can, as agreed upon when you begin the buy now pay later service.

Some popular buy now pay later services include Afterpay, Zip Pay, Brightepay, and some credit card networks such as  Mastercard and Visa, can offer buy now pay later arrangements.

Though it can be a convenient, immediate solution, it may be challenging to juggle the necessary repayments with other financial commitments. It’s not always the most appropriate method for people, and you should bear in mind your situation and ability in paying back the amounts. 

Before you sign up, keep in mind: 

  • It becomes easier to overspend with buy now pay later services, so know your limits on what you can and can’t afford.
  • You will be charged fees and costs to use the service, which can add up to a princely sum in and of itself.
  • Keeping track of your payments can be tricky if you’ve signed up for multiple services.
  • It could affect your loan applications for a car or mortgage as lenders consider buy now pay later spending just as much as your credit score.
  • Late repayments can appear on your credit report, which affects your ability to borrow money in the future.
  • Layby can be a cheaper alternative to buy now pay later, with no account-keeping or late fees to consider

If you are someone who could make use of BNPL services, you may wish to:

  • Ensure that when using the BNPL service, you stick to a set limit on what you spend so that you can comfortably pay it back later. 
  • Aim only to have one BNPL account at a time to manage payments through, rather than confuse yourself with multiple payments across different providers.
  • Always budget for bills, loan payments and BNPL payments, and 
  • Rather than use your credit card for payments to your BNPL account, consider linking to your debit account instead.

If you would like assistance in planning your financial future, help in managing your budget or some friendly advice, see us for a chat about what we can do for you.

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John Briggs

Jane Noller has been my accountant for the last 15 plus years. I can testify to Jane’s professionalism and expeditious manner in dealing with the day to day issues that surrounds our business accounting.

John Briggs

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