Excise, Fuel Tax and Grants - under construction

The Fuel Tax Bill 2006 was introduced to simply the fuel tax system.

• The Fuel Tax Bill 2006 contains 64 pages Fuel Tax Bill 2006
• The Fuel Tax (Consequential and Transitional Provisions) Bill 2006 contains 98 pages Consequential and Transitional Provisions
• The Fuel Tax (Consequential and Transitional Provisions) Bill 2006 Explanatory memorandum contains 103 pages Explanatory memoranda

Fuel Tax Credits

Fuel tax credits commenced 1 July 2006 and substantially replaced the energy grants credits scheme (EGCS) with final changes applying from 1 July 2012. Fuel tax credits provide a credit for fuel tax (excise duty) that is included in the price of fuel.

Fuel tax credits are available to entities using fuel in their businesses.

Eligibility for Fuel Tax Credits

From 1 July 2006, fuel tax credit can be claimed for fuel acquired, manufactured or imported for use in the carrying on of a business as follows:

diesel and petrol when used in;

• a vehicle with a gross vehicle mass (GVM) greater than 4.5 tonne travelling on a public road (diesel vehicles acquired before 1 July 2006 can equal 4.5 tonne)
• electricity generation (business and commercial).

diesel only when used in activities (other than road transport) that were previously eligible under the energy grants credits scheme. They include:

• rail or marine transport
• certain primary production activities (for example, agriculture, fishing and forestry)
• mining.

In addition, other fuels (including diesel, petrol, kerosene, heating oil and toluene) are eligible when used

• in burner applications such as heating
• in the manufacture of explosives (diesel only), and
• for any other non-fuel use, such as a solvent, or as an ingredient in the manufacture of other products (for example paint or plastic).

Additional criteria apply from 1 July 2006:

• diesel motor vehicles (other than farm vehicles used primarily on an agricultural property in carrying out primary production business) need to meet one of the following environmental criteria. The vehicle must either:
  • be manufactured on or after 1 January 1996
  • be part of an accredited audited maintenance programme
  • meet the Australian Transport Council’s in-service emission standard (referred to in the National Environment Protection (Diesel Vehicle Emissions) Measure), or
  • comply with an Australian Government-endorsed maintenance schedule.

From 1 July 2008, fuel tax credits will be expanded to include the following changes to activities other than road transport:

• petrol, as well as diesel, will be eligible for a fuel tax credit when used in previously eligible EGCS activities (for example, agriculture, forestry, fishing, mining and marine and rail transport)
• petrol and diesel will be eligible for 50% fuel tax credit when used in activities, machinery or equipment not previously eligible under EGCS. A full fuel tax credit will apply from 1 July 2012.

Alternative fuels such as biodiesel, liquefied petroleum gas (LPG), and compressed natural gas (CNG), are not eligible for fuel tax credit until 1 July 2011. However, you may be eligible for a fuel grant under the energy grants credits scheme if you use alternative fuels in a vehicle with a gross vehicle mass (GVM) of at least 4.5 tonne travelling on a public road. See ATO Fact Sheet Alternative fuels (NAT 15232),

Energy Grants Credit Scheme

The Australian Government has announced its intention to replace the energy grants credits scheme (EGCS) with fuel tax credits as part of fuel tax reform.

Fuel tax credits will provide a credit for fuel tax that is included in the price of fuel. It will commence 1 July 2006, with final changes applying from 1 July 2012.

Alternative fuels, including biodiesel, will not be eligible for a fuel tax credit until 1 July 2011.

However, alternative fuels including biodiesel will continue to be eligible for a fuel grant under EGCS for fuel purchased before 1 July 2010, providing EGCS eligibility criteria are met.

Eligibility for Energy Grants Credit

• the activity must be road transport (that is, vehicles must be registered for use on a public road)
  There is no entitlement for a fuel grant for unblended biodiesel used off road

• applies to alternative fuels including biodiesel, or

• a biodiesel component of a blend of biodiesel and diesel 
  (a grant for the biodiesel component of a blend will not be permitted if there is an entitlement to a fuel tax credit on the entire amount of the fuel because the blend meets a certain standard)
  – for more information on fuel blends visit www.ato.gov.au/fuelschemes

• the alternative fuel must be used in vehicles weighing:
  – over 20 tonnes gross vehicle mass (GVM) operating in all areas; and
  – at least 4.5 tonnes GVM and less than 20 tonnes GVM only when operating outside of or across defined metropolitan boundaries. 
  The metropolitan boundaries do not apply to emergency vehicles, primary producers and buses using alternative fuels.

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From 1 JULY 2006 the amount of the grant will reduce over 5 years as shown in the following table.